The complete guide to finance and freedom
Imagine by Saphii
To me life is about freedom first and foremost, and money can make you a slave. Personal Debt is slavery. Now a case can be made that some business debt is good, and I would agree but that is outside the scope of this post.
Because of decisions I made when I was younger I have rebuilt my finances several times. This is how I did it. How I got money to be my slave rather than my master. How can mastering money give us freedom? Let's start with debt.
Personal debt is a major emergency.
There are two basic ways to pay off debt.
#1 The snowball method. This is the method that works best for me. Basically you take all your debts and pay them off from lowest to highest. So you pay the minimum on everything except the lowest debt then take all the extra money you have each month and pay as much as you can on the first dept. Once that is paid off you go on to the second debt and so on. This gives you a psychological win, that I found personally very rewarding. This is the method Dave Ramsey talks a lot about here and personally I have found that this calculator works well This should include paying off your house ASAP.
#2 The logical method. Basically pay off your highest interest debt first to your lowest interest debt last. This is mathematically the best way to go. Personally I found the snowball method rewarding and worked for how I am wired. You have to find what works best for you.
The next step is automating your finances.
Basically put all your bills on autopay to your credit card. Then have that autopay from your checking account every month to pay off the card. Managing your money should take minutes a month not hours. You may need to pay larger bills like a mortgage on the lenders website every month but that should take five minutes. Bill should not be a worry.
Next is investing. Once your debts are paid off, time to get to work saving and building wealth.
This is surprisingly simple as well. Unless you want to dedicate your life to studying business and stocks, then invest in an index fund every month consistently forever. You will beat the market and about every money manger every time.
Also know that financial advisors make money if you do or not. They also make money when you MOVE money around. You make money when you DON’T move money around. Investing is a game of patients. The average money manger will cost the client 100k in lost investing opportunity.
Next step is early retirement.
Basically you need to live as inexpensively as possible and save as quick as possible. You need 25 times your annual spending. If you have no debt then you should basically be down to insurance, food, taxes and utilities. It should be pretty cheap. Add it up realistically and find that number. If you need 40k a year, then you need about a million bucks. This is totally doable for most people. Here is a great post about it
But what happens if you can live comfortably on 25k? Now you just need to save 625k to live forever with no job. It’s pretty simple math.
Your money or your life is another great book on the topic, check it out here (not affiliated link)
Thats the basics. Get to it and be free!