A Guide to Financial Freedom

There are many people who lack the proper knowledge to financially plan for their future. After graduation from college, I realized I was one of them. I became obsessed with finances and learned all I could. I started helping friends and family and developed the guide below that have helped people get on track financially. This guide is targeted at people living in the USA who are interested in financial freedom. This is not a one-size-fits-all. Please comment questions for detailed advice for a specific individual's case. Enjoy!

Step 1 Establish a General Budget

Monthly Average Net Income (+):
Monthly Average Expenditures (-):
Monthly Goal (-):
Monthly Remaining (=):
Know your budget like the back of your hand. Leftover cash should go towards goal additionally.
Know your net worth (assets + cash - debt = net worth)

Step 2 401k

Is 401k offered at employment?
YES

• Immediately Invest!
• Max out whatever they match no matter what!
• There is no better return than this

NO

• You will need to start an IRA, at step 5, and make it a goal to invest 15% of income
• Have this 15% automatically deducted so you never see it (can start at 5-10% for first year or two but get to 15% ASAP)

Step 3 Plan to Pay Down High-Interest Debt

• If interest > 8% this needs to be priority
  • Monthly goal needs to be set to get rid of this ASAP before moving on
  • If you have this, you should be acting like you are homeless until it is gone
• If interest < 8% have solid monthly payment set in place but can move on

Step 4 Emergency Fund (3 - 6 month)

• You need 3 - 6 months of current monthly expenditures in savings account
• Make this the monthly goal before moving on
  • Saves you from periods of unemployment, economy crashes, unexpected burdens
• Once you have it do not touch it unless you HAVE to
• Place money into Savings account
  • I went through online savings for a higher interest rate

Step 5 Retirement Fund

• Start an IRA
  • Retirement contributions should be 15% of income
  • If 401k is at 5% of income then this would be the 10% for example
• This is where your money begins to make you money
• Set up monthly payments that come out immediately
• Money usually grows by 8-12% (over long term)
• With compounding this results in a lot of money in the future!

Step 6 Short Term and Long Term Goals

• Start saving for short term expenses
  • Car, vacation, etc.
• Long term expenses
  • House down payment (usually 20% of house cost)
• This money can be kept in savings, cd’s, bonds, money market depending on time scale
  • I prefer online savings account since it earns higher interest (1.05% APY)
    • Money needs to be moved to checking before major purchase which takes 3 days typically
    • Then, write the check from normal checking account for major purchase

Tips

• Find multiple streams of income
• Find out what is eating at your budget and cut it back
• Bargain shop
• Make your monthly goal a struggle to reach
• Sell things you don’t need, minimalism
• Look to consolidate loans if possible
• Have insurance, people have ruined their lives by not having it
• Set up a Financial Management Account https://www.mint.com/ (https://www.mint.com/)
  • Has all your accounts in one, budgets, goals, track money flow etc.
• Investing early is extremely important, get to the point where you can do this ASAP
  • Try to be investing 15% of income
  • 401k match helps a ton, EX: you put in 5% and they match 100% = 10% of income, which means only 5% needs to be going into Roth IRA
  • My retirement goal is 2 million but could get by on 1.5 million just fine
• Know how to boost credit score
  • I use app Credit Karma
  • Tells you what's lowering your score
• Credit cards can be very useful if used correctly
  • Always pay balance in full
  • Get cash back from use
  • My credit card has made me over $500 dollars and has a ton of benefits such as free theft protection and rental insurance etc.
• Don’t forget to live but live with frugality in mind
• Ask me if you have any questions on retirement accounts or anything related to financials

This was a general guideline I wrote for my brother, although I made it slightly broader. That being said, this financial plan is not a one-size-fits-all. Keep doing research; add and adjust accordingly. Good luck!