Simple Steps to Financial Freedom

Updated : Sep 04, 2019 in Articles

Simple Steps to Financial Freedom


You may have heard that money doesn’t buy happiness and the person that told you that probably had a lot of money, but they aren’t exactly wrong. I think what’s closer to the truth is having money’s not everything not having it is. Kanye West said that. And while I don’t always take financial advice from rappers, Kanye’s got a pretty good point. When you don’t have money it becomes the source of a lot of pain, frustration, and anger. It consumes your life and becomes the lens with which you see the world. “Hey, how much did that cost?” “Oh, that must’ve been expensive.” “Hey, I think you owe me 20 bucks. You can… you can pay me later. That’s… Venmo?” When we don’t have it, every problem seems to revolve around money. And while being rich won’t fix every problem in your life, stacking up some money seems like a worthwhile pursuit. When you become financially free, you will no longer make every decision solely based on money. You don’t take the job just because it pays better, you don’t have to look at the price of organic groceries to make sure you can afford them, hell, you can take Uber Black to the airport …every once in awhile. Imagine being at a place where you never had to worry about money again. And maybe not even that far Imagine a place where money wasn’t the major stressor in your life and on your relationships. The steps to get there are simple, but it’s not gonna happen overnight. So let’s get started. Step one: create an emergency fund. Save a thousand dollars and put it into an emergency fund that you’ll only use in dire circumstances. I remember reading a story from Dave Ramsey from someone who literally put their emergency fund inside a frame with the words “break glass in case of emergency.” Hold up though. Emergencies don’t include beer money, vacations, or even an engagement ring. It’s a… it’s a minimalist ring. This money should only be used if, and when, shit hits the fan. When your car breaks down, when you need to replace your water heater, basically when your life would otherwise become completely derailed, that’s when you go to the emergency fund. Why create an emergency fund? Because everything that can go wrong, will go wrong and instead of borrowing money from your family again, or pulling out your credit card, pushing yourself further into debt, you’ll have something to fall back on. The great thing about the emergency fund is that it starts to give you that feeling of financial freedom. For the first time maybe in your adult life, you have some room to breathe. This step is the quickest way to finally start to gain some control back in your life. Step two: pay off your debt. About 80% of American adults are in debt and we’ve just accepted this as the status quo. Maybe we bought shit we didn’t need to furnish an apartment we couldn’t afford, or purchased a new car when we could’ve bought used. For me, one of the biggest problem with debt is that it restricts your monthly income. So when you’re paying five to seven hundred dollars, even more on your mortgage, student loans, your car payment it severely restricts the amount of money you can save. The other thing I’ll say is that you’re gonna be saving thousands of dollars in interest if you’re able to pay off your loans quicker. Forget about cutting back on your daily lattes, this is where you’re gonna take the biggest step toward financial freedom. Let’s say you have a hundred thousand dollars in student loans at a 5 percent interest for a twenty year term if you only pay the minimum for the entire period of the loan, you’ll end up giving the bank over a hundred and fifty eight thousand dollars. This kinda feels like an emergency. So what’s the best way to pay off your debt early? There are a couple takes on how to do this. You could tackle the high interest loans first. Each loan is a different amount with a different interest rate. By the numbers, the smartest decision is to attack the highest interest rate first, then take them out one by one. Another option is called “The Debt Snowball.” It takes into account human behavior. By tackling the smallest loan first, we’re able to knock it out quicker, which helps build momentum and motivates us to pay off other loans. So when I first got really serious about paying off my debt early I brought everything and organized it into a spreadsheet like this. I would log in a couple times a week sometimes I would log in every single day and just visualize what it would be like to pay off some of these loans. And I would just delete them, one by one, like a madman, like somebody who’s completely delusional, and I would keep an eye on my monthly payments because I knew that if I could get them low enough, then I’d be able to move out of my parents’ house. So this is what drove me. I started to have hope again. I started to feel like there was a light at the end of the tunnel and I would actually eventually be able to pay all this off. Step three: create a runway. What would it feel like to have six to twelve months worth of expenses in your bank account at all times? Imagine the kind of freedom and stability you’d have knowing that if you ever got injured, lost your job, or you couldn’t find anymore clients, that you’d be taken care of for the foreseeable future. This is why having runway is so important. Open up a spreadsheet and take account of all your monthly expenses. Rent, groceries, internet, insurance, Netflix, your phone bill, etc. So pulling all of this information into my spreadsheet was an amazing way for me to start to see what’s the absolute minimum that I needed to survive on? And as a freelance filmmaker with my income varying widely, this was a really powerful number to have. Okay, now for some tough math. Multiply that number by six months to get your first target runway goal. The next goal after that would be to get twelve months of runway. This