What is the Fastest Way to Achieve Financial Freedom?

What is the Fastest Way to Achieve Financial Freedom?

Fastest Way to Financial Freedom

Financial freedom is a dream that many people aspire to but few actually achieve. The reasons for this are many, ranging from lack of financial knowledge, to poor spending habits, to simply not making enough money.

However, achieving financial freedom is not an impossible feat. With dedication, hard work, and the right strategy, anyone can achieve financial freedom in a relatively short amount of time. In this article, we will explore the fastest way to achieve financial freedom and what steps you can take to start your journey today.

If you want to achieve financial freedom as fast as possible then you need to be absolutely cut throat with your expenses.

This starts with taking a deep dive into your current financial situation, getting out of debt ASAP, cutting out all unnecessary expenses, increasing your income and consistently investing.


Understanding Your Financial Situation

The first step to achieving financial freedom is to understand your current financial situation. This involves looking at your income, expenses, debts, and assets. It is important to be honest with yourself and have a clear understanding of what you are dealing with in order to make a plan to improve your situation. You can use tools such as a budgeting app or a spreadsheet to track your spending and see where your money is going each month.


Setting Financial Goals

Once you have a clear understanding of your financial situation, the next step is to set financial goals. This could be paying off debt, saving for a down payment on a house, reaching a certain level of savings or retiring early.

It is important to have specific and measurable goals so that you can track your progress and adjust your strategy if necessary. It is also important to set a timeline for each goal to ensure that you stay on track and make the necessary changes to achieve your goal.


Cutting Expenses

Cut Expenses from Financial Freedom

One of the easiest ways to improve your financial situation is to cut expenses. This could involve finding ways to save money on bills, such as negotiating with your cable company for a better rate, or cutting out unnecessary expenses, such as subscription services that you no longer use. Every little bit helps and by reducing your expenses, you can free up more money each month to put towards your financial goals.

The easiest way to get started is to use a spreadsheet or Google docs and list out all of your expenses and then separate them into two categories, necessities and discretionary.


Necessities are things that you absolutely need to live such as:

Your rent or mortgage


Payments on current debt if any


Insurance premiums



Now list all of your discretionary expenses:

Eating out


Car Payment



Now take a look at your biggest expense (for most people this will be rent or mortgage) and figure out how you can reduce this. 

If you’re really serious about achieving financial freedom fast, then you will need to make some sacrifices which could include moving into a smaller house or apartment or house hacking (renting out a room or part of your house/apartment).

Do this will every item that you have on the list, starting with the largest ones to the smallest ones, and figure out how you can reduce or eliminate each one. 

Now that you have your expenses as low as possible, multiple this amount by 12 to give you your yearly spending, then again by 25.  This is how much you need to save in order to be completely financially free and live off of the 4% Rule.


$3,000 x 12 = $36,000

$36,000 x 25 = $900,000


Increasing Income

Once your expenses are cut as low as possible, it’s time to increase your income.

This could involve getting a part-time job, starting a side business, or asking for a raise at your current job.

By increasing your income, you can put more money towards your financial goals and achieve financial freedom faster.



Now that your expenses are decreased and your income has increased or is at least stable, you should have some money left over every month. 

First make sure that you have 3-6 months in a savings account that is paying you interest, like Ally Bank.

Now it’s time to start investing as much as you can every single month.  Investing doesn’t have to be complicated and the easiest way to get started is with low cost ETFs and invest in a diversified index fund like the S&P500.  For the past 100 years the S&P 500 has gained an average of over 10% a year and also pays quarterly dividends. 

You can also set up monthly automatic buys into this index fund which will give you two benefits.  The first is that you won’t have to think about it or be tempted to spend it on something else because this money will automatically come out of your checking account.  The second is that by buying on a regular monthly basis, you will be Dollar Cost Averaging into the market. 

This means that you will buy in all market conditions and will actually buy more shares when the market is down and less shares when the market is up.


Staying Focused

Achieving financial freedom is not a one-time event, but rather a lifelong journey. It is important to stay focused on your goals and make the necessary changes to ensure that you are on track.

