steps to financial freedom

7 Steps to Financial Freedom and Personal Finance Success

Erik Featured, Financial Education, Thoughts of a Mastermind 11 Comments

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Are you looking to become financially free? Does financial freedom sound amazing to you? What if you could become financially free?

What if you could skip your commute and spend time with your friends or family uninterrupted all day? Wouldn’t that be fantastic?

Make no mistake, financial freedom is quite a lofty goal, but is possible. If you decide financial freedom is what you want, there are a number of personal finance habits you can cultivate to become wealthy.

If you want to become better with your personal finances, you’ll definitely want to read this post all the way through.

In this post, I’m going to share with you a seven step plan to get to financial independence – the ultimate personal finance goal.

The 7 Steps to Financial Freedom

You may have heard of the seven steps to financial freedom before. Maybe you haven’t. There are two versions of the seven steps to financial freedom I’ve come across over the past few years.

One is by Dave Ramsey and the other is by Tony Robbins.

Dave Ramsey’s 7 Baby Steps to Financial Freedom

The first seven steps to financial freedom is from the one and only, Dave Ramsey.  Dave Ramsey, for those of you who don’t know, is a personal finance and money management expert with a radio show and many courses and workshops that help people get their finances in order.

Dave Ramsey’s 7 baby steps to financial freedom are:

  • Baby Step 1 – Build a $1,000 emergency fund
  • Baby Step 2 – Pay off all debt using the debt snowball
  • Baby Step 3 – Save 3 to 6 months of expenses in savings
  • Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
  • Baby Step 5 – College funding for children
  • Baby Step 6 – Pay off home early
  • Baby Step 7 – Build wealth and give

I like these, and completely agree that for most people, these steps are great for building wealth and reaching financial freedom. If a person doesn’t have $1,000 in the bank, then that should be goal number one on the way to financial freedom. Next, pay off your consumer debt and start saving for the future. Finally, become fully debt free and share your wealth with the less fortunate.

If you follow these steps, you will be wealthy – I have no doubt.

Tony Robbins’ 7 Steps to Financial Freedom

money master the game 7 steps to financial freedomThe second set of seven steps to financial freedom are from Tony Robbins. Tony Robbins wrote Money: Master the Game a few years ago and goes over his seven steps to financial freedom in it.

Tony Robbins’ 7 steps to financial freedom are:

  • Step 1 – Make the most important financial decision of your life (Decide to be the investor, not a consumer.)
  • Step 2 – Become an insider: know the rules before you start investing
  • Step 3 – Make the game winnable through knowledge
  • Step 4 – Make the most important investment decision of your life (dollar cost average, asset allocation)
  • Step 5 – Create a lifetime income plan (consider insurance and annuities for income)
  • Step 6 – Invest like the 0.001 percent (model the portfolios of hedge funds)
  • Step 7 – Just do it, enjoy it, and share it!

I read Money: Master the Game a few years ago and I really enjoyed it.  While there was quite a bit of fluff, there were many actionable tips and takeaways for me to implement in my life.

Step two of Tony Robbins’ steps is all about managing fees, how financial advisers may not be the best route to go, and buying and holding are all things to know and consider before investing.

Finally, he talks about alternative routes to income and wealth once we have a substantial nest egg. It’s one thing to have a lot of money, but it’s another to have a lot of money that is protected from disaster.

I want to be unique with my content and ideas. Both of these plans have a lot of merit, and I’ve built off of them and created my own seven step plan to financial freedom for you.

The Mastermind Within’s 7 Step Plan to Financial Freedom

Coming up with a seven step plan was tough. Everyone’s situation is different – and with anything you read or consume, it’s important to take a step back and see how it can fit into your life.

All I can share and point to is my seven step plan to financial freedom. The following list is what I’m personally trying to do to grow my wealth, and get on the way to financial freedom:

  1. Build an emergency fund
  2. Pay down consumer debt
  3. Save 10% of my income
  4. Learn about investing
  5. Invest in yourself and grow your income
  6. Stay consistent
  7. Give back with your time or money

Let’s go into each of these in more detail.

Step 1 for Financial Freedom: Build an Emergency Fund

An emergency fund is most important for your personal finance success.

It’s truly tragic – around 70% of Americans don’t have $1,000 in their bank account.

What happens when the furnace or AC goes out in your house? What happens if your car breaks down, or you get sick? There’s so many unplanned emergencies to account for.S

Having a safety net will be beneficial for your financial well-being, and will also be great for peace of mind.

Step 2 for Financial Freedom: Pay off Consumer Debt

Debt sucks. Debt is a restriction on your life, and does not allow you to live the life you want and deserve to live.

Getting out of debt is possible by spending less money, and applying debt payoff strategies.

After getting your debt knocked out, you can start focusing on offensively building your wealth.

Step 3 for Financial Freedom: Save 10% of your Income

After building an emergency fund and destroying your debt, the next steps are to start saving. Take 10% of your income, and start saving it for the future.

