2 | Financial Freedom Guidebook
Financial freedom is a phrase that a lot of
people use and hear, but very few people
know its true meaning. An entrepreneur or
small-business owner might think financial
freedom is about making enough money to
run their business smoothly and without
worry. A college student may think the
term means having enough money to put
themselves through school and still be able
to enjoy a night out (or three, or four) with
friends every week. But really financial
freedom is bigger than that.
Financial freedom is about getting to a place
where your money is working for you and you
don’t have to worry about hazards such as
losing your job, taking care of a costly repair on
your car, or living paycheck to paycheck.
Financial Freedom for Dummies
3 | Financial Freedom Guidebook
But in reality, many Americans have to worry
about such things. For instance, a CBS News
article found that 7 out of 10 Americans are
living under crushing debt or aren’t making
enough money to cover their basic expenses.
The story notes that financial analysts say
having at least three months worth of liquid
cash in the bank is the best place to be in, but
even the country’s top earners say they’d
only have about 52 days worth of funds
available to them.
So how do you achieve financial freedom?
It’s all about being well versed in the do’s
and don’ts of personal finance, and planning
for the future. Here a down and dirty - but
thorough - primer on finding your way to the
paradise called financial freedom.
Financial Freedom for Dummies
4 | Financial Freedom Guidebook
One of the biggest problems people have when
it comes to money is that they don’t have
enough saved for emergencies. Unforeseen
circumstances like car repairs, leaky roofs, job
loss, and medical emergencies can be expensive.
For many Americans, the solution is to use a credit
card to get out of trouble. But putting expenses
like these on credit cards almost always to paying
substantial interest, which is not the road to
That’s why it’s smart to build a strong emergency
fund that can carry you through tough times.
Experts say to have a saving account containing
enough to cover at least 3 months, but if possible,
it’s a good idea to save even more. That way, you
can use those funds that you saved rather than
racking up interest on a credit card.
Save For Life
5 | Financial Freedom Guidebook
When figuring out the best place for your emergency
fund, shop around for the best bank. The best way
to make your money work for you is by putting it in a
savings account or money market account where it
will gain interest. Interest rates on savings accounts
are not through the roof right now, but a little bit of
interest is better than nothing. Keep in mind that
credit unions and online banks will generally give you
higher interest rates on your savings account. But
still, shop around until you find a rate and bank that’s
best for you and your situation.
Also, in addition to an emergency fund to fall back
on in tough times, be sure to save for tangible goals
like a dream vacation, a new job, and your child’s
wedding or education. Again, having cash to pay for
some of all of these things, rather than putting it on a
credit card, will save you money in the long run.
Save For Life
6 | Financial Freedom Guidebook
For some people, budgeting is a scary
word. But a budget is almost always
one of the first steps to financial
Once you know how much money
you spend and what you spend it on,
you can figure out how much you
can afford to save and how much
leftover money you have to play with
and spend on such as going out to
dinner, buying new clothes, or going to
concerts and movies.
If you’ve decided you want to
achieve financial freedom, track your
expenditures for a month or two
and then compare that with your
Know What You Spend
7 | Financial Freedom Guidebook
income. Are you spending more than
you earn? If so, look for ways to cut
back. Little things such as bringing
your lunch to work most days of the
week, or cutting back on eating at
restaurants can make a significant
impact on your spending.
Financial websites such as Mint can
offer budget spreadsheets that
help you easily see how much you’re
spending. You can also use the Mint
app, or similar apps, to electronically
track your spending. In fact, many
of the apps plug right into your bank
accounts and credit cards, so the
moment you make a purchase, it
categorizes it and tracks it for you.
Know What You Spend
8 | Financial Freedom Guidebook
More and more studies are showing that
Americans are sorely unprepared for
retirement. While experts recommend
putting away 15 percent of your salary
to prepare for retirement, the typical
American saves just 8 percent of their
salary, if not less.
Retirement may seem far away, but it’s a
time that most of us will face eventually.
And advances in health care and helping
people live longer, which means we’ll need
more money to get by in those later years.
The best time to start saving for retirement
is when you first start making money.