This could involve regularly monitoring your expenses and making adjustments as necessary, seeking out new opportunities to increase your income, and seeking out new investment opportunities.  Another great way to stay motivated is to here stories and quotes from others who have already achieved your goals.

we can sell our time, but we can't buy it back financial freedom quote

Financial Freedom Quotes

With dedication, hard work, and the right strategy, anyone can achieve financial freedom in a relatively short amount of time. By understanding your financial situation, setting financial goals, cutting expenses, increasing income, investing and staying focused, you can start your journey towards financial freedom today.

Does Financial Freedom Mean Rich?

Does Financial Freedom Mean Rich?

Does Rich mean same Financial Freedom

Financial freedom is a term that is often thrown around in financial circles and usually means that someone is wealthy, not just rich. Being rich might just mean that you have a high income but says nothing about your income producing assets or debts.

Financial freedom is more about having the ability to live the life you want without worrying about money, while being rich is simply the amount of money you have in the bank.

In this article, we will examine the relationship between financial freedom and being rich, and whether financial freedom can be achieved without being rich and if pursing financial freedom is worth it.


Being Rich vs Being Wealthy

Being rich and being wealthy are often used interchangeably, but they are not the same thing. Rich refers to having a lot of money, while wealth refers to having a combination of assets and resources, including money, investments, property, and other valuable possessions.

A person who is simply rich may have a high income and a large bank account, but they may also have a high amount of debt, which would reduce their overall net worth. On the other hand, a wealthy person may not necessarily have a high income, but they have a diverse portfolio of assets and resources that provide them with a comfortable standard of living, financial stability and the ability to grow their wealth over time.

Another difference between being rich and being wealthy is that wealth is often more sustainable, while being rich may only be temporary.

For example, a person who is rich because of a high-paying job may lose their income if they lose their job or are unable to work. However, a wealthy person’s assets and resources can provide them with a steady stream of income, even if they lose their job.

So while being rich is about having a lot of money, being wealthy is about having a balanced and diversified portfolio of assets and resources that provide stability, financial independence and the ability to pursue one’s goals and dreams.

 Robert Kiyosaki Rich Financial Freedom Quote

What is an Example of Financial Freedom?

Financial freedom can mean a lot of different things. On one end of the spectrum it can mean finally paying off all of your credit cards so you don’t have any more debt collectors calling you while on the other end it can mean buying your 10th investment property and hiring a property manager so that you can be completely hands off.

For some people, financial freedom means being able to travel the world, pursue hobbies and interests and live a life free from financial stress. For others, it might mean being able to retire early and enjoy a comfortable retirement. Whatever your definition of financial freedom is, the goal is to have the ability to live your life on your own terms, without worrying about money.


Can Financial Freedom be Achieved Without Being Rich?

It isn’t necessary to be rich to achieve financial freedom. If you save a high percentage of your income, you can build assets overtime and become wealthy while your “rich” neighbors who make 3 times as much as you might be burdened by a mountain of debt.

Being rich or having a high income can certainly help someone achieve financial independence, but FI is more about making smart choices with the money you have and developing a plan to achieve your financial goals.

One of the keys to achieving financial freedom is to live below your means. This means spending less money than you earn, and saving and investing the difference. By doing this, you can gradually build up your savings, which can then be invested in a diversified portfolio of stocks, bonds, and other investments. Over time, this portfolio can provide a steady stream of passive income that can support your lifestyle, even if you are no longer working.

Another important aspect of achieving financial freedom is to reduce debt. This includes paying off credit card balances, student loans, and other forms of debt. By reducing your debt, you will have more money available to invest and grow your wealth, which can help you achieve financial freedom faster.


Building Wealth vs. Achieving Financial Freedom

While financial freedom and wealth are related, they are not the same thing. Building wealth is step towards achieving financial freedom and once FI is having the ability to live the life you want without worrying about money.