After paying off your consumer debt, take that money and start directing it towards investment and savings accounts for the future.

Get your savings rate up!

Step 4 for Financial Freedom: Learn about Investing

You need to learn how to invest.

Financial freedom isn’t going to come through investing in CDs. The only thing guaranteed about a CD is you are guaranteed to lose money due to inflation! (Okay, in some situations and rate environments they are okay – but not right now)

Do you want to be an active investor or passive investor? Active investors should look at starting businesses or buying real estate. Do you want to sit back and watch your money grow without much work? Stick it in the stock market.

These questions are worth asking yourself.

After figuring out your goals, next learn about the different fees, downfalls and traps in your chosen market.

For example, paying a financial adviser 2% over 30 years could amount hundreds of thousands of dollars lost!

With these information, you can wisely grow your wealth and become wealth over time.

Step 5 for Financial Freedom: Invest in Yourself and Grow Your Income

The best investment you can make is in yourself.

Your level of success will rarely exceed your level of personal development, because success is something you attract by the person you become.

If you are looking to make more money and be successful, then you will have to work on yourself.

If you increase your income, you will be able to save more. By saving more, you will be able to increase your investments.

All of these steps go back to investing in yourself and improving as a person.

Step 6 for Financial Freedom: Stay Consistent

Paying off debt and then going back into debt isn’t going to help on the way to financial freedom. Saving $5,000 in one year isn’t going to amount to much.

BUT, saving $5,000 a year for 30 years and investing it in something returning 5-7% a year can grow to hundreds of thousands of dollars.

Consistency is the key to everything. 

Step 7 for Financial Freedom: Give Back

No matter how wealthy you become, there’s one thing you should always remember: IT DOESN’T MATTER UNLESS YOU SHARE IT WITH OTHERS.

Giving you time, money, and knowledge can help others achieve their goals and dreams.

We make a living by what we earn. We make a life by what we give.

With these 7 steps, you will be on your way to financial freedom. However, if you are still struggling to get past step 1, below are 2 easy steps you can take for personal finance success.

2 Easy Steps to Take for Financial Success

Make no mistake, becoming better with your money and personal finances can seem tough.

However, there are two easy steps you can take for overnight financial success:

  1. Tracking your income and expenses
  2. Learning about personal finance

Step 1: Track Your Income and Expenses

What gets measured gets managed.

Knowing where you are financially is so important to financial success.

Consider the following example of two people: Mark tracks his income and expenses every month, and Lisa doesn’t track her income or expenses at all.

Mark wants to retire in 15 years, and has identified that by saving $500 a month, he will reach his goal with average market gains.

Lisa also wants to retire in 15 years, but doesn’t know she needs to save $500 a month, and as a result, is only putting $250 into her retirement account each month.

Mark saves $400 a month right now, but has identified he can cut $100 out of his food spending each month and put that towards retirement.

Lisa spends $300 a month on random shopping expenses (of which she doesn’t know the dollar amount), and doesn’t realize that she doesn’t need these random shopping expenses.

Who do you think will be successful? Mark, who tracks his financial situation, or Lisa, who doesn’t track her financials at all?

I’m going to guess Lisa will be mighty disappointed at the end of the 15 year period.

income statement balance sheetHow to Track Your Income and Expenses Each Month

Each month, I pull all of my transactions from my Mint account into my income statement spreadsheet.

I categorize my transactions and see exactly where my spending and savings rate landed during the month, and look to see if there are any trends forming.

You could download these transactions from your bank directly, you could use similar tools to Mint, or you can analyze your income and expenses through your online banking application – all are acceptable.

For me, I see the importance of tracking my income and expenses by looking at my spending in various categories. I typically spend $300-400 on food and drink a month. I know this as I’ve spent $300-400 a month for the past 18 months consistently. Some months are worse than others, and in those months, I may spend closer to $500 on food and drink.

If I didn’t know how much I was spending on food in a given month, maybe I’d continue to spend that amount month over month, or even start spending more.  Let’s say, somehow, I started spending $300 more a month on food and drink because I wasn’t tracking it.

Now, all of a sudden, I could end up spending an additional $3,600 a year ( $300*12 = $3,600) on food and drink, just because I’m not keeping track of my expenses!

That’s a lot of money that could be better served somewhere else.

Tracking our cash flow also makes us think more about our finances.  If I wasn’t tracking my expenses, I wouldn’t have this mental trigger to keep my spending down on food and drink.

There are a number of tools and apps you can use to track your income and expenses.

If you aren’t already tracking your income and expenses, and you don’t want to click through to my other post, I have a spreadsheet for download which you can get by putting your email into the box below.

Step 2: Be Consistent, and Learn with Books, Blogs, and Podcasts

prioritize and track financial goalsConsistency is the key to being successful in this world. Consistency involves working, learning, and growing a little bit each and every day on the way to your goals.

It’s not enough to invest $100 one time and let it sit.  It’s not enough to cut expenses one month, and then revert back to your previous spending habits.

