So today's video is an
overview of the five steps to
financial freedom.
Plus,
I have a new format,
so comment below and tell me
if you like this new format,
or if you like the old format
better,
and let's dive right in.
So my five by two financial
freedom framework is going to
help you actually become
financially free by giving you
the simple steps in order to
do that.
Because 72% of Americans
report being financially
stressed each month.
And we for sure don't want
that.
Plus 75% of us can expect to
see our assets disappear
before we die,
if we do not have a proper
plan in place,
which is another reason I am
sharing this framework with
you guys today.
And I really liked this quote
by Jim Rohn says formal
education will make you a
living self-education will
make you a fortune.
And the reason I'm sharing
this is because I learned
quite a few things in college,
but I kind of didn't learn
certain life skills that I
feel like everyone needs to
learn.
For example,
how to buy a house and how to
buy a car without paying a lot
of money in order to do that,
and how to set up a budget,
these simple things that
pretty much most people are
going to do throughout their
lives.
So while yes,
I did learn a lot in college,
especially because I was a
business major,
but it didn't really relate to
my personal life that much.
So that is part of the reason
I am sharing this framework
with you so that you can get
those basic skills in order to
succeed at life and especially
with your finances.
And I just want to show you a
little bit of proof in case
you're thinking,
Tiffany people don't really
become financially free and
especially not at young ages.
I have a whole list of people
that have become financially
free at young ages.
As you can see,
Mr.
Money Mustache is at the top
of my list and all of these
people are part of the FIRE
movement,
financial independence retire
early movement.
And I go into more detail
about the FIRE movement in
another video.
So I will leave a link above
and below.
You can check that one out
later on.
But I just wanted to show you
that a lot of people are
retiring early or becoming
financially free at young ages
in their thirties and forties.
And you can see the last one
on my list is Paula
Pant at affordanything.com.
I have checked her website
multiple times for a lot of
real estate questions that I
have had.
Plus I have one more evidence
for you,
and that would be myself.
I became financially free at
age 38,
and I also became a
millionaire.
So if you are looking to do
one or both of those things,
make sure and hit that like
button and hit the subscribe
button and I'm going to get
right into my financial
freedom framework.
Here it is broken down for you
guys. So step one is all about our
mindset.
We need to believe that we can
become financially free and
then we need to know why we
want to become financially
free.
Then the second step is to
know where you are now,
where are you financially
right now?
So that we can move forward so
that we can make progress.
We need to know all of the
details about our spending
plan or a budget.
Like a lot of people like to
call it,
but I like to call it a
spending plan and we want to
know our net worth so that we
can increase that over time.
And then the step three is to
know where you're going,
where you're headed.
You want to know what your
financial freedom number is.
The actual amount you'll need
to have invested in order to
become financially free and
live off of your investments.
And then you want to know when
you want to achieve financial
freedom and we will figure out
how to do that.
And then step four is how you
are going to get there,
how you will become
financially free.
We will talk about decreasing
our expenses.
And don't worry,
it's not all about just
cutting back on everything and
not living a joyful life and
enjoying things.
Plus,
we'll talk about increasing
our income because that is the
flip side of decreasing our
expenses.
And then we'll also want to
make our money work for us
because we don't want to be
working for the money all of
the time.
And then the step number five
is to stay financially free.
We want to secure that
financial freedom and we do
that by being smart and also
be giving.
So let's go over each of these
in a little bit more detail.
Let's dive in and talk about
step number one,
which is all about our
mindset.
Believing we can become
financially free and then
understanding why we want to
become financially free.
We really have to have the
right mindset to become
financially free,
to work on our financial
freedom plan.
We can be given all of the
tactics and even the best
investments to make,
but if we don't actually
believe we are going to become
financially free,
then we most likely will not
take that action.
So make sure and have that
belief of becoming financially
free.
Achieving financial freedom
begins with that belief
because what you believe will
happen,
will happen.
If you believe you'll be stuck
at your nine to five job for
the rest of your life,
then you are going to be stuck
at a nine to five job,
the rest of your life and not
be able to retire.
