Simple Steps to Financial Freedom

Summary

This script outlines a step-by-step guide to achieving financial freedom, emphasizing the importance of creating a cash flow, building an emergency fund, mastering credit card usage, eliminating debt, and investing in tax-advantaged retirement accounts. It encourages viewers to enjoy the journey to financial independence, balancing current joys with future financial goals.

Takeaways

• 💼 **Create Cash Flow**: Start by generating income from a job, side hustle, or business to cover your basic needs and have surplus for financial goals.
• 💰 **Value Creation**: Enhance your earning power by increasing your value to your employer or customers and negotiating for higher pay.
• 🏦 **Emergency Fund**: Build a starter emergency fund of $2,000 to avoid living paycheck to paycheck and to cover unexpected expenses.
• 💳 **Master Credit Cards**: Avoid credit card debt which can hinder financial freedom; pay more than the minimum and aim to pay off the balance.
• 💲 **Full Emergency Fund**: Progress to a full emergency fund covering 3-6 months of living expenses for financial security and peace of mind.
• 📈 **Invest in Retirement Accounts**: Open and fund retirement accounts like 401K or Roth IRA to take advantage of tax benefits and grow your wealth.
• 🚫 **Debt Freedom**: Prioritize paying off all debts except mortgage to free up cash flow and feel the psychological benefits of being debt-free.
• 💎 **Maximize Retirement Accounts**: Contribute the maximum amount to your retirement accounts to accelerate your path to financial freedom.
• 🏡 **Avoid New Debt**: Refrain from taking on new debt, especially for depreciating assets like cars; save up to buy used cars in cash.
• 🌟 **Enjoy the Journey**: Financial freedom is a journey; balance saving and investing with enjoying life now, it's not just about a future destination.

Q & A

What is the first step towards achieving Financial Freedom according to the script?

The first step towards achieving Financial Freedom is creating a source of income, often referred to as 'Cash C', which provides enough cash flow to cover subsistence needs and have a surplus to put towards financial goals.

How does one increase their income as suggested in the script?

To increase income, one should focus on providing more value and then asking to be paid for that value. This could involve increasing skills, taking on more projects, gaining experience, expanding networks, and negotiating for higher pay.

What is the significance of creating a cash cow in the context of Financial Freedom?

Creating a cash cow refers to establishing a business or income stream that generates consistent and substantial profits. It's essential for Financial Freedom as it provides the necessary funds to cover living expenses and contribute to financial goals without constant work.

Why is building a starter emergency fund recommended in the script?

Building a starter emergency fund of $2,000 is recommended to break the cycle of living paycheck to paycheck. It provides a financial cushion for unexpected expenses without resorting to credit card debt.

How does mastering credit cards play a role in achieving Financial Freedom?

Mastering credit cards involves using them wisely to avoid high-interest debt. It's crucial for Financial Freedom because credit card debt can significantly hinder one's progress towards financial goals.

What is the recommended approach to handle credit card debt as per the script?

The script suggests stopping the use of credit cards temporarily, strategizing to find extra money to pay off the balance, and focusing on a short-term sprint to pay off the debt as quickly as possible.

Why is it important to build a full emergency fund according to the script?

A full emergency fund, typically 3 to 6 months of living expenses, provides financial security and the freedom to leave a toxic job or handle unexpected life events without financial stress.

What are the benefits of investing in tax-advantaged retirement accounts as mentioned in the script?

Investing in tax-advantaged retirement accounts allows for tax-deductible contributions, tax-free growth, and potentially tax-free withdrawals in retirement, which can significantly reduce lifetime tax bills and accelerate the path to Financial Freedom.

Why should one consider paying off all debts except for the mortgage?

Paying off all debts except for the mortgage is important because it reduces financial obligations and increases monthly cash flow, which can be directed towards investments and further financial goals, thus speeding up the journey to Financial Freedom.

How does the script define Financial Freedom?

The script defines Financial Freedom as a journey rather than a fixed destination. It's about having the option to pursue passions, take care of loved ones, and live without the necessity of working for money, all while maintaining a balance between enjoying life now and preparing for the future.

