on this channel I talk a lot about investing the whole idea is that we're trying to build
wealth as quickly as possible and by making good financial decisions but we're at the
end of the year and what happens at the end of the year people are trying to make resolutions
people are motivated to try to improve their lives and I wanted to talk about five steps
that I'm taking to make sure that I can reach Financial Independence this is more than just
investing that's pretty much only what I talk about on this channel and I want to go a little
bit away from that and talk about some of the behavioral aspects of finance that makes such
a big impact on your long-term financial future that I wanted to discuss it because I feel like
it doesn't get talked about enough so these are the five steps that I'm going to be using to make
sure that I can build wealth and not only build wealth but be able to be financially independent
this is more than just having x amount of dollars in the bank it's about being able to
be able to trade your time for money this is why it's so early on you're working so hard to try to
make as much money as possible because you don't have the ability to not work and we want to get to
the point where we can decide what we want to do with our lives and these are the five main steps
that I wanted to talk about in this video they might not work for everyone but these are the five
steps that I'm using and let me know which steps you would swap out or which ones you think are the
most important to your financial Journey so number one I put this up first because I think it's the
most important and that's making sure that my expenses stay the same no matter where I am in my
life does the idea of the hedonic treadmill that gets talked about so frequently on YouTube it's
the idea that no matter what you do and change in your life your level of happiness is going to go
down to a certain Baseline and this is not going to change whether if you buy a brand new car or a
new house or if you buy some new jewelry and it's the idea of keeping up with the Joneses where you
see your friends are buying other stuff so you want to be just like them and you spend your
money on that as well and we want to avoid that at all costs the whole idea of getting raises and
progressing in your career is that you're going to have more money to be able to invest and Save
my main philosophy is that I'm trying to keep my expenses exactly the same so that's why I
don't budget because ideally month to month my expenses are going to be exactly the same so
what I'm getting raises at work or maybe I get a bonus work some extra overtime that is additional
money that's going to be automatically invested and saved for the long term instead of something
where I'm like oh I got an extra hundred dollars this month I might as well go out to a nice dinner
this doesn't mean that you can enjoy your life but it's the idea of as you progressively get a
higher and higher paying job if you can keep your expenses the same those raises are automatically
going in and increasing your net worth almost immediately by being able to be invested put
into a a safety fund something that's going to protect you financially for the long term instead
of just immediately spending it so this is the most critical thing for me and this is where I'm
planning for the next year and I'm looking to see what my major expenses are just so I have
a baseline of what my minimum expenses are going to be so that when I do and Theory get some raises
or work some extra overtime it'll kind of have an idea of where I'll be spending on the stuff
that I have to like food gas groceries that type of stuff so that everything additional
can be invested that's how I went from pretty much living paycheck to paycheck in 2020 when I started
my career field to saving 35 percent of my income and investing that all uh in this current month of
December so this was a huge change for me that I didn't make that much more money but the idea
is that I kept my expenses relatively the same I downsized when I came to housing that's been
able to allow me to invest way more aggressively than I would if I was keeping the same lifestyle
and increasing my spending as my income went up and going along with that additional investing is
number two we're going to talk about the dividend snowball and if you don't want to use the dividend
snowball it's just consistent investing it's the idea of avoiding lump sum the more decisions that
have to be made about when and where you want to invest the less likely I believe you're going to
actually successfully invest the whole idea of the dividend snowball and consistent investing
is that if you can take some of the decision processes out of it out of investing you're more
likely going to be able to invest more money into the overall Market the dividends Noble for people
that don't know I'll throw up a video I made a full video about it like a week and a half ago
talking about it but the idea of using dividend stocks and the dividends that you come in give
you such an incredible level of flexibility you can do whatever you want with them you can use
them to pay off bills you can use them to reinvest back into your dividend stocks which is the drip
or the dividend reinvestment plan or you can use them for some fun expenses you can do whatever
you want with them and that's why I think it's so exciting for talking about financial Independence
that these dividends give you so much more flexibility than having your money locked
up an individual stock that you're not going to be able to touch unless you decide to actually
sell off your shares so that's why I think it's so beneficial but it's the idea of the dividends come
