The Secret to Financial Freedom | 10 Steps to Achieve Financial Independence

What steps are you currently taking to achieve your financial freedom? What are your short- and long-term financial goals? Check out this video about how we took 10 steps to start the FatFIRE journey.

What is the ultimate secret to achieving your financial freedom what are the steps you need to take to start working on your financial independence journey almost every client asked this question during our 20-minute introductory session which is absolutely free if you visit firesidechat.com introductory every one of you watching this video has your own story about

Your personal finances there is not a singular or a simple answer to your question as to how to achieve your dream to be financially independent so this is where i asked my client what does it mean to you when you become financially independent if you’re brand new to my channel my name is sai and welcome to my channel i break down a lot of the retirement numbers and

How to calculate your retirement numbers in this channel with spreadsheets and all that but in this video i’m gonna go over how i got started on my financial independence journey and how my wife and i are following the 10 steps to achieving our financial freedom as a financial coach about 20 of my time is solving clients math problems but 80 of my time is spent

On adjusting their financial mindset and i can give you all the solutions to how much you need to invest each month or what types of investment accounts you need to retire early but it’s completely up to you on how long you want to be on the financial independence journey so the first step i took was writing down my big financial goals i just grabbed the piece of

Paper it was my napkin and a pen and started writing things down in 2014 my net worth was negative 250 000 with 110 000 in consumer debt yup you heard that right my first goal was to get out of debt as soon as possible because i just couldn’t lift paycheck paycheck anymore my second goal was to invest in financial education and understand how millionaires became

Millionaires and my third goal was to retire early before age 60 because i realize how short my life is and i want to truly enjoy it by spending more time with my family and traveling the world my other goal is to either donate my time and money to help others in need and i want to go to the grocery store and pay for other people’s groceries and i want to bring

Food to the homeless shelters i want to donate my time to the children’s hospital when you write down your financial goals you need to make sure they’re measurable achievable and realistic and it’s probably unrealistic to become a millionaire overnight unless you win the lottery right i would suggest you write down the timeline of your net worth so something like

You’re gonna have one thousand dollars saved in three months you’re gonna have ten thousand dollars in a year you’re gonna have one hundred thousand dollars invested in three to five years or something like that for people on the fire journey they also write down their desire retirement age and absolute retirement age for us our desired retirement age is 45 and our

Absolute retirement age is 50. and it’s okay if you don’t have a perfect plan to achieve your financial goals right now i wrote down my financial goals on a piece of napkin when i sat in the restaurant on the day i completely paid off my debt back in 2016 the second step i took was to assess my current financial situation here are the three things i always ask my

Clients their income expenses and savings you need to know how much is coming in and how much is going out and how much is being saved and invested i also put together a net worth statement like i did in 2014 and that’s when i found out how deep of a hole i was in with my finances you want to put together your total assets and your total debt and then you subtract

See also  Is selling your house with owner financing a good option?

Your debt from your assets and that gives you the total net worth if you have debt you need to write down how much you owe in total how much you pay each month and break them down between principal and interest and the interest rate for each debt that you owe and let’s say you have a car loan you write down your monthly payment and i’ll just say it’s 400 a month

The interest rate is at let’s say four percent and the total loan balance as of today is twenty thousand dollars so instead of paying off your loan in five years i want you to create a debt payoff plan in a year and ask yourself if you could do it in a year and if you have fifty thousand dollars in a student loan right now could you pay it off in a year how about

Two years my financial coaching program can help you create a debt payoff plan and the goal is to pay it off within a year but that also depends on your income and the size of your debt right the next thing i did was pull up my total expenses how much did i pay in hoa utilities and gas how much did i pay for groceries and restaurants every month once that’s all

Done i look at how much i was investing towards my retirement and that could be your 401k tsp or ira i wrote down what percentage of my gross income and my take-home income i was contributing towards my retirement for example if i made 100 000 a year in gross income and i contributed 15 000 a year towards my 401k and ira then that’s 15 percent of my gross income

Going towards my retirement by the way you can get our free fire resources by visiting fisa.com contact you can also check out the fireside chat shop and i have all my stuff on my bookshelf at firesidechat.com shopping the third step i took was to take a look at my credit scores and my credit score back in 2013 or 2014 was just absolutely awful and it was like

Around 600 or something like that and there are so many websites to get a copy of your credit report for free and if they try to make you pay to see your credit score then it’s a scam okay by federal law consumers can request a free copy of their credit report once a year and i personally like using experian.com and it’s completely free to sign up i get an email

Alert from that website whenever my credit score increases or decreases or whenever my credit usage or income to debt ratio changes and i am not sponsored by experian i wish but i just want to make sure you’re aware of it when you get a copy of your credit report i would take a look at the negative factors on negative information that might be hurting your credit

Scores if you have anything that you want to dispute like if you see anything inaccurate on your report you can write a letter to the credit bureau and the bureau has like 45 days to investigate and respond to you on experian you can actually dispute your information on their website and it’s really easy to do so i will put their link in the description below your

Credit scores will be really important to you especially if you’re looking to buy a house in the future and having a good credit score could save you thousands of dollars on mortgage interest the fourth step i took was to prioritize my savings and investment accounts and i’m gonna pull up mine for example and this is not a simple thing to do because your financial

