Just because it's simple doesn't mean it's easy.
Based upon all my study and my personal experience, there are three steps to financial freedom.
Step 1: Stewardship
I personally believe the first step toward financial freedom is doing a good job managing what you have.
Imagine being a mom of a kid with a pet goldfish (that you take care of) who now wants a puppy. Wouldn't you think, “first, show me you can take care of a goldfish. Then we'll see about the puppy.” I think money is the same way. If you can't manage the money you have now, for most people more money will just mean more problems (the rappers know from personal experience that this is the case).
If you are working a full time job as a professional, your biggest problem is not an income problem. It's a lack of intentionality with and attention to the money you have. It's a spending problem. It's wanting to make yourself feel better through stuff (which never works in the long run).
So the first step to financial freedom is learning to spend less than you make, running your life like a profitable business. When you open up a little margin, you can use that margin to pay down high interest rate debt.
Step 2: Investing
If your company matches your retirement plan contributions, this match is the biggest ROI with the lowest risk.
The next best rate of return is paying off your high interest rate. Historically, the market returns about 7%. If your credit card is at 28%, you are digging the hole faster than you are throwing dirt in it.
The third best rate of return is investing. I like very boring ETFs and index funds. I don't believe day trading is investing – it's speculation and gambling. If you are looking for excitement, go to Six Flags. Don't try to get excitement from investments.
I'm not licensed to give investment advice, so talk to someone who is before you make a decision, but this boring approach has worked for us.
Step 3: Earn More
Now that you've proved you can wisely manage the money you have, focus in on earning more. Look for opportunities at work to help the company spend less or sell more and negotiate a cut of that for yourself as compensation. Ask for a raise. Negotiate a bonus.
If you have truly maxed out the opportunities at your job and you've been there at least a year to a year and a half, sometimes the best way to increase your income is to move to another employer. If you do, be sure you don't accept the first offer that is presented to you. Employers make their offer artificially low because they expect you to negotiate and have left themselves room to do so. If you don't do what they expect, you've left money on the table.
If you don't want to change employers, consider ways to make money outside your day job. Most wealthy people have multiple streams of income, so this can be your opportunity to set that up.
Entrepreneurship has a steep learning curve, so expect to have failed businesses and even within successful businesses to have failed launches, failed products, and failed offerings. Expect people to tell you no. Be resilient and keep going.
Most of school is about learning information and retaining it until the test, but math and foreign languages are skills. Likewise, entrepreneurship is a skill. Learning to walk and to ride a bike and to drive a car are skills. Falling down and getting it wrong is normal. Hang in there.
Once you get your business working, look at ways to increase revenue. Add new clients. Sell more to existing clients. If you are in demand, raise your rates.
At each step, you will need to learn new information, develop new skills, and practice new behaviors. You will essentially need to become a new person. This is where my coaching can help you. I specialize in helping you uncover and move past the thoughts you have that are in the way of becoming the person you want to be. To learn more about my coaching or my money management course, schedule a free one on one call today.
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