Outlines

00:00

💼 Building a Cash Cow for Financial Freedom

The speaker begins by emphasizing the importance of financial freedom and how it can be achieved by breaking it down into manageable steps. The first step is to create a source of income, or a 'cash cow', which can be a job, side hustle, or business. The goal is to generate enough cash flow to cover basic needs and have a surplus to put towards financial goals. The speaker challenges the notion that some people are not good at earning money, suggesting that earning money is a skill that can be learned. To increase income, one should focus on providing more value and negotiating for higher pay. The speaker also advises on choosing the right business model for a side hustle, recommending scalable online businesses over traditional brick-and-mortar businesses.

05:01

💳 Mastering Credit Cards and Building an Emergency Fund

The second paragraph focuses on the importance of mastering credit card use to avoid debt and interest payments. The speaker suggests temporarily stopping the use of credit cards to prevent further debt and strategizing ways to pay off existing balances. The goal is to build a starter emergency fund of $2,000, which is more than the average emergency expense. This fund helps break the cycle of living paycheck to paycheck and allows for 'aging' money in the bank. The speaker also recommends opening a high-yield savings account to keep this fund separate from everyday spending and to earn interest.

10:01

💹 Investing in Retirement Accounts and Becoming Debt-Free

The third paragraph discusses the next steps towards financial freedom, which include opening and funding retirement accounts, such as a 401k or a Roth IRA, to take advantage of tax savings. The speaker highlights the benefits of employer matches in 401k plans and the tax-free growth potential of Roth IRAs. The paragraph also addresses the need to pay off all other debts, except for mortgages, to achieve true financial freedom. The speaker advises against taking on new debt, especially for depreciating assets like cars, and suggests saving up to buy used cars in cash.

15:03

🚀 Maximizing Retirement Accounts and Enjoying the Journey

The final paragraph emphasizes the importance of maximizing contributions to all available retirement accounts, such as 401k, Roth IRA, and others, to build a strong financial foundation for the future. The speaker also introduces the concept of a 'Financial Freedom starter kit' to guide viewers on which accounts to open and how to invest in them. The paragraph concludes with a reminder that financial freedom is a journey, not a destination, and encourages viewers to enjoy the process, maintain a balance between saving for the future and enjoying life now, and to not feel guilty about spending on small joys.

Keywords

💡Financial Freedom

Financial Freedom refers to the state of having enough financial resources to cover one's living expenses without having to rely on a regular job or actively working. In the video, the concept is central to the narrative, with the speaker outlining steps to achieve this state. The goal is to be able to pursue passions and take care of loved ones without the pressure of needing to work for money.

💡Cash Flow

Cash flow is the money moving in and out of a business or individual's pocket. Positive cash flow means more money coming in than going out. The video emphasizes the importance of having a surplus cash flow to fund financial goals, suggesting ways to increase income and manage expenses to achieve this.

💡Income

Income is the money received, typically from work or investments. The video stresses the need to create a source of income as the foundational step towards financial freedom. It encourages viewers to seek ways to increase their income, such as by improving skills, taking on more projects, or starting a business.

💡Passive Income

Passive income is money earned with little to no effort by the recipient. The video touches on the idea of creating passive income streams as a means to financial freedom, suggesting business models like e-commerce or digital products that can generate income without constant active work.

💡Emergency Fund

An emergency fund is a financial cushion used to cover unexpected expenses or financial hardships. The video outlines creating an emergency fund as a critical step towards financial stability, suggesting starting with a $2,000 fund to cover average emergency expenses.

💡Credit Card Debt

Credit card debt refers to the money owed on credit cards. The video discusses the burden of credit card debt as a significant obstacle to financial freedom and provides advice on how to eliminate it, such as stopping the use of credit cards and focusing on paying off the balance.

💡Investing

Investing is the act of allocating resources, such as money, with the expectation of generating an income or profit. The video encourages investing as a means to grow wealth and achieve financial freedom, highlighting tax-advantaged retirement accounts as smart investment vehicles.

💡Debt-Free

Being debt-free means having no outstanding loans or debts. The video promotes becoming debt-free as a key step in achieving financial freedom, suggesting that it allows individuals to keep more of their income and accelerates progress towards financial goals.

💡Retirement Accounts

Retirement accounts are financial vehicles designed to save for retirement. The video discusses various types of retirement accounts, such as 401(k)s and IRAs, as tools for tax-efficient investing and emphasizes their importance in the journey towards financial freedom.

