My honest advice to someone who wants financial freedom

Summary

This video shares the journey and advice of an individual who achieved financial freedom and millionaire status in their 20s. It offers a step-by-step guide to achieving financial independence, starting with calculating your 'freedom figure'—the amount needed to live without financial worry. Key strategies include smart investments, living below your means, leveraging credit, creating additional income streams, and using money for growth. Practical tips like car hacking, brand hacking, and tax-saving methods are also shared, aiming to help viewers achieve financial security and build wealth through wise financial choices.

Takeaways

• 😀 Financial freedom starts with figuring out your 'freedom figure' — the amount of money you need to live comfortably without worrying about expenses.
• 😀 To achieve financial freedom, you need to invest wisely. The S&P 500 index fund is a great option for consistent long-term growth.
• 😀 Use the 25x rule: Multiply your yearly living expenses by 25 to calculate how much you need to have invested for passive income to cover your lifestyle.
• 😀 Dollar-cost averaging is a smart investment strategy — invest the same amount regularly, regardless of market fluctuations, to reduce the risk of buying high.
• 😀 Car hacking is a great way to save money: buy a quality used car that has already depreciated, avoiding costly monthly payments and car loans.
• 😀 Brand hacking can help you save money without compromising quality. Generic brands can save you up to 87% compared to premium brands.
• 😀 Consider house hacking: Buy a duplex or a property with extra rooms and rent out the other units to cover your mortgage or living costs.
• 😀 Use tax hacks to reduce your liabilities: Take advantage of deductions, tax-free savings accounts (like ISAs or Roth IRAs), and other legal strategies to keep more of your earnings.
• 😀 Build your credit score with responsible credit card use. A good credit score helps you secure better loans and lower interest rates, saving you money in the long run.
• 😀 Create multiple income streams. Relying solely on your job is risky — add side hustles or investment income to build a more secure financial foundation.
• 😀 Use money as a tool for expansion. Rather than spending more as you earn more, focus on reinvesting and generating passive income through investments in stocks, real estate, or other assets.

Q & A

What is financial freedom and why is it important?

Financial freedom means having enough income from investments or other sources to cover your expenses without having to work actively for money. It's important because it allows you to live life on your terms, focusing on what you enjoy without being tied to a job or paycheck.

How do you determine your 'freedom figure'?

Your 'freedom figure' is the amount of money you need to live your desired lifestyle without working. To calculate it, estimate the yearly cost of living, including housing, car, vacations, bills, food, health insurance, and leisure. Multiply that total by 25 using the 'Rule of 25' to figure out how much you need invested to generate enough passive income.

What is the Rule of 25 and how does it relate to financial freedom?

The Rule of 25 is a guideline for calculating how much you need to save and invest to be financially free. By multiplying your annual expenses by 25, you determine the amount needed to generate enough passive income to cover those expenses. This is based on the assumption that you can safely withdraw 4% of your investments each year.

What investment strategies should you follow to reach financial freedom?

Investing in a diversified portfolio, such as an S&P 500 index fund, is a solid strategy. Dollar-cost averaging is also recommended, which involves investing a fixed amount consistently regardless of market conditions. This helps you avoid buying in when prices are high, lowering your average purchase cost over time.

How does using credit cards wisely contribute to financial freedom?

Credit cards, when used responsibly, can help build a strong credit score, which is essential for obtaining favorable loan terms. A high credit score can save you money on things like mortgages, car loans, and insurance premiums by qualifying you for lower interest rates.

What are some practical ways to save money on everyday expenses?

Some practical ways to save include car hacking (buying used cars that have already depreciated), brand hacking (choosing generic or store-brand products), and living in a duplex or renting out part of your home to cover mortgage payments. Additionally, tax deductions for small businesses or side hustles can reduce your taxable income.

What is car hacking, and why is it a smart financial strategy?

Car hacking involves buying a quality used car that has already depreciated significantly, avoiding high monthly payments and loans. This allows you to drive a reliable car without the financial burden of new car loans, which are often a major drain on personal finances.

What is brand hacking and how can it help you save money?

Brand hacking is the practice of choosing generic or store-brand products over expensive name brands. Research shows that you can save up to 87% by switching to generic options, which often offer similar quality for a fraction of the price.

How can someone build additional income streams to achieve financial freedom?

Building multiple income streams is crucial for financial freedom. Consider side hustles like freelancing, affiliate marketing, e-commerce, or gig jobs that utilize your existing skills. The key is to diversify your income sources so that if one stream fails, others will continue to support you.

Why is it important to use money for its true function, and what does that mean?

The true function of money is to generate more money. Instead of using it solely for consumption or buying depreciating assets, wealthy people invest their money to create passive income. By investing wisely in stocks, real estate, or other assets, you can make your money work for you and achieve long-term financial freedom.