But if you believe you can
become financially free,
then you will be able to,
you have to take that action
once you have that belief,
you can't just believe it and
kind of will it to be.
You have to also take the
action along with your belief.
And then the second part is to
know why you want financial
freedom.
This will help motivate you on
your path to becoming
financially free.
We need a reason to be on the
path to financial freedom,
and we can create a why
statement in order to help us
remember why we want to become
financially free.
For example,
some of my why statement
includes building up my own
dream instead of building up
someone else's dream and also
not having to ask for a day
off and just being able to
spend time on things that I
want to be spending time on or
spending time with people I
want to be spending time with.
So think about some different
reasons why you want to become
financially free and actually
write them down,
create that why statement.
You can turn it into multiple
sentences,
have a little paragraph,
and you can reference that
when you start to deviate off
the path,
or if you just get discouraged
and it can be something as
simple as you just don't want
to be stressed about money.
You don't want to be in debt
anymore.
You want to have that peace of
mind and be able to sleep at
night.
And then the second part of my
five by two financial freedom
framework is to know where you
are now.
We're going to talk about our
spending plan and our net
worth.
So I know a lot of people like
to use the term budget,
but I think it's more fun to
say a spending plan.
So you really want to have
your budget or spending plan
in place.
You want to know all of your
income that's coming in and
you want to know all of your
expenses,
everything that is going out
and where it's going out to.
We can't know where we're
headed,
if we don't know where we are
currently with our finances,
one of the things that I like
to use that makes it a lot
easier to keep my spending
plan up to date is a free app.
It's called Personal Capital.
You can hook all of your
financial accounts to Personal
Capital.
Like your checking,
your savings,
your credit cards,
your mortgage,
your 401k,
everything that you can think
of, hook it all to Personal
Capital so that you can see
everything in one place.
And it makes it really easy to
start tracking where you are
spending your money.
And then you can start to make
changes and say,
okay,
maybe I shouldn't be eating at
Chick-fil-A as much,
or maybe I shouldn't be going
clothes shopping as much.
If Personal Capital is
something you're interested
in, I will leave my referral link
below. You can click on that link to
set up a free account with
Personal Capital.
Otherwise you can just set up
a,
an Excel spreadsheet or even
just handwrite everything,
but figure out exactly where
you are with your finances.
What's coming in and what's
going out and net worth is
your assets minus your
liabilities,
essentially what you own minus
what you owe.
And you want this number to
increase over time,
even though it will go down
sometimes,
especially when the stock
market is down,
but over the long-term,
you want to see this number
increase.
And just to give you a quick
example of this would be
taking your car that you have,
your home that you have,
the value of those two things,
the amount that you have in
your checking and your savings
and your 401k,
things like that,
and add all of those things
up.
And then you'll take all of
your debts,
everything that you owe,
which could be your car loan
and your mortgage loan that
you have,
and any student loans,
any credit card debt that you
might have.
And you'll subtract that from
your assets,
from everything that you own,
and that is going to be your
net worth.
And part of the reason we are
figuring this out now is
because it's going to come
into play later in the
process.
Comment below and tell me if
you already know your net
worth.
And then the third step is to
figure out where you're going.
We want to figure out our
financial freedom number and
when you want to be
financially free.
So let's talk about your
financial freedom number.
In order to figure out the
amount you need to have
invested,
not sitting in a savings
account,
but actually invested,
you'll want to take your
annual expenses,
and this will be your expenses
during retirement.
And I know that can be kind of
a hard concept,
but to make it easier,
you can just do your annual
expenses currently and maybe
add a little bit of a buffer
to that.
So just give this a good
guess,
figure out what your annual
expenses would be.
And then you're going to
multiply that number by 25.
And that is going to give you
your financial freedom number.
And I go over this in more
detail in another video.
So I will leave a link above
and below.
You can check that one out
later on.
To give you an example if your
expenses are 50,000
a year,
you're going to multiply that
by the number 25.
And that's going to give you
1.25
million,
and that would be your
financial freedom number,
that number or amount you want
to work toward to have
invested.