number now becomes your baseline; it’s like an extended emergency fund. Except I wouldn’t put twenty two thousand dollars in a frame above your bed, I think the bank might be a little bit safer. Step four: start a retirement fund. Retirement funds are one of those things that you know you should do, but you haven’t done yet, but eventually you’ll get to it, but you probably never will. Retirement funds are those things that your friends talk about sometimes and whenever they do you just smile and nod, but really you’re thinking, “fuck you, Brian, you’re a piece of shit. I don’t care what your stocks are,” and then you think to yourself, “what’s a 401k I’m gonna look that up.” Personal finance is often about making short-term sacrifices for long-term gain. By saving a little bit each year you’ll be able to set yourself up for a dignified retirement. First, compound interest is the shit, and here’s why: So you have a lot of money, like you have ten thousand dollars, and then over the course of a year, that money is making money because you’re investing it into stocks and stuff and then you have more money at the end of the year so then the next year you’re making more money on top of that money and then that money’s making even more money and then the next year you’re making even more money. I’m just gonna do a quick illustration so it’s not as confusing. Say you put ten thousand dollars into a 401k receiving a ten percent annual return at the age of twenty if you never touch that money until you turn seventy years old you’ll have over 1.1 million dollars in the bank all that from simply putting away ten thousand dollars. Use a compound interest calculator online to see how much you could retire with based on your yearly savings. Alright, so for me personally, I invest at Vanguard vanguard.com, I invest primarily in low-cost mutual funds about ninety percent stocks, ten percent bonds. Now I chose this fund because it’s essentially a snapshot of the U.S. economy. So since 1923 when the S&P started it has produced a return of around ten to twelve percent, and that’s basically what this fund is giving me. Now that’s over the long run, we’re not talking about a five year period. So when you invest in the long run you’re not checking your Vanguard account every day, every other day, you’re putting your money in, you’re making sure you have everything set, and then you’re checking it maybe in six months, maybe in a year but you’re not stressing out every time that the stock market’s shaky. When 2008 hit, a lot of people lost money, but if you’re investing in the long term, that’s not gonna matter at all, because in thirty years, you’re gonna eventually make your money back. Now there are many many variables that will factor into your own investment strategy, like your age, your income, how much money you’ll think you’ll need when you retire, how much risk you’re willing to tolerate. Please do your research before investing. I’m not your financial manager, investor, or fiduciary. Read up and make a decision based on your life circumstances. This is not a definitive blueprint. If you’re a freelancer and you can’t stomach that much risk, or you’d feel safer if you had five thousand dollars emergency fund from the very beginning, then do that. Or maybe you can actually handle the extra risk and you decide, “I don’t wanna build six months of runway, I wanna actually start investing in my future and my retirement right now.” Then do that. I personally liked the idea of paying off my debt first, and then moving to my retirement fund, but for a lot of people if you’re not able to pay off your debt that quickly, you may want to actually start your retirement fund now, especially if you have a 401k-match with your company because then you’re gonna be able to take advantage of the compound interest. I wouldn’t have been able to pay off my debt if it wasn’t for reading books like Dave Ramsey’s “Total Money Makeover” or Ramit Sethi’s “I Will Teach You to be Rich.” I recommend reading one personal finance book a year, or listen to one of a hundred podcasts on the topic. This will help you rest your priorities every year as we can sometimes get distracted by shiny objects. Once you’ve got a solid emergency fund, pay off your debt, padding your bank account with runway, and you’ve got your retirement fund started, you’re on your way to financial freedom, and it won’t take finishing your retirement fund to finally realize that having money’s not everything. Is this an awkward time to ask for money? As you guys know, if you watch my channel a lot, I usually end my videos with a Patreon pitch. It’s how I’m able to make these videos ad-free, but before I do that today, I wanna be very clear, if you do not have the money, if you are trying to pay off your debt, and you’re trying to cut down as many expenses as possible, if you feel stressed out about buying a cup of coffee, please please please please please do not contribute to my Patreon this is not reverse psychology or anything, I truly want you guys to kick ass, I want you to do amazing stuff, and I want you to not feel stressed out about money, and I don’t want you to make bad decisions with your money. That said, if you do have the money, if you do… if you feel so inclined and you’re feeling great about it, I would love it if you would consider contributing to my Patreon account. I’ve been working my ass off to try to make really great videos and extra podcast episodes to add value to you guys, so these are some of the things that you can get from it. If you wanna support my channel I’ve set up a Patreon account, but I’m not just asking for your money. I’ve created tiers that get you access to content like my Patreon-only AMA podcast, and I also make videos on minimalism, filmmaking, and business. Learn things like how to grow an audience, or how to tell a great story through film. As always, thank you guys so much for watching, and I will see you next time.