That being said, building wealth is certainly an important step in achieving financial freedom. By investing in a diversified portfolio of stocks, bonds, and other investments, you can grow your wealth over time, which will provide you with a steady stream of passive income that can support your lifestyle.

Additionally, by building wealth, you can also have the peace of mind that comes from knowing that you have a financial cushion that can help you through tough times, such as a job loss or an unexpected medical expense.


Is Financial Freedom Worth it?

If you don’t want money to control what you do or how you think then financial freedom is definitely worth it.
Being financially free means having control over your finances, having the ability to make choices about how you want to live your life and having the peace of mind that comes with being financially secure.

It can also mean being able to retire earlier, pursuing your passions and hobbies, or starting your own business.

Just remember that achieving financial freedom takes hard work, discipline and sacrifice. It requires planning, budgeting, and making smart financial decisions. It may take years of saving and investing, and there may be setbacks along the way.  But not matter where you’re currently at financially, you can always improve your situation and move to the next level of financial independence.

But despite the challenges, the benefits of financial freedom make it well worth the effort. With financial freedom, you have the freedom to live your life on your own terms and the security to weather life’s ups and downs. Ultimately, financial freedom is about having the ability to live life with purpose, passion and peace of mind.

Is Financial Freedom Legit or a Scam?

Is Financial Freedom Legit or a Scam?

Is Financial Freedom Legit

Financial freedom is a concept that has gained a lot of popularity recently, most notably with millennials and the F.I.R.E . movement.

Financial Freedom is when you have enough income and assets to cover their expenses without having to work for a living. The idea of financial independence is alluring and has attracted many people to pursue it and with that comes a lot of gurus selling courses and skeptics about it’s legitimacy.

In this article, we aim to provide a comprehensive analysis of the concept of financial freedom and its practicality. We will examine its definition, the different paths to achieving it, and its pros and cons. Our objective is to help individuals make an informed decision about whether financial freedom is a realistic and desirable goal to pursue or not.


What Financial Freedom Means?

Financial freedom will mean something different to everyone depending on your specific situation.  If you’re living in New York City, then what you consider financial freedom will be vastly different than if you are retiring early on a beach in Bali, Indonesia.

So while everyone’s requirements for financial independence may differ, FI is generally defined as when you have sufficient income and assets to cover their expenses without having to work.

With FI you should be able to live comfortable life without being tied to a job or a source of regular income.  This happens when your passive income exceeds your expenses, and you can live solely on your savings and investments.


Why Financial Freedom Matters?

Financial freedom is an attractive goal for many people for several reasons:

Reduced stress: Financial freedom means having the security and stability of knowing that you have enough money to cover your expenses and provide for your future needs. This can reduce stress and anxiety about money and allow you to live a more relaxed and fulfilling life.

Increased flexibility: Financial freedom allows you to have more control over your time and decisions. You can pursue your passions, travel, start a business, or work on a project without having to worry about financial constraints.

Better quality of life: Financial freedom enables you to live a better quality of life. You can afford the things that matter most to you, whether it’s a comfortable home, quality education, or health care.

Ability to help others: Financial freedom also gives you the ability to help others in your life. You can give back to your community, support loved ones, or make a positive impact on the world.

A sense of control: Finally, financial freedom gives you a sense of control over your life. You are in charge of your financial decisions and can make choices that align with your values and goals.


Is Financial Freedom a Scam?

There are scammers in every field and Financial Freedom is no different.  Basically, if someone tells you something that sounds too good to be true, then it probably is.

Financial freedom is something that takes work and will not happen overnight.  It requires taking a deep look into your income and expenses and making tough choices in order to achieve your goals.

Don’t believe someone who says they have a magic pill that will automatically give you financial independence, because like anything else worth doing, it requires hard work and sacrifice.

 Is Financial Freedom Legit or Scam

The Problems with Financial Independence

One of the biggest problems with financial independence is that it is a goal, that once achieved, might leave you without any real motivation or direction.  This can manifest itself in many different ways but here are something’s to consider:

Lack of structure: Financial freedom can be both a blessing and a curse. Without a regular 9-to-5 job, it can be difficult to maintain a structured schedule and establish a routine. This can lead to feelings of boredom, restlessness, or a lack of purpose.

