The hardest part of getting where you are going is starting out. The same goes for starting out on your financial independence journey. There are so many ways to get started such as: paying down debt, increasing income, or investing in the stock market. We only recently started on our journey to financial independence (about 17 months ago) but the strides we have made are incredible. Below, I came up with a standard plan to start a financial journey. The keyword being “standard.” Every situation is different. Everyone’s mindset about money is different. This is just a way to get started. Once you begin on your journey, your plan will shift and change multiple times. Once you start to truly learn about money, your view of money will change. But that’s enough of the chatter, let’s get into it.
1) Read. We all want to jump right into our journey, head first. However, it pays huge dividends if you can read a book first. I highly recommend “I Will Teach You to be Rich” by Ramti Sethi. This book has everything you need to become a basically trained financial guru. He has a 6-week plan to get you started. If you follow that, you will be well on your way. You have a great life.
2) Define. Look up the following words: Income, Expenses, Liabilities, Assets, and Cashflow. You need a spreadsheet (or two). I know this is not fun, but this is super important. Income is money coming in. Expenses is the money going out. Liabilities are part of your balance sheet that leads to expenses. Assets are the part of your balance sheet that leads to income. And cash flow is the money that is left between income and expenses. Whew. Learn what these words mean. Document everything.
3) Decide. Choose what kind of investor you will be. You can be a passive investor (401K or index funds). You can be more active (value, growth, or dividends). Or you can choose other investment vehicles such as real estate. Truly, it is your decision. The stock market is easiest to get started, and the easiest to lose money. Read on the stock market. Real Estate is great but can be very hard for people to get a foothold into.
4) Lower. Review your debt and expenses. Lower these numbers religiously. I chose to lower our debt and expenses while we started investing. Once you start to love investing, you will start to hate debt and expenses. So they work together. Create a net worth spreadsheet. As you lower debt and increase investments, your net worth will grow rapidly.
5) Increase. Increase your income. You can do this by working a second job, starting a blog, or opening a small business from your home. There are literally hundreds of ways to increase your income. It doesn’t have to be by much. If you can get an extra $300 a month from selling veggies that you grow, this can be huge. If that money goes towards paying off high-interest debt or buying investments, it can multiply the speed at which you get to your goal.
6) Repeat. Do this same process every month. Every day for that matter. Money is vital to your success. It is a lot easier to have a successful marriage when you have money flowing through the household. It is easier to be a great worker when you are not worried about bills. The more detailed you are, the better. At least at the start.
That is it. There is nothing more, at least as far as I am concerned. I am learning so much from reading a book every week, however, it all leads to these key points; educate, lower expenses, and increase income (by buying assets). Keep it super simple. Once you get the hang out this, you will automate the easier stuff and you will naturally begin to want to take on more difficult or complex notions, such as leverage. Get started and see where it takes you. Good Luck! I am always available if you need some assistance getting started.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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