I can guarantee you short term success will not lead to long term success unless the short term actions are internalized and made into long term habits.

Consider this example: would you rather receive $1 million dollars today, or would you rather take a penny, but have it double every day for a month? Naturally, most people would say, “Give me the million bucks!”

But if we step back and actually analyze the other side, we can see what a big mistake that might be.

The first day, you have 2 cents, the second day, you have 4 cents, the third day, you have 8 cents… two weeks in, you have $81.92. Well, guess what? At the end of the month, you’d end up with over $10 million dollars. You only started off with a penny, what happened?

Yes, you started off with a small amount, and for a long time, you didn’t have much, but 30 days later, boom, $10 million bucks – much more than $1 million!!!

This is the same concept as the power of compounding over time.

If you save $10,000 a year for 30 years and achieve a 7% rate of return, you will become a millionaire.

This is a mathematical fact.  It’s the power of consistency and compounding at work.

Applying Consistency and Learning in Your Life

The penny example we just went through above can be applied to the base of your knowledge on personal finance, not just investing or savings.

I’ll be the first to admit, I’m not a personal finance expert.

I have no idea the intricacies of Roth IRAs, 403(b)s, or how 1031 exchanges work in real estate. That being said, I know that I could learn any of these things if I wanted to. There are millions of words published in text and voice out in the world and on the internet.

While hopefully this site will be a great starting point for you, there’s so much more out there. For example, there are so many personal finance books, blogs, and podcasts which all have something to offer.

If you want to become an expert on the stock market, take a step today. Maybe you want to build your understanding on different forms of debt – take a step today.

For you, if there is anything you want to accomplish this year, or in life, just take a step. That’s all you can do initially.

No one goes from 0 to 100 in an hour or a day.

But, by going from 0 to 1 to 2 to 3, you can get there over time.  It’s about taking baby steps to start, and as you get more comfortable, you can increase the pace – in other words, you sometimes have to slow down to go fast!

What you do today matters. What you do every day matters.

Successful people are those who understand that the little choices they make matter, and because of that they choose to do things that seem to make no difference at all in the act of doing them, and they do them over and over and over until the compound effect kicks in.

Start Tracking and Improve Your Financial Situation

Tracking your income and expenses, and having a hunger for knowledge, will get you firmly on the path to financial success.

Start with identifying your why, as outlined in this post, then start tracking your income and expenses with a spreadsheet or online tool – and continue to learn about personal finance, investments, and building wealth!

Having these two steps in mind will guide you on your path to your financial goals.

Get on the Path to Financial Freedom and Become Financially Free

With the information presented in this post, you now have three different, seven step plans to financial freedom to draw inspiration from and put into action.

After reading this, take a step back to reflect on these different plans, and how they may align with your own plan.

If you aren’t quite yet on the path to financial freedom, implement the 2 easy steps to take to become better with your finances, and you’ll be in a better place financially soon.

Take action today and get on your way to financial freedom!

7 Steps Towards Financial Freedom
7 Steps Towards Financial Freedom
7 Steps Towards Financial Freedom
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Comments 11

    1. Post
      Author
  1. Off the top of my head…

    1. Stop the bleeding – Start tracking your spending and get yourself a budget. You got start operating in the red.
    2. $1,000 emergency
    3a. If you got a 401K with company match start investing up to that amount
    3b. Pay off consumer debt
    4. 3 month emergency fund
    5. Invest a minimum of 20% of your earnings in tax advantages retirement accounts
    6. Start working on building some passive/semi passive income
    7. Pay off mortgage once you are maxing out all available tax advantages accounts

    Not thrilled with that list but that is the 2 minute off the top of the head.

    1. Post
      Author
    2. are your steps 3a and 5 not the same thing? I look at my 401k as retirement but would it be smarter if I invest in that and also something outside of what my employer offers? I’ve been contributing 15% of my paychecks to 401k since i started working and thats been going on for 5 years.. i just want to optimize and maximize,,

      1. Post
        Author

        Hi Angel,

        The difference is that most companies only match up to a certain percentage (for example, at the company I work, I get a 4% match)

        Grant’s step 5 was to contribute 20% to these accounts, which is probably an increase from his company match in 3a

        At 15% for you, you are doing well. Keep it up, learn a little more each day, and you’ll continue to improve your financial situation 🙂

  2. I think the best way to achieve financial freedom is to build your own business. WHen you’re on a salary, your income is always a function of how many hours you work. Only when you have a scalable business can you grow your income exponentially.

    1. Post
      Author

      Completely agree with you – that’s step 4 🙂 Building your income can come in any shape or form – be it at a job or in business.

  3. Pingback: Zero Waste: A Month of Tracking My Trash (Guest Post from The Mastermind Within) - Tread Lightly, Retire Early

  4. This is a great list to have financial freedom and live as you wish. #7 is the last thing that you can offer, giving back to people through teaching them the knowledge on how to have financial freedom.

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