Reduced security: Financial freedom means having control over your financial decisions, but it also means you are solely responsible for your financial well-being. Without the security of a steady paycheck, you may be exposed to more financial risk and instability.

Difficulty maintaining motivation: Achieving financial freedom can be a long-term goal that requires discipline and hard work. Without the structure of a job or regular paycheck, it can be difficult to maintain motivation and focus on financial goals.

Responsibility for investment decisions: If you rely on investments to provide financial freedom, you are also responsible for making sound investment decisions. This can be challenging, especially if you are not familiar with investing or the financial markets.

Potential for isolation: Financial freedom often means having more control over your time and decisions, but it can also lead to feelings of isolation. Without a regular job or structure, it can be more difficult to socialize and connect with others.


Is Financial Freedom Possible?

Financial freedom is definitely possible and there are a few different paths to follow.  Individuals can choose the one that suits their goals, personality and lifestyle. Some possible financial freedom paths are:


Path 1: Early Retirement

Financial Independence Retire Early or FIRE is a popular path to financial freedom. It involves saving and investing a substantial portion of one’s income to achieve financial independence and retire at a relatively young age, usually in the 30s, 40s or 50s. This path is ideal for individuals who are not passionate about their careers and are looking to escape the 9 to 5 grind.

The easiest way to figure out how much you will need to retire early is to use the 4% Rule.

Click here to watch a video on how I started living off of the 4% Rule

To use the 4% Rule, first figure out exactly how much you spend and how much you make.  Now take a close look at your expenses and start to eliminate all the unnecessary expenses like expensive dinners out, car payment, etc.

Once you have your monthly number, multiply it by 12 to get your yearly spending and then multiply this by 25x.

4% Rule Example:

$3,000 monthly expenses

X 12 Months/Year = $36,000

X 25x = $900,000 – This is what you will need to save in order to retire early while spending $3,000/month.


*Note – taking 25x of expenses is the same as the 4% Rule (but in reverse) – $900,000 x .04 = $36,000*

Now that you have gotten rid of all your unnecessary expenses and still have a comfortable life, consider that this is what your life will be like if you retire early without any extra income coming in.  If you think you’ll be happy with this scaled back lifestyle, then go for it, but if not then consider working a few more years or getting a part-time job or side hustle in early retirement.


Path 2: Entrepreneurship

Entrepreneurship is another path to financial freedom. It involves starting and growing a business that generates passive income. This path is ideal for individuals who are creative, entrepreneurial and willing to take risks. The goal is to create a business that generates enough income to cover one’s expenses, allowing them to work on their terms.

Businesses to consider are local businesses (landscaping, roofing, etc.), franchises or starting an online business.

I started and sold an online business which gave me a certain level of financial freedom and so this is what I naturally recommend other people do.  Online businesses are unique because there startup costs and risks are extremely low when compared to a brick and mortar business.


Path 3: Real Estate Investment

Real estate investment is another path to financial freedom. It involves buying and managing rental properties that generate passive income. This path is ideal for individuals who are willing to put in the time and effort to learn about real estate and who have a strong network of contractors and property managers. The goal is to build a portfolio of rental properties that generates enough income to cover one’s expenses.

If you’re not sure where to get started when investing in real estate then you can consider house hacking.

House hacking is a real estate investment strategy that involves purchasing a property and living in one part of it while renting out the other parts to generate income. The goal of house hacking is to use the rental income to offset the costs of ownership, including mortgage payments, property taxes, insurance and maintenance expenses.

The easiest way to do this is to purchase a single family home and then rent out the other rooms.  This might be an uncomfortable way to live but remember that it is only temporary.  This will also greatly reduce your rent (mortgage) and in some cases can even eliminate it all together so that you can live for free!

A more advanced strategy is to purchase a multi-unit property, such as a duplex or triplex, and live in one unit while renting out the other units. The rental income from the other units can be used to help pay for the mortgage, taxes, and other expenses, reducing the overall cost of ownership and potentially allowing the owner to save money each month.