See also  How to Finance A Car the Smart Way

Situation could be different from mine but our number one priority is to invest in our employee sponsor retirement accounts up to the employer match the second priority was to fully fund our emergency fund and that was anywhere between three and six months in expenses the third priority was to maximize their contributions to our hsas and iras and i will link

Those videos in our description below the next priority was to maximize our employer sponsor retirement accounts and this year we could contribute up to 20 500. your investment strategy will also depend on your income and expenses and once you pay off your debt your initial goal is to save at least 15 percent of your income and as our income went up we increased

Our retirement contributions from 15 to 20 25 and then eventually 30 once we maximize our retirement contributions we open a taxable brokerage account to invest our excess cash into our non-retirement account we also open several savings accounts to fund our lifestyle invest my daughter’s future and create generational wealth once we prioritized our savings and

Investment accounts our fifth step was to set up automatic contributions we created a comprehensive budget system so that our money goes directly to our savings and investment accounts what’s really amazing about the automatic automatic investments is that we don’t think twice about these savings we have allocated how much money we’re going to spend on restaurants

Each month we have allocated how much money we’re going to spend on travel next month we’ve allocated how much money we’re going to invest for our future every single month sounds simple right but it’s only simple if you consistently track your expenses which is your six step and if you’re in debt i always recommend that you track your expenses every single day

Your money is tight because you’re putting every dollar you possibly can to pay off your debt right if you’re out of debt then i recommend you track your spending at least twice a week it doesn’t matter if your net worth is one hundred thousand dollars half a million dollars or you’re a millionaire you should always track your expenses on your budget if you’re not

A spreadsheet person there are so many apps out there that you can help that can help you track your expenses if you’re my client i use the spreadsheet to track your expenses to help you zero out your budget the seventh step you should take is to improve your spending plan with your personalized budget and i divide my clients budget by needs and wants right or

Expenses my wife and i project our expenses throughout the year so we know how much money we can invest towards our early retirement since we’re on a fire journey our goal is to save at least 50 percent of our income if you can’t achieve that 50 savings rate you need to reassess your expenses most of the time people spend too much money on groceries and restaurants

And you need to be very intentional with every dollar you spend and you need to try to put a cap on each category and you can’t go into the month of may and spend one thousand dollars on restaurants but you also spend one thousand dollars on groceries for a family of three people right do you really need all five streaming services do you really need to spend 100

A month on subscriptions that you barely use and then the next step we did was listing our irregular expenses and the most common annual expenses are your dmv registration fees doctor’s visits for both medical and dental birthday presents and parties anniversary and car maintenances and these items can cost you hundreds of dollars at a time right what i notice

With my clients is that they get these these uh surprising bills and they don’t get to save as much money as they could for that month and there’s a way to budget for these irregular expenses and i will link that video in the description below you can also schedule a free one-on-one 20 minute financial coaching session by visiting fisa.com coaching the ninth step

See also  Mercor Finance visits Boosting Alpha HQ

Is to evaluate your income and let’s say you did all you could to reduce your expenses and you still feel like you don’t have enough coming in you need to take a look at your overall income and i’ll be completely honest with you and if you start the fire journey at age 35 and you’re looking to retire in 10 years making 50 000 a year is going to be very difficult

Unless you’re saving 70 or 80 of your income right having a high savings rate will get you to fire quick no doubt about that but i want you to be able to enjoy your life while you’re on the fire journey as well and you shouldn’t have to save eighty percent of your income making fifty thousand dollars a year your goals should be making one hundred thousand dollars

One hundred and fifty thousand dollars or two hundred thousand dollars a year or more in earned income if you’re in a career field that caps out at 75 000 a year in income then you’re not growing and every one of you watching this channel has the potential to make 100 000 a year or more in annual income do not let anyone else tell you otherwise and when i began to

Pay off uh 110 000 in consumer debt i was only making 58 000 a year in gross income not only that i had a debt problem but i also had an income problem and i applied for several different jobs and then i eventually found a job that paid 85 000 a year to start and i was working between two jobs to pay off my debt within two years by the time i paid off my debt my

Income had increased to over 150 000 a year don’t ever be afraid to get out of your comfort zone and if you want to take any risk at all do it while you’re still young the tenth and final step i took was to create generational wealth and you should check out the video i made about the buy borrow die strategy and i will put that link in the description below i know

When i die the step up cost basis is going to help the people i i leave behind and my financial freedom isn’t just about me but it’s also leaving a legacy for my children and grandchildren i met with an estate attorney to make sure my will is in place and every asset has a beneficiary having a living trust is especially important for people with a net worth over

A million dollars or if you’re a single parent with at least half a million dollars in assets i know that our investment accounts will last my lifetime and the next generations long after i’m gone from this world and creating a generational wealth will also require you to teach your children or grandchildren the importance of investing and this is why investing

In financial education is more important than anything else take the time to talk to your beneficiaries then make sure they understand what to expect if anything happens to you i also have this fire checklist that you can download by visiting firestation.comcontact if you want to know more about how to invest in your to your generational wealth be sure to check

Out these two videos so with that said i appreciate you watching my video don’t forget to subscribe and i hope to see you in the next video have a good one

Transcribed from video
The Secret to Financial Freedom | 10 Steps to Achieve Financial Independence By FIRE Psy Chat