in and as we're trying to build wealth as quickly as possible to reach that level of financial
Independence it gets automatically invested back into that same stock so the next time that you get
a dividend it's going to be slightly higher this is why I set up automatic deposits weekly so I
don't have to think about it the less you have to think about it the less friction there is the more
I believe you'll be able to invest for the long term and that's why I put that as numbers two I'm
my step of my plan to reach Financial Independence then we're going to go down to number three and
this is kind of a controversial one it has to do with debt debt is a very important topic right
now because right now we have these student loan freezes who knows how much longer that's going to
go on but and part three is going to be talking about not paying off low interest debt this could
be a a faux pod depending on who you're talking to if you're talking to someone like Dave Ramsey
his whole thing is paying off debt as soon as possible but I don't think that's the best thing
money is a fantastic tool that's why we're trying to invest aggressively but there is an opportunity
cost that goes along with having money if you're putting additional funds or trying to pay off a
debt early that means that that money is not going to be able to be used elsewhere and in
this instance in my idea of low interest debt is anything below five percent the whole idea is that
while the stock market right now especially is so low I believe that it's going to be able to beat
that interest rate for the long term right now I have a car loan that's for the next three years
of an interest rate of 3.17 percent which in my mind is low interest debt is the idea that I could
pay that off early but in my mind would the stock market being down in Bear Market territory still
the likelihood of it going up the 10 which is the average that it's done over the past hundred years
I think is pretty high so I think it's going to be able to outperform that interest rate it
means that it's going to allow me to build more wealth for the long term my expectation is with
the market being down that when it does slingshot back up to where it was previously we're probably
going to see like 15 returns for the next five years not Financial advice that's just kind of
what I'm expecting to happen so yes you could pay off that debt early that's going to come with the
opportunity cost of not being able to invest in this fantastic opportunity when we're looking at
the market you should see these discount signs and all of your favorite stocks we're going to
try to avoid the growth stocks the ones that are going to have additional risk associated
with them but if this is a fantastic blue chip stock that's been around for a long time I am so
happy to buy shares of my favorite companies at a discount right now and not pay off that debt a
little bit early yes you're going to have to have your loan be a little bit larger this does not
apply to mortgages mortgages are kind of their own beast that's kind of why they have their own name
and it does not apply to that but for student loan payments for car debt I'm not going to be
paying off my low interest debt early and that's going to be part three number four is going to be
having to do with housing housing is the largest expense you're likely going to ever pay if you're
renting this is going to be a huge part of your income is just kind of Disappearing so the whole
idea is that we want to be able to buy a house as quickly as possible historically this has been the
best place for Americans and people around the world to build wealth and for a lot of people
it's the largest asset that they're ever going to own the problem with it is that it is not
liquid so it's a concept of being a house rich and cash poor you in theory if you look at your net
worth you have an incredible net worth because your house is increased in value significantly
over the past you know 10 15 years since you've lived in it but that cash is not accessible it's
something where in theory you do have it there but to be able to access it you're gonna have
to take out a an equity loan against your house or you're going to have to be able to sell it so
you don't have the liquid flexibility that this wealth building tool is going to have so as I'm
in my mid 20s I'm almost 26 my birthday is in like a week and a half two weeks I'm looking to buy my
first house with my partner which is incredibly exciting and thankfully we're on the same page
of what we're looking for we don't need to buy something that's going to impress our friends
or family members we're trying to buy something that's realistic and something that we're going
to be able to afford that's the biggest thing with housing prices and 2020 skyrocketing as
a result of people being less tied to the major cities interest rates falling housing prices went
up significantly during that time we saw housing prices in 2020 were up 11.3 percent and then they
went up 17.8 in 2021. so these people that know that housing is probably the biggest asset that
you'll ever buy in your life and they want to be a part of it instead of just throwing their money
away to a landlord with rent people were chasing houses that may have been out of their price range
and especially when you have things like not doing appraisals not doing inspections this brings a lot
of risk into the house buying process so my whole thing is not overpaying on a house that could be
size that could also be in a time like now not trying to chase the overall Market yes we want
to get you into a house as soon as possible but we want to make sure that you're actually