Pros and Cons of Financial Freedom

Financial freedom has its pros and cons and it is essential to consider both before pursuing it as a goal.


Financial Independence Pros:

More time for personal growth and development

Freedom to pursue personal interests and hobbies

Reduced stress and better health

Ability to travel and see the world

Increased quality of life

On the other hand, some of the cons include:


Financial Independence Cons:

Reduced income and financial security

Lack of structure and discipline

Increased risk of boredom and loneliness

Dependence on passive income sources

Difficulty in making a significant impact in the world


Financial freedom is a concept that has gained popularity in recent years and can simply be defined as having enough passive income and assets to cover expenses without having to work.  It’s important to understand that it is possible but it is not easy to achieve.  So while many unscrupulous people will try to sell a magic pill promising financial independence, the truth is, is that it takes hard work and sacrifice.

There are several paths to achieving financial freedom, including early retirement, entrepreneurship and real estate investment and each path will depend on your current financial situation and skill set.

It’s also important to consider that financial freedom has its pros and cons and that you will need to fill your new found freedom with positive activities in order to live a full and happy life.

How to Become Financially Independent: Achieve Financial Freedom in 8 Steps

How to Become Financially Independent: Achieve Financial Freedom in 8 Steps

 How to become financially independent

Financial independence usually defined as having enough wealth to support your lifestyle without having to work.

This means that someone can live on their own terms, free from financial stress and worry. Becoming financially independent is not an overnight process and can take hard work and dedication.  But, no matter what Level of Financial Independence that you’re currently at, FI can be achieved by taking a series of steps and making smart decisions.

Achieve Financial Independence by Following these 8 Steps:

1) Understanding Your Current Financial Status

The first step to becoming financially independent is to understand your current financial status. This involves getting a clear picture of your income, expenses, debts, and investments. You can start by making a list of all your debts and expenses.  This includes everything you’re currently spending money on including your rent or mortgage, utilities, food, transportation, entertainment, student loan payments, car payments, etc.

Once you know all of your expenses it’s time to figure out all of your income sources, including your paycheck, rental income, dividends, stocks, savings account interest or any other sources income you might have.

There are two main levers to pull when becoming financially independent, you can either decrease your expenses or increase your income, but ideally you will do a combination of the two.

So start looking at all of your unnecessary expenses first and start with the largest ones.  For example, you could sell your new car which has a $500.00 monthly payment on it and buy a much cheaper car that will help you achieve your goals of becoming financially independent.

Once you have a clear understanding of your income and expenses, you can create a budget. This will help you determine how much money you have left over each month after paying all your bills. This extra money should first be used to pay down debt, then build an emergency fund, then for investing as you work your up the ladder of Financial Independence.


2) Paying Down Debt

Paying down debt is a crucial step in becoming financially independent. High levels of debt can put a significant strain on your finances and limit your ability to save and invest. One of best way to pay down debt is to focus on paying off the debt with the highest interest rate first. This will help you save money in the long run as you will pay less interest over time.

There is also a strategy known as the Snow Ball Method.  The Snowball Method is a debt repayment strategy that involves paying off debts in order of smallest to largest, regardless of interest rate. The idea is to start with smaller, easier-to-pay debts to build momentum and motivation to tackle larger debts.

Here is an example of how the Snowball Method can be used to pay off three different credit card debts:

Credit Card A: $1,000 balance, 18% interest rate

Credit Card B: $2,500 balance, 18% interest rate

Credit Card C: $3,000 balance, 22% interest rate

If you have $500 each month to pay off debt, then make the minimum payments on cards B and C and put the rest towards paying off Credit Card A.  In a couple months Credit Card A will be paid off and you can then repeat the process with Credit Card B.

3) Building an Emergency Fund

An emergency fund is a pool of money that you set aside for unexpected expenses, such as a medical emergency or a car repair. Having an emergency fund can help you avoid going into debt during tough times. It is recommended that you have enough money in your emergency fund to cover three to six months of expenses.