💡Tax-Advantaged

Tax-advantaged refers to financial products or strategies that provide tax benefits. The video highlights tax-advantaged retirement accounts as a way to save on taxes while investing, allowing contributions to grow tax-deferred or tax-free.

💡Mortgage

A mortgage is a loan used to finance the purchase of real estate. The video mentions mortgages as an example of debt that, while often necessary, should be managed carefully in the pursuit of financial freedom.

Highlights

Achieving Financial Freedom is simple if you take it one step at a time.

Financial Freedom allows you to pursue passions and take care of loved ones without work being mandatory.

Step Zero is creating a source of income to cover subsistence needs and have surplus for financial goals.

Earning money is a skill that can be learned by providing value and asking for appropriate compensation.

To increase income, improve skills, take on more projects, gain experience, and network.

Negotiate for pay raises regularly to reflect the value you bring to your company.

If you're entrepreneurial, choose scalable business models with high profit margins.

The first financial goal is to save $2,000 in a high-yield savings account for emergencies.

Having an emergency fund allows you to avoid living paycheck to paycheck and covers unexpected expenses.

Mastering credit cards is crucial for Financial Freedom; avoid carrying credit card debt.

To eliminate credit card debt, stop using cards, find extra money to pay off the balance, and focus on a short-term goal.

Building a full emergency fund of 3-6 months of living expenses provides job security and peace of mind.

Investing in tax-advantaged retirement accounts is a smart way to grow wealth for Financial Freedom.

401K and Roth IRA are popular retirement accounts that offer tax benefits.

If self-employed, consider a solo 401k or SEP IRA for retirement savings with high contribution limits.

Invest the money in your retirement accounts wisely to maximize growth.

Paying off all debt except for the mortgage is essential for true Financial Freedom.

Avoid taking on new debt, especially for depreciating assets like new cars.

Max out all retirement accounts and invest surplus money to accelerate Financial Freedom.

Financial Freedom is a journey, not a destination; enjoy the process and maintain a balance.