And then the second part of
this step is going to be when
you want to achieve financial
freedom,
when you want to become
financially free.
And there is a really cool
calculator online,
and I put the link here,
it's net worthify dot com and
this is going to help you
figure out how much you'll
need to be investing currently
in order to achieve financial
freedom when you want to,
you'll want to make sure that
you are investing in things
that have a high enough risk
so that you can have a higher
return.
For example,
if you were looking to grow
your wealth,
you'll want to be investing in
mainly stocks because that
will help you grow your wealth
and bonds on the opposite end
will help you preserve your
wealth.
So once you hit financial
freedom,
you may want to transfer money
over to bonds or a bond fund.
And that way you can kind of
preserve your wealth instead
of focusing on growing your
wealth.
And then to just give you an
example,
I went to this calculator
online and typed in some
numbers.
So let's say you are aged 35
and you want to retire in 31
years at age 66.
So if you put in that you make
55,000
a year and you are investing
10% of that income,
and you already have a
portfolio amount of $82,500.
Then you would be able to have
a monthly investment of about
$417.
And that would get you to
financial freedom at age 66.
And just go and check out this
calculator because it's really
fun to run some different
scenarios and just see if you
increase that savings rate is
what it's called on here,
but the amount that you are
investing,
how much sooner you can
actually retire.
And if you've already used a
calculator similar to this or
this exact calculator,
let me know in the comments
and tell me if it was helpful
for you or not.
All right and then we are
moving to step number four,
which is how you will get
there, how you will get to financial
freedom.
And the first part of this is
going to be focusing on
decreasing our expenses and
increasing our income.
And the second part is going
to be focused on making your
money work for you.
So let's talk about decreasing
our expenses and increasing
our income.
You already know your expenses
and your income because you
set up your spending plan
earlier.
So this will make it really
easy.
You want to go over each
expense that you have and see
where you can cut back and
say,
okay,
where am I spending the most
money?
And do I really need to be
spending the money in these
certain categories?
Or is something else more
important?
Maybe you don't really care to
go out to eat.
Maybe you would rather go to a
play.
So cut back on going out to
eat,
and then you can spend money
on going to a play and also
take a look at your fixed
expenses,
especially your car insurance,
or even your rent and figure
out how you can reduce those
expenses.
You can call around to
different insurances and see
if they have better rates.
You just have to put forth a
little bit of effort and you
can cut back on a lot of
expenses.
And like I mentioned,
you want to match your
spending to your priorities,
not someone else's priorities,
and while you are decreasing
those expenses and then
increasing your income,
your happiness is also going
to increase because you are
focusing on spending money on
what's important to you.
And then as far as increasing
your income,
think about the lowest hanging
fruit.
What is going to be the
quickest way to increase your
income right now?
And that could be to just sell
a few items and have a little
boost in your income,
or maybe you haven't gotten a
raise at work for a while.
So ask for the raise,
or maybe it is time to switch
jobs and get an increase in
pay that way.
Think about some simple ways
that you can just increase
your income,
even if it is a really small
amount,
it is going to add up over
time.
And then the second part of
this is how to make your money
work for you,
instead of us working for the
money all of the time.
There are numerous ways to
make your money work for you.
You can start with one simple
way and then expand later.
I don't want you to feel
overwhelmed.
Here are some examples you can
invest in the stock market.
I talk about this all the time
on my channel,
and I have plenty of videos
about how to get started
investing in the stock market.
You can invest in stocks or in
funds,
or even in bonds,
if you're looking to preserve
your wealth,
but you can keep it very
simple.
You could just maybe set up a
Roth IRA.
I like using Vanguard and just
start contributing a small
amount each month into an
index fund.
And if you want to know what
my favorite index fund is,
I have a video for you.
I'll leave a link above and
below,
but just pick something and
get started.
And it doesn't have to be in
the stock market.
If that's not something that
interests you.
I also like investing in real
estate.
I like investing in buy and
hold properties.
So I buy the property,
plan to hold it for the
longterm.
So I'll put tenants in there
and then collect cashflow
every single month.