Also, be sure to have your emergency fund in an easy to access savings account and don’t be tempted to put it into stocks or Bitcoin, we’ll get to the investing stage later.

An emergency fund should be easily accessible in case of unexpected expenses, such as a job loss, medical emergency, or car repair. A high yield savings account is a relatively low-risk option that provides a modest return compared to investments like stocks or mutual funds. Additionally, savings accounts are FDIC insured, meaning that the funds are backed by the government, providing added security. This can give peace of mind knowing that the emergency fund will be there when it is needed and will not be subject to market fluctuations that can occur with investments. Ultimately, the goal of an emergency fund is to have quick access to cash in case of an emergency, and a high yield savings account is a good option to achieve that goal while also earning some interest on the funds.  There are a lot of options out there and Ally (as of 2023) has rates between 3-4%.


4) Investing in Retirement Funds

Investing in a company-offered 401(k) plan can be a great way to save for retirement and build wealth over time. If your company offers an employer match, it can be especially attractive because it is essentially FREE MONEY. An employer match means that the company will match a portion of an employee’s contributions, usually up to a certain percentage.

Some employers will match 50% or even 100% of your contributions.  So if you put in $1,000 you can automatically get a free $500 or $1000!  This is usually capped at a certain percentage of your salary so be sure to talk with your boss or HR manager to figure out how you can fully take advantage of this option because it can be a significant boost to your retirement savings.

Investing in a 401K or IRA also has tax benefits, as contributions are made pre-tax and grow tax-free until they are withdrawn in retirement.


5) Building a Diversified Investment Portfolio

In addition to investing in a retirement fund, it is also important to build a diversified investment portfolio. A diversified portfolio means that you invest in a variety of assets, such as stocks, bonds and real estate. This helps to minimize the risk of losing money because you’re not relying on a single investment to provide all your returns.

If you’re new to investing, then the simplest way to get started is with low cost ETFs like the S&P 500.  With the click of one button you can instantly buy shares in the top 500 companies in the US!

While it is tempting to try and pick individual stocks, there are several benefits of investing in the S&P 500.

Diversification: The S&P 500 is a market capitalization weighted index that tracks the performance of the 500 largest publicly traded companies in the United States. By investing in the S&P 500, you can spread your investments across a wide range of industries and sectors, reducing the impact of any single stock’s performance on your overall portfolio. This helps to mitigate risk and can lead to more consistent returns over time.

Low Costs: Investing in an S&P 500 index fund typically has low fees and expenses compared to actively managed funds or individual stocks. This can help to maximize returns and minimize the impact of fees on overall portfolio performance.

Convenience: Investing in the S&P 500 index is easy and convenient, requiring only one investment decision. You do not need to spend time researching and picking individual stocks, which can be a time-consuming and complex process. The S&P 500 is widely followed and well-established, making it an accessible investment option for many people.

6) Living Below Your Means

Living below your means is another key to becoming financially independent. This means spending less money than you earn and avoiding unnecessary expenses. This can include things like eating out less, cutting back on entertainment expenses, and reducing your monthly bills.  The great thing is, is that once you learn to live with less, you’ll realize that you don’t need all of this stuff to be happy.  This also makes you less reliant on these luxuries which can increase happiness and peace of mind.


7) Avoiding Lifestyle Inflation and the Hedonic Treadmill

One of the main reasons that most people never become financially independent is because of lifestyle inflation.  This is the tendency to increase your spending as your income increases. While it is natural to want to improve your lifestyle, it is important to avoid this trap as it can quickly eat away at your savings and prevent you from becoming financially independent. Instead, try to live on a set budget and only increase your spending as necessary.

The Hedonic Treadmill is a psychological phenomenon that refers to the tendency for people to quickly return to their baseline level of happiness after experiencing a positive or negative event, regardless of its impact on their life.

This can result in a never-ending cycle of chasing after pleasure and material possessions, thinking that they will bring happiness, only to find that the initial burst of happiness is short-lived.