Transcripts

look I see you you work hard you did

everything that by Society standards you

thought you were supposed to do yet you

wonder if there's more to life than just

working to pay the bills a life where

work is optional you are free to pursue

your passions and you're able to take

amazing care of the ones that you love

although schools won't teach you

anything about this it turns out

achieving Financial Freedom is actually

simple like anything big in life if you

just take it one step at a time you can

get there these are the simple steps

that I took to reach Financial Freedom

in my 30s each step Builds on the other

and if you miss one step or do things

out of order Financial Freedom could

take you a lot longer than it needs to

so without further Ado let's start with

step zero that's right we have to start

at ground level which is to create what

I call your cash C achieving any

Financial goal first starts with having

money to put towards them that's why you

need to create a source of income

whether it's your career your job your

paycheck or a side hustle or a business

that you start bottom line is you need

need something that brings in enough

cash flow to cover not only your

subsistence needs but even extra you

need to have a surplus to put towards

your financial goals and get ahead now a

lot of times I hear people say things

like I suck at earning money I'm not

good at making money I I'm in a career

that doesn't pay a lot this is where you

really need to kind of challenge

yourself earning money earning lots of

it it's a skill like any other skill

this skill can be learned so just

breaking it down for you if you want to

earn more money you need to provide

provide more value and then ask to get

paid for the value that you're bringing

those are the two equations I really

want you to focus on this because like I

said this is Step Zero you can't really

accomplish anything else until you have

some Surplus from a cash C so if you're

working at a job find out how you can

increase your skills volunteer to take

on more projects to get more experience

expand your network and then negotiate

hard for your pay every single year if

not every quarter you need to sit down

with your manager and show them the

value that you've brought to the company

and then keep asking for more pay to to

compensate you and if you're not

bringing value to the company and you

don't feel like you deserve asking for a

raise then get yourself to a position

where you can ask for a raise where you

feel absolutely entitled to a raise if

you just bring the value you become

someone of value then the money is going

to come that's how it works so that's if

you're working at a company if you want

to go to entrepreneurship route you got

to also create your cash cow pick the

right business model pick a business

model such as online businesses that are

scalable e-commerce digital products

that have really high profit margins

don't get into a business such as a

brick-and-mortar business where it's

really hard to maintain large profit

margins and it's hard to scale you got

to create something that's going to be

your cash cow bottom line is whatever

your cash cow is you need one so that's

Step Zero now let's talk about step one

once you've got some Surplus money to

actually do something with the first

place to Route some of that extra cash

is towards building a starter emergency

fund we can't talk about financial fre

Freedom until we first have Financial

stability Financial Security and that

starts by having something of a cash

cushion that gets you out of the living

paycheck to paycheck cycle you want to

start having money in your bank account

that doesn't move it's the concept of

Aging your money if as soon as money

comes in and has to go right back out

the door towards expenses then your

money isn't Aging in your bank account

for very long whereas if you have money

sitting in there but you have so much

extra now you're starting to create more

financial cushion and this doesn't just

happen by accident you really need to

make it a goal so I want you to set a

goal to first save up just

$2,000 have $2,000 sitting in your

account that you never need to touch

better yet I recommend opening a high

yield savings account that is separate

from your everyday checking account

because these accounts pay high interest

and if it's not attached to your

everyday spending account you're less

likely to be tempted to dip into it and

the reason why I say start with $2,000

is because that is going to be more than

enough to cover the average emergency

expense which data shows is around

$1,400 so whether it's an emergency vet

visit for your cat an emergency car

repair or any other unexpected expense

this $2,000 cash cushion will be enough

to cover you so you can pay for it in

cash no stress and not have to get into

credit card debt for it and like I said

since every step Builds on the other the

benefit of starting with this step is

that it starts building your muscle of

saving it really is a muscle and since

$2,000 is not a large amount to save you

can get there relatively quickly get a

quick win and you're going to feel so

accomplished and good about yourself

that you're going to be super motivated

to tackle the rest of the steps to

Financial Freedom and that brings me to

The Next Step which is to master credit

cards according to a bank rate survey

over 50% of Americans are carrying

credit card debt and the total credit

card debt carried by Americans

collectively is over $1 trillion that's

the GDP of a small country so obviously

credit card debt is a huge huge obstacle

to Financial Freedom so before you move

any further you want to create a really

good relationship with credit cards like

straight up I love my credit cards I

love using them I don't think it's

necessary to completely cut credit cards

from your life and never use them I

think if used wisely they are actually a

great tool for Financial Freedom where

you can get a lot of free flights and

free things but you got to learn how to

beat credit card companies at their own

game don't let them get the better of

you so when you spend on a credit card

it might seem really convenient and then

just make the minimum payments but the

amount of interest that you pay is going

to be multiples more than the dollar

amount you originally put on your credit

card credit card companies don't want

you to know this they want you to just

enjoy the convenience and keep making

them tons and tons of money but check

this out let's say you bought something

for $1,000 on your credit card and if

you just make the minimum payments with