You don't have to use that
strategy if you don't want to.
There is a number of different
strategies that you could do.
You could invest in commercial
real estate or even do fix and
flips.
And then you could also set up
your own business if you want
to.
And one of the nice perks
about having your own business
is that you get to save a lot
of money in taxes,
but you also get to create
things that you are passionate
about.
So you could create some
digital products that could
start creating some passive
income for you.
So think of different ways on
how you want your money to
work for you.
Just pick one and start very
simply.
And then the last step,
step number five is securing
your financial freedom.
We're going to talk about
being smart and being giving.
So what I mean by being smart
is just take a step back and
think,
okay,
what are a few things that I
need to have in place in order
to make sure that I continue
to build my wealth or at least
preserve my wealth?
And one of those is going to
be to protect yourself.
Your investments.
You'll want to set up a will
or a trust.
Um, you want to make sure that you
have beneficiaries listed on
all of your investment
accounts,
things like that.
You want to protect those
investments.
You also want to make sure you
have insurance,
right?
So if you own a home,
you want home insurance.
You want to make sure that if
there is a fire or something
bad,
that happens that you have
insurance that can help take
care of that.
And then you'll also want to
be flexible.
So this just means that you
want to keep an eye on your
investments and on the stock
market,
if you've chosen to invest in
the stock market.
And when you see a decrease in
the stock market,
when things start to go down,
you'll want to slowly decrease
your spending.
Or if you see an increase in
the stock market,
your investments go way up.
Then you could increase your
spending a little bit and have
a little bit more fun.
So just be willing to be
flexible.
And then also just watch for
opportunities just because
you're financially free.
Doesn't mean you can't invest
anymore.
Look for opportunities that
you could even make your money
work a little bit more for
you.
Maybe you have a daughter or a
granddaughter that wants to
start a business.
Maybe you could give her some
capital to get started,
but take a little percentage
back and then invest that
percentage in another
grandchild or something like
that. Just be aware of different
opportunities that could be
coming your way and then make
sure to keep an eye on how
much you're paying in taxes,
you want to keep those as low
as possible.
So realize what's in your tax
advantaged accounts and your
non tax advantage accounts and
make sure that you are
depleting those in the best
way possible.
And then the second part is to
be giving.
Generosity is the path to
wealth,
be giving throughout your
entire journey.
And I really feel like this
makes a big difference,
even though it seems
counter-intuitive to building
your wealth,
if you are giving away money,
but we don't want to be just
focused on the money itself
because that is going to make
us super selfish and very
unhappy.
So we want to make sure that
we are looking out for others,
and I'm not saying be extreme
in your giving.
You don't want to give away
all of your investments and
then run out of money in
retirement.
But I think that we can share,
and we can inspire other
people and be helpful toward
others.
And also you'll want to be
smart and secure your
investment so that you can
leave a legacy for your
family,
for your posterity.
Instead of thinking about
getting and spending all of
the time,
let's focus more on giving and
receiving and participating
kind of in a larger circle.
So it's not just all about us.
And then remember to be
satisfied with what you have.
Otherwise,
you'll continue to just want
more and more and more,
and it will never be enough.
You'll never be content.
And we definitely don't want
that happening.
We want to make sure we are
living a balanced life and not
just focusing on the money all
of the time.
And I go into depth a little
bit more about this in another
video.
So I'll leave a link above and
below.
And I just wanted to share the
study that was done.
So a team of researchers found
that generous people have
healthier bodies,
minds and relationships,
and in the long run,
they actually make more money
than people who are selfish.
In other words,
it literally pays to be
generous.
So it's not just me saying
this, but there have been studies
that have been done show that
people are actually healthier,
which reduces your medical
expenses and they are happier
and even wealthier.
So this is my five by two
financial freedom framework.
And if you found this video
helpful,
please hit that like button
and share it with someone else
who would like to hear this
information,
and to the subscribe button,
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channel and hit the little
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post new videos.
And if you want to see even
more content from me,
make sure to check out the
videos on the side of the
screen.
Thanks so much for watching.
I'll see you in the next
video.