The hedonic treadmill is fueled by a number of factors, including societal and cultural pressures to pursue material wealth and success, the brain’s tendency to adapt to new stimuli, and the human tendency to focus on what is lacking in life rather than what is present.

By recognizing and understanding the hedonic treadmill, individuals can make conscious choices about their priorities and strive for a more fulfilling and meaningful life, rather than constantly chasing after fleeting pleasures.

Financial Freedom Hedonic Treadmill

8) Staying the Course

Becoming financially independent requires a mindset shift.  You have to want it more than your brand new car, big screen TV, etc.  Similar to losing weight, a short term mindset will usually fail and you’ll eventually be back to your old habits.

So, when times are tough or your motivation is low, it’s important to take a long term view and stick with your plan.

Always remember that the path to Financial Freedom is a marathon and not a sprint. It requires discipline, patience, and a long-term mindset. By following these steps, you can take control of your finances and achieve financial independence.

The 5 Levels of Financial Freedom and How to Reach Them

The 5 Levels of Financial Freedom and How to Reach Them

The 5 Levels of Financial Freedom and How to Achieve Them

The 5 Levels Of Financial Freedom

Financial Freedom is when you have sufficient wealth to live a comfortable life without having to worry about money.

It’s a dream that many people have but few actually achieve, but it’s not impossible to reach.

The key to financial freedom is to understand the different levels and work towards achieving them.  No matter what your situation is, you can always improve it and get to the next level.

In this article, we will go over the 5 levels of financial freedom and how you can reach them.

Level 1: Get Out of Debt!

My credit card bill just came meme

The first level of financial freedom is to get out of debt!

Debt can be a heavy burden and can hold you back from reaching other levels of financial freedom. The goal at this level is to pay off all your (bad) debt, including credit cards, car loans and student loans. Once you’re debt-free, you’ll have more disposable income each month to put towards savings and investments.  To achieve debt-free living, you need to create a budget and stick to it.  Some financial gurus like Mr. Money Mustache even go so far as saying that you should treat your debt like an emergency.  Meaning that if you have (bad) debt, you need to pay it off ASAP, at all costs.

Differences Between Good and Bad Debt

It’s also important to distinguish between “good” debt and “bad” debt.  Good debt is typically considered to be debt that helps you make money in the long run, such as a low-interest mortgage on a house or property that increases in value. In this case, the debt is seen as good because the asset you bought with the debt has the potential to increase in value over time, thereby helping you build wealth.  You also need a place to live anyways so paying a mortgage instead of rent will help you reduce your expenses over time.

On the other hand, bad debt is debt that does not offer any long-term financial benefits, such as high-interest credit card debt or debt on a depreciating asset like a car.  In this case, the debt is seen as bad because it does not generate any income or add value to your financial situation. Instead, it often results in paying more in interest than the amount you originally borrowed, making it harder to get ahead financially.

When paying off “bad” debt there are two schools of thought and both make sense depending on your situation and on your personality.

The first is to pay off your debt with the highest interest rate first.  This debt is “costing” you the most money and should be dealt with first, but there is another method that appeals more to human nature which is called The Snow Ball Method.

the debt snow ball method

The Snowball Method is a strategy for paying off debt that involves focusing on paying off your smallest debt first, while still making the minimum payments on your other debts.  For example, if you have 3 credit cards open and Credit Card A has a balance of $500.00, Credit Card B has a balance of $800.00 and Credit Card C has a balance of $2000.00 then using The Snow Ball Method, paying off Credit Card A with $500.00 first makes the most sense, even if it has a lower interest rate than the other credit cards.

You will see results and gain momentum faster if you’re able to pay off an entire credit card balance.

Once the smallest debt is paid off, you then use the extra money you were putting towards that debt to pay off the next smallest debt, and so on, creating a “snowball” of extra money that gets larger as you pay off each debt. By focusing on paying off one debt at a time, the snowball method can help you stay motivated and see progress in your debt repayment journey.