a 25% APR not only is it going to take

you more than 10 years to pay off that

balance but you're going to also have

paid over $1,400 in interest over that

period and that's on a $11,000 original

purchase and the numbers get even worse

the more you spend on a $10,000 credit

card balance not only will it take you

28 years to pay that off if you only do

the minimum payments but you will have

paid over

$144,000 in interest in that entire

period so you can quickly see why if you

don't Master credit cards Financial

Freedom is never going to happen for you

you just can't get ahead paying 25% so

here's my advice if you need some help

digging out of this credit card cycle

first I I want you to stop using credit

cards temporarily until you get a handle

on it it's best to just freeze that

credit card in a block of ice or even

cut it up and order a new one later but

the first step is to stop digging a

deeper hole then I want you to

strategize and think about how you can

hustle up extra money and really focus

on paying that balance down it's

incredible how much you can accomplish

if you just focus on one thing if you

make it a top priority to pay off that

credit card and you ask your brain every

night before you go to bed what are ways

I could come up with extra money to pay

off this credit card I guarantee you you

will see your balance go down quickly

and then I want you to just do a Sprint

just for like 30 days you could do

anything if it's temporary cut out all

discretionary expenses and put all of

your money towards paying off that

credit card by the end of this Sprint

your credit card balance will have gone

down quickly and you're going to be so

motivated to do another one it's really

all about focusing and keeping up your

motivation all right moving right along

to step three which is to build up a

full emergency fund this is when you

officially have what I like to call

you money just imagine this let's say

you're working at a job and the

environment is really toxic but you

can't leave because you need money next

month for rent but then what if you had

3 to 6 months worth of living expenses

in a high yield savings account that not

only paid you interest every month so it

was growing money on its money but it

was just set aside because and you don't

need to touch it but if you ever needed

the money it would be there for you

which would give you the freedom to say

goodbye to this toxic job quit give you

a month or two of Runway to find a new

job to take a mental health break or

whatever you need because you've got

money in the bank that in and of itself

is a measure of Financial Freedom so

this is where I want you to build on

step one where you saved up your starter

emergency fund of $2,000 now I want you

to build it up to

$10,200 some large amount that will

cover you for a minimum of three months

of living expenses just having this

money is going to give you so much peace

of mind whether you get sick whether you

get laid off you know you're going to be

okay and even though it might seem like

a large amount of money to you maybe

you've never had a five figureure

savings account balance but like I said

with Focus you can accomplish anything

and Financial Freedom like I said it's

steps that build on the other you don't

become a millionaire and you don't you

can't take shortcuts it first starts

with building the muscle of saving this

amount and then that amount and and a

bigger amount and a bigger and bigger

amount I'm so exced excited for you

because once you accomplish this and

you've got that money in the bank you

will never be the same you will not feel

the same way about your money it's going

to be so good for you okay next step now

you want to start putting your money to

work and doing it in a tax Savvy way

which is why step four is to open and

start funding retirement accounts since

Financial Freedom can mean having enough

money from your Investments to cover

your living expenses at some point just

having a large emergency fund and

savings account isn't going to be enough

we need to invest that money and luckily

the government has given us many ways to

invest money in a very tax advantaged

way in other words any money that you

put into these Investments not only can

they grow tax-free but any contributions

you make to these accounts are a direct

deduction to your taxable income since

taxes will be your single biggest bill

in your lifetime it makes sense to make

use of these accounts so the most

popular ones in America are the 401K

this is a workplace sponsored retirement

plan and you can make contributions to

it that are tax deductible the growth

will be tax deductible and although you

will have to pay taxes on withdrawals

later on in the future but because you

are able to make pre-tax contributions

you'll save a lot of money in taxes

along along the way and be able to

contribute more because you're doing it

with pre-tax income so start with your

401k if you have one at your job likely

your employer is offering what's called

an employer match which is where for

every dollar you put in they will

contribute X number of dollars so this

is essentially free money I was able to

grow my 401k to over

$25,000 half of that being investment

growth the other half being primarily

from employer match so it's a really

great hack for quickly jumpstarting your

Investments for Financial Freedom

another account you can look at is

what's called a Roth IRA this is where

any contributions you put into it are

after tax so it doesn't reduce your

taxable income but all the investment

growth happens tax-free and later on in

retirement you can make withdrawals tax

free too this is great because if your

Investments Grew From I don't know from

$1,000 to a million you can withdraw a

million taxfree which is pretty

incredible the Roth IRA is probably the

best thing since sliced bread so

definitely look into that now if you're

self-employed you might not have a 401k

but I also want you to look into either

a solo 401k or a SEP IRA these are

accounts that allow you to put a ton of

money away pre-tax reduce your business

income and take a lot of tax deductions

so definitely look into that and if

you're self-employed you're also

eligible to open a Roth IRA there are so

many ins and outs to these retirement

accounts but if you're not opening them

and contributing to them regularly

you're leaving a lot of money on the

table and paying way too much in taxes

so to help you out I created a

comprehensive guide called the Financial

Freedom starter kit and in it I will

explain all of the accounts that you can

open for Financial Freedom what order