100 Comments

  • If you're looking to get started on your path to financial freedom I'd recommend reading the books below. I wouldn't have been able to get out of debt or make this video without them. Let me know any other great resources that have helped you…

    The Total Money Makeover: https://goo.gl/jg55WS
    I Will Teach You to Be Rich: https://goo.gl/B1iES2
    Money Master the Game: https://goo.gl/e23iZZ

  • "please do not contribute to my patreon," I was thinking if this was reverse psychology until he said " this is not reverse psychology." lol

  • I’d say: Start fix your country. Most people from developed contries probably do not understand whatg you are speaking about. Make education and health care free of charge. Give people money when they are unemployed and you will free financial freedom.

  • Romanians own their houses. I bought my house when I got married. I have no debts and I am building a second house. But I am not rich. I don't work for a lot of money. Romanians work abroad and bring the cash home. The couples that rent pay in the big cities even a quarter of their salary. Students live like 4-5 ppl in a house. Financial Freedom in Romania is done by lying and stepping over other one. Honest is a weak stupid strategy. So is hard work :))) This video makes me laugh.

  • Compound interest calculators aren’t great as they don’t factor in the inflation rate. Many pensions don’t have real returns. They just stop individuals from not saving for retirement

  • The Sage does not hoard , the more he does for others the more he has. The more he thereby gives to others, the evermore he gets . Lao Tzu

  • Take care of your stuff. Learn how to fix things rather than paying to have them fixed or replaced. Notice when there are problems with your possessions so you can avoid bigger issues. Always keep your valued possessions safe. Being aware of what you have is important to financial decision making.

  • once i heard on the internet: if you cant afford to buy it twice, you cant afford it. or if it exceeds your monthly salary, you cant afford it.

  • I used to spend 2£ on soda pop every week. That's 104£ per year on pop. The tiniest changes really make the biggest difference.

  • This summer I started saving away money and I noticed something peculiar. I saved away a couple hundred a month, which had me itching for the wallet a lot because I wanted to spend it – but then my tax returns came in this August and I got pushed past the $2,000 mark and just like that… I didn't want to spend it anymore. I have debts, pretty big ones that'll take years to pay off, but for the first time in a while I kinda felt like "y'know what, I'll survive". I still want to buy things but I just don't now because I feel like I've got so far into my savings now that it would hurt me more than it would benefit me to use it the savings for fun. So, now, I'm just watching it grow. And as it does I feel a little bit more safe if something bad would happen.

  • These solutions apply to a very limited number of people. If you pay child support, have a student loan and the school was closed and your degree is useless and you still have 100k debt to pay back without said degree with a low paying job because the 8 years you wasted on what you thought would be a smart move just ended all of these options. People aren't realistic with these goals or plans. Its easy if you are single or had the time to get established correctly to follow these rules. But in real life its just a waste of time for many of us. None of these will work and you will work till the day you die. Just a slight rant of reality.