Level 2: Build an Emergency Fund

build Emergency Fund

Once your (bad) debt has been paid off, it’s time to move onto the second level of financial freedom, which is building an emergency fund. An emergency fund is a savings account set aside for unexpected expenses, such as medical bills or car repairs. The goal at this level is to have three to six months of living expenses saved in this account.  So first, sit down and figure out how much your monthly expenses are (rent, car payment, groceries, school supplies, entertainment, etc.) and then aim to have three months set aside.  Once you get that amount, try to get it up to six months.

Imagine how it would feel if you knew that you could take care of anything that life throws your way, this is what it feels like to be at Level 2 of Financial Freedom.

To achieve this level of financial freedom, you need to start by setting a monthly savings goal. Then, make sure you’re putting a portion of your income into this account each month. This will help you build up your emergency fund over time.  Also, put this money into a savings account that is earning interest.  As of 2023, there are a lot of savings accounts that are paying 3-4% interest like Ally Bank.


Level 3: Start Investing in Your Future

Level 3 of Financial Independence

The third level of financial freedom is to start investing in your future. This includes investing in stocks, money market funds, real estate funds, etc. The goal at this level is to build a diversified portfolio of investments that will provide you with passive income.

Also, don’t be tempted to stick your emergency fund into these investments.  This is because investing in something like the stocks needs a longer time horizon than three to six months.  Over the long run, the stock market almost always goes up, but during shorter time periods, it could go down and you don’t want to have to sell when it is down just because you have an unexpected expense like a car repair.

To achieve level 3 of financial freedom, you should first start but putting aside a certain amount of your paycheck every month and first putting it into low cost index funds, like the SP500.  This gives you access to the top 500 companies in the US and means that you don’t have to pick any winners or losers, you get the aggregate of amazing companies like Apple, Microsoft, GE, Boeing, Tesla, etc. without having to worry about whether one of them is going up or down this quarter.


Level 4: Freedom From Your Job

4th level of financial freedom from job

The fourth level of financial freedom is freedom from your job. This is the point where your passive income from investments meets or exceeds your living expenses. The goal at this level is to have enough wealth to live off of your investments, without having to work for a paycheck.  A simple calculation to figure out how much you need for this level is to use the 4% Rule.

For example, if you have saved up and invested $1,000,000 then you just multiply this by 4%:

$1,000,000 x .04 = $40,000

This means that you can spend $40,000 every year or $40,000/12 months = $3,333/month

This rule also works by taking your yearly expenses and then multiplying them by 25x.  So if your yearly expenses are $2,000 a month, then you just need to multiply this by 25 which will give you $500,000.

Click here to watch a video on how I am using the 4% Rule to “Retire Early”.

Also, you might have noticed that the lower your monthly expenses are, the less you need to save for financial freedom.  So start attacking your monthly expenses first and learn to live with less.


Level 5: Wealth Accumulation

5th level of Financial Freedom

The fifth and final level of financial freedom is the continued accumulation of wealth, skill and time accumulation. At this level, you have accumulated a significant amount of wealth and have the financial resources to do what you want in life. The goal at this level is to continue growing your wealth and using it to make a positive impact on the world.

To achieve wealth accumulation, you need to have a long-term investment strategy in place and this can be something as simple as a two fund portfolio, with 40% of your money in cash or bonds and the other 60% in a low cost ETF.

If you reach the stage where you quit your job, you’ll also find that you’ll have a lot more free time on your hands.  This can be a double edged sword, especially if you derived a lot of your identity and feeling of accomplishment from your job.  This is because there will be a big hole where your job used to be.  It is important to fill this with productive activities like learning new skills and hobbies.  It will be extra beneficial to find a skill that also helps you make some extra money so that you can continue to grow your wealth.  This can include things like building websites, teaching guitar lessons, installing solar panels, etc.

Another important area of your life that you will want to consider investing in is in your relationships.  The data on long term happiness is pretty clear and says that happiness is highly correlated with close relationships.  Take your new found freedom and time to reach out to friends and family members that you have lost contact with.  Now that you have monetary wealth, it’s important to have wealth in your personal relationships as well.