you need to open them in and where

exactly to open them so check it out

it's completely free you can download it

at Ros hon.com starterkit I'll also put

the link in the description something

else I want to clarify is these are

investment accounts but they're not

Investments so once you open the account

you need to put money in and then invest

the money in that account that's another

step and I have a bunch of videos on my

channel that teach you how to do that

I'll put a link to my Investing For

Beginners playlist below so check that

out but your first step right now is to

figure out what retirement accounts you

are qualified to open open them find out

what the annual max contribution limit

is and start funding them right away

okay and step five for Financial Freedom

is to pay off all other debt except for

maybe your mortgage at this point you've

already knocked out credit card debt way

back in step two so now you're only left

with lower interest kind of singled

digigit rate debt such as car loans

student loans and maybe a mortgage even

though the interest rate on these types

of debt are pretty low you can never

really call yourself financially free if

a portion of your income every month is

going towards these fixed monthly

payments so your next step is to make it

a priority to become debt-free there is

no other better feeling than being

debt-free and knowing that everything

you make every month is for you and not

for anybody else and the amazing thing

about this is once you knock out those

debts you will have so much extra cash

flow freed up to then move you even

closer to Financial Freedom faster when

I finished paying off my student loans

and it was incredible how much extra

money was freed up to put even more

towards investing and that's when things

really started to take off so that's

something else I wanted to point out

even though the steps to Financial

Freedom are sequential it doesn't take

the same amount of time to accomplish

each step it's actually the first few

steps that might take the longest but

because momentum builds and you'll be

gaining more skills more confidence with

your money and generating more cash flow

and freeing up more and more cash flow

as you knock out each step each step

actually getss easier and easier and

faster to accomplish okay one more thing

I want to say about this one part of

paying down other debts is to not take

on new debt in the first place and the

one major mistake that people make is

getting a car loan on a new car there's

nothing worse than debt on an asset that

depreciates in value every single day

and sadly the average American is paying

a monthly car payment of around $7 $800

a month think what could be possible for

for you if you had that money going

towards your Financial Freedom goals

instead so I know this is unpopular

advice but I really believe in saving up

money to buy a gently used car that you

pay for in cash you can get a decent car

for under $20,000 even $10,000 and save

that money up in cash just because it's

normal just because everyone else takes

out car loans to buy a shiny brand new

car doesn't mean that you have to and

remember the average person doesn't have

Financial freedom and so if you want

Financial Freedom you can't do what the

average person is doing okay moving

right along to step six which is to max

out all of your other retirement

accounts and invest all of your Surplus

all of the retirement accounts that I

mentioned in step four they have quite

large annual contribution limits as of

2024 you can put up to $23,000 a year

into your 401k pre-tax and you can put

up to and $7,000 a year into your Roth

IRA so that's already $31,000 that you

can and should be trying to put away

every single year towards retirement and

then there's other amazing retirement

accounts you can look into such as the

health savings account I also mentioned

the solo 401k and SEP IRA and then if

you've maxed out all of those accounts

you can then start investing more in a

taxable brokerage account you can also

open additional high yield savings

accounts where you can save up for

short-term financial goals like your

dream vacation or a down payment on a

house again check out my Financial

Freedom starter kit for guidance on

where exactly to open all these types of

accounts so those are the six simple

steps to Financial Freedom seven steps

if you count Step Zero it took me 8

years to get through all these steps for

others it could take longer maybe 10

years or several decades whatever amount

of time it takes you to get through each

step just remember that you are on your

own Journey you're running your own race

and as long as you take one step at a

time in the right order you will get

there the other thing I wanted to point

out is that Financial Freedom is not

really a fixed destination or a fixed

amount that that once you reach it you

will all of a sudden feel completely

different and have total peace of mind

and a beautiful relationship with money

Financial Freedom is more of a journey

even if you're on step one or two and

just at the beginning you can actually

choose the feeling of Financial Freedom

I don't believe in the whole philosophy

of deprivation and putting all of your

money towards investing and saving for

the future for this one day hopeful

destination of Financial Freedom you

also want to be able to balance enjoying

some of your money now living the way

you want to live now spending the time

with your loved ones now doing the

things that you want to experience now

with also preparing for a life of more

Financial Freedom in the future there

are people who might save up a certain

amount of money to be financially free

faster because they deprived themselves

and had a 90% savings rate and never

went out and spent and enjoyed any money

but once they reached that dollar amount

they will not have exercised that muscle

of being able to enjoy the journey and

enjoying their money along the way and

just hold holding their breath for this

one-day destination that when they get

there they might actually regret all

those years that they spent just living

in deprivation so this is your reminder

that Financial Freedom is a journey not

a destination so don't forget to enjoy

the Little Pleasures along the way to

not always feel guilty about the little

things that give you Joy in life that

you spend money on and to just always

maintain that balance let's just say

Financial Freedom is more of a state of

mind than a fixed dollar amount thank

you so much for watching that's it for

this video don't forget to download my

Financial Freedom starter kit and I'll

see you in the next video bye