  • Investment can fuck you up hard. Really. Fucking. Hard. Do a shit load of research and either invest on your own or with a massive and well known investment corporation. If you invest with a smaller company and they fuck up, your money is pretty much gone

  • WOW A 1000US$ AT MONTH ON STUDENTS LOAN? IM LUCKY THE ONLY GOOD THING OF MY COUNTRY IS THE FREE UNIVERSITY (im argentinian)

  • I took loan from the bank for house. 40 000$ – 2.1% – for 25 years. I could give back load right now, but I am sure infliation will be close, what I will overpay for my loan, So I am 50/50% to give it back or not, becouse I can use these money right now. Whats your opinion. (ps. I am from 3rd world country and 40k = 200k in US).

  • My parents would save up euros or some other currency they couldn't exchange in a matter of minutes. That way, they couldn't waste it on unnecessary stuff.

  • Kanie West is a sell out, he sold his soul, he will live under the globalist agenda until the end of his days, he is puppet… sad life!!!

  • haha I do not have a car and I take a shower with no shower, I just heat my water in a bucket, so .. joke's on you , emergency fund. Greetings form Mexico,

  • Like I don't get it, how can u say money doesn't buy happiness???? This phrase comes from the poor people, yes those who barely can't afford anything. With money you do what you want, you go on vacation, you can create new things, you can marry, you can buy the car you love, you can buy and do more stuff..that you love. This brings freedom to you, you don't have to depend on anyone. And many more things… in this shitty world, money is everything. Stop spreading those things "blah blah money doesn't buy happiness..blah". GOD

  • You also need financial confidence, cause if you are not confident on your finances, then you can kiss the freedom bye bye.

  • if i tell you the minimum annual salary of a person from Portugal cant pay your "student loan 1" you won't believe it…

  • this is why i chose not to have kids. . . F*** this bulls*** world !!! How the F*** did we get hoodwinked into buying into the illusion of "money" ?!?

  • Below steps really helped me to become financially stable.
    1. Eliminate Depts.
    2. Pay yourself first.
    3. Set savings goals.
    4. Try to buy gold coins(especially if you live in India) .
    5. Avoid plastic money use real money .
    6. Go shopping with a list.
    7. Create an emergency fund.

  • Not having money makes you more obsessed with money because you need to pay bills or else. Once you have money you no longer have to obsess over it and can live your life without all of the stress and pain. You will have the time to focus on the family and things that you care about. Money is freedom. That is my life in a nutshell. Yes money is not everything, But man it sure is easier to live a good life with it.

  • I’ve made approximately $765,000 off my $87,000 Investment within 3months i started investing with Marilyn Su Thuyen.

  • WTF hapen with americans and his student debts, in spain university cost like 1k a year and i have a work now in a big company.

  • Decent content, but the title is misleading. Financial independence is the status of having enough income to pay one's living expenses for the rest of one's life without having to be employed or dependant on others. I don't believe you will achieve that with these strategies. There are good ways however to sort and prioritize your finances.

  • How to live without any debt?

    Don't buy things you don't have money for yet.
    Wait until you have the money and then buy them.

  • Really wonderful video! Feeling like I just learned something really important for my life, I am sorry for not being able to help your patreon, because if I could I certainly would. Grateful for the video, hope to be able to help others some day like you just did for me.

  • Matt D'avella,
    Great video love the suggestions! I knew about the debt snowball and starting with the high interest rates first. But I do have a question on that program I see you're using, I have been looking for something like that.

    When you add your Bill's and % rate in the program does it automatically add the % rate balance when you put in a payment that you've made?
    I hope you understand what I'm trying to say. Army Vet with PTSD.
    P.S, what is the program name?
    Thank you!
    Will

  • If you're like me you'll be stuck on number 2 for a number of years…so the rest of the video has no point for me at all. 4:32 is where it ends for me…I'll come back once I repay my debts. Thanks for the really unequivocal advice Matt.

  • I have an emergency fund at 10K for a couple years now. Everyones has to be different, but it would allow me in a case of emergency to pay rent for the next 6 months or take care of costs of my parents for the same time with zero additional income (which is fairly unlikely, still good to have). I wonder though where does financial freedom starts? When you have 100K in your bank account? When you make 10K a month consistently over years?

    I am super early into this and still spend way too much money on fancy restaurants but getting there :O)

  • Love your body language when you speak in order to make a joke or create a humorous atmosphere <3 Kind of embarassed rushed speech ^_^ Freaking awesome

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