able to afford it and that you know we're making sure that historically you want to have like 25
percent of your income going to housing I know that with right now that could be a little bit
higher I'd probably go up to 40 just to make sure that you can get into a house as soon as possible
but you don't want to be house rich and cash poor on paper it'll make you look like you're
financially independent but when most of your cash is stored up in your house and you can't access it
easily not as uh flexible and not as financially independent as the dollar amount would make it
look like and the number five the last thing on this list is career growth career growth is kind
of a complicated topic because a lot of people you know picked a career when they're 18 years
old and they're afraid to move away from something that they spent so much money you know going to
a university a community college and they don't want to switch away from that but I'm here to say
that if you're in a career field that you don't love I think it's usually consider leaving it
and looking for something else it's not something where in the past you started in one career and
you worked in that one field or that one business for your entire life that's not the case anymore
historically on average people change careers between three and seven times during the course
of their lifetime this is not just change the business that they're working for these are major
career changes and if you're in something that is either mentally mentally physically draining
or it's just not something you enjoy it might be beneficial to look for other options we want
to get to the point we're financially independent but we don't want to have to slog through the next
5 10 15 years doing something that we absolutely hate just so that we can reach this future that's
going to be much better I'm in a career field where I'm not going to be making a lot of money
conservation is not something that's highly paid I could go on a full rant about why I disagree with
that as being a concept but that's the state of where it is so I'm looking for opportunities to
increase and my my company get higher and higher which will give me more responsibility which will
make me more attractive for future uh careers but I'm also trying to make the switch over to
a government job which historically is much better when it comes to benefits and job security so even
if you are set in the area that you are right now whether it be the job that you're working
at or the career field I think it's always nice to kind of look for other options out there because
you don't have to stay in a career field that you picked at 18 years old if you find something that
you think is going to improve your life whether it be a shorter commute better wages better benefits
I think it's worth taking a look at and it's not something that needs to be shamed everyone changes
jobs everyone changes career paths and if you're getting to the point where your job is burning you
out we were probably going to want to switch out of that and look for something that we're
going to enjoy a lot more so overall these are my five steps that I'm going to be taking to reach
Financial Independence Financial Independence looks different for pretty much everyone I've
talked about the fire movement where some people are looking to retire early and live off of you
know 25 000 a year and just live the simple life and not have to work for the rest of their lives
some people want to reach the type of Lifestyle where they're able to spend aggressively and
enjoy themselves that really is going to be different for every person but the five steps
that I talked about in this video I think are applicable to pretty much everyone because not
only are we trying to build wealth we're trying to avoid making these huge financial decisions
that are going to put us back significantly this is stuff like taking on additional debt
that you don't need this is stuff like having a major expense for something that could be
protected so making sure that your insurance payments are actually protecting you is a major
major factor that goes into Financial Independence that is not as exciting to talk about I talk about
a lot on this channel the importance of investing we're trying to translate our likely low wealth
because I'm in a low paying career field to make it to the point where we can retire comfortably in
the next 40 to 50 years but if you have to go back a step and you're Building Wealth for all these
years and you make this one major mistake and it pushes you back significantly that's going to be
not only demoralizing that's going to be really upsetting to see that you've kind of gone back a
couple steps so make sure that you're deductibles your liabilities are covered so that you're not
going to go backwards in addition to these five steps to try to build wealth going forward let
me know what you thought about this video and if there are any things that you would change
something that maybe I forgot that you believe is going to be very important or you've used
it yourself to build wealth and become financially independent let me know in the comments down below
and if you'd like to see more videos from me I'll throw it up on the screen right now I feel like
I've gotten the pointing wrong every time I've done it so it's on one of these sides as one of my
previous videos and if you have enjoyed my content be sure to subscribe to see the next video that I
put out and if you made it this far be sure to hit that like button because I'm sure the algorithm
will really appreciate it thanks for watching my name is Andy and I will see you in the next video