The second best time to start saving for
retirement is right now. Sit down and
Save for Retirement
9 | Financial Freedom Guidebook
calculate how much you think you’ll need to live
on once you’re retired. Whether you think you
can get by on $50,000 a year or prefer to live on
$100,000, start putting away money that will help
you reach that goal.
Be sure you know all the different types of
retirement options that are available to you. If
your employer offers a 401(k) and matches your
contributions, be sure to take advantages of that.
Those matching contributions are literally free
money, and you’d be a fool to turn it down. You’ll
also want to look at stocks, IRAs, CDs, and other
savings vehicles to see which one works for you.
You may decide that one or two of these best suit
your needs, or you may decide that a mix of many
different kind of savings and investments is best
for what you’re trying to accomplish.
Save for Retirement
10 | Financial Freedom Guidebook
Our everyday lives are made up of
many financial decisions, some big,
some small. Do you buy the $20,000
car or the $40,000 car? Should
you buy a latte at Starbuck’s every
morning before work, or would you
rather make your own coffee and
bring it on your commute? Do you
send your kids to a public school or a
private school? Do you have to have
the latest fashion or are you content
shopping off the sale rack?
These decisions have lasting
consequences, especially when you
think of how all those little decisions
add up over a lifetime. That being said,
life is about finding a balance.
If you do buy the $40,000 car, make
it’s best to make coffee in the morning
instead of buying it at your local cafe.
If you’re good about buying clothing
off the sale rack, it might not matter
that you treat yourself to a massage
every now and then. Again, it’s all
about figuring out what works for you.
Consider what makes you happy in the
moment and what will make you happy
when you’re retired or need cash to
pay for a major plumbing issue, and act
Think Through Big Purchases
(and Small Ones Too)
11 | Financial Freedom Guidebook
We’ve all heard about the dangers of irresponsible
credit card usage, and when it comes to responsible
personal finance and the pursuit of financial freedom,
we can’t stress this enough. Find credit cards that
offer you a great interest rate and pay off your
balance in full every month. You should also look for
cards that offer cash back, airline miles, or other
perks. Again this is a way of making your money
work for you, and you’ll reap the rewards by being a
responsible card user.
Also, know how credit affects your credit score. For
instance, closing a credit card, or having a credit card
that you never use, can be bad for your credit score.
Your credit score is what will help you get a mortgage
and other major loans down the road. By keeping your
credit score high, you’ll get lower interest rates on
loans, which will save you money.
Be Smart About Credit
12 | Financial Freedom Guidebook
Financial freedom is something that
very few people can achieve on their
own. That’s why it’s a very good idea
to find a financial advisor who can
help you reach your goals.
A good, trustworthy financial advisor
will charge you based on a session-
by-session basis, or by the hour. If a
financial advisor wants to charge you
based on the amount of money you
make or want to invest, find someone
else to work with.
A financial advisor can help you figure
out the best way to pay down debt,
how to properly save for retirement,
and how to save money for thing like
a new home, vacations, a new car,
your child’s wedding and more. They
can also answer many of the financial
questions that you were too afraid to
ask or weren’t even aware of. Best of
all, you can get to know your financial
advisor over time and they can help
you anticipate needs and generally
make your life easier.
Many people think that only rich
people need financial advisors, but
everyone making money could use a
bit of help figuring out how to manage
their money. If you have a job and are
starting to think about how to save
and prepare for the future, see
a financial advisor.
See a Financial Advisor
13 | Financial Freedom Guidebook
Financial freedom isn’t something you
magically achieve overnight. It’s a goal you
slowly work toward every day through good
spending habits, smart planning for the
future, and a willingness to evaluate your life
and decide what’s most important to you.
Are you in a place that feels far away from
financial freedom? To paraphrase something
we said earlier (and also an old Chinese
proverb), the best time to start working
toward financial freedom is the day you start
earning money; the second best time to do
it is right now. Remember, when it comes to
money, time is your friend, so the bigger head
start you get on saving for retirement or that
dream home, the happier you’ll be 5, 10, 20, or
50 years down the road.
Remember: It’s a Process
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