Updated: Apr 2
I've always had the dream of becoming financially free. Meaning, I wouldn't have to worry about paying rent each month, I would have enough money to pursue my passions, travel the world, give to others.
I've never had a certain number in mind or a specific plan to get there until this year.
I always just imagined some day I would start my own business, it'd become really successful, I'd make a lot of money, and I'd be set. In 2019, I realized that that's probably the stupidest plan you could have. . . because that's not a plan. That's wishful thinking.
Financial freedom doesn't come from a huge income, it comes from being financially literate. Even if I did make a lot of money, if I didn't know where to put it or how to handle it, it wouldn't last long.
Because I want to be rich, I've come to realize I need to figure my shit out. Baby steps, as finance expert Dave Ramsey says. Back in February 2019 I literally had $200 to my name. After using my savings on college, and then using whatever was left for traveling, my account was wiped out. I worked a solid job for a few months, yet I hadn't accumulated any savings.
I didn't know wtf I was doing. I was putting all my money into rent, groceries, things that I thought were essentials. I was spending and then saving the rest. I should have been saving first and then spending.
I knew that if I wanted to start saving money for future investments, like real estate, or to start saving for retirement, I had to figure out what I was spending so much money on. In August I started writing down every single purchase I made. I had this little "Cash" book and I wrote it all out. I'd then go back and highlight the purchases based on different categories to see where my money was going.
My little handmade reports looked like this:
It was simple, and looks kind of elementary, but it worked. Using excel just seemed too daunting and thinking big was keeping me from getting started. So I started small, and only now, in January am starting to move into using a spreadsheet.
My next step after tracking everything, was to assess how much I was making vs how much I was spending. I set up a separate savings account with a higher APY, that I wouldn't touch. I set up recurring deposits of $100 every month into that account. It goes in without me seeing it.
I'm doing the same for an retirement IRA account. $200 goes into that account every month automatically. Granted $300 a month might not seem like a lot, and it's really not even if it kind of feels like it based off of what I take home every month. . . what matters is that it's recurring and automatic. As Darren Hardy says in his book The Compound Effect, it's the little actions compounded overtime that bring the greatest results.
Now, without any real increase in my income, I've been able to pay off a few thousand dollars in credit card debt, and save thousands of dollars. I'm almost close to completing Dave Ramsey's baby steps before saving up for a down payment on a house.
1. Save $1,000 for a starter emergency fund
2. Pay off all debt
3. Save 3-6 months of expenses in a full emergency fund
4. Invest 15% into a retirement account (I'm around 10% right now into IRA, but will increase that once my company 401K kicks in)
Being smart with your money is so important if you want to be financially free someday. Get out of the mindset that in order to have more money, you have to earn more money. That will definitely help, but even more important is your financial literacy.
Take small steps, make recurring deposits into accounts you can't access, and soon you'll start to see your money grow like I did. I went from living paycheck to paycheck to having a decent amount of savings in 2019, even while living in Boston, and that's only from starting to be smart with my money a few months ago. Imagine what I can do in the year of 2020. I'm excited to find out!
Here are some of my favorite resources that you can use to get started:
MONEY Master the Game by Tony Robbins
Rich Dad Poor Dad by Robert Kiyosaki
Rich Bitch by Nicole Lapan
The Automatic Millionaire by David Bach
The Compound Effect by Darren Hardy
Let me know if you liked this post, have any insight to contribute, and if you'd like to hear more about my financial journey!