Your Financial Freedom Plan

Having a financial freedom plan is the best way to go about retiring early and becoming financially independent. Below we'll talk about 9 steps to financial freedom you can take to start your journey towards financial independence.

If you read our article on money and happiness you have done our exercise to show you how money and financial freedom can indeed bring you happiness.

Now all you need is a plan.

9 Steps to Financial Freedom

Your Financial Freedom Plan in 9 steps:

Learn from your past financial mistakes.

Get the right financial mindset.

Get honest with money.

Create a budget and stick to it.

Pay off your debt.

Save as much as possible.

Invest in what you know.

Think outside the box.

Prepare for taking the plunge.

Now that you have seen the outline of this financial freedom plan, I will elaborate more on each individual step.

You will see that I start with learning from your past mistakes and getting you in the right mental state. Following that are the things you need to do financially to be money wise and save and invest for your financially free future. All this will prepare you for taking the plunge into financial independence.

If you are looking for a good read on financial freedom and how to get there, Financial Freedom Informant highly recommends you try Suze Orman's critcally acclaimed book, The 9 Steps to Financial Freedom: Practical and Spiritual Steps So You Can Stop Worrying. Suze is one of the best out there in terms of giving financial advice. She really go into detail about her 9 step financial freedom plan.

Let's get started with the financial freedom plan.

Learn from your financial mistakes.

I want you to list any financial mistakes you may have made in your past. Sold your car too cheap, late payments on a loan, withdrawn from your 401k, traded that Ted Williams rookie baseball card when you were a kid, lent a family member or friend money and never got paid back, your shoe fetish, etc. Write down anything you can think of that may have caused you to have less money than you do today.

Now look at each of these habits. Why did you do these things? What were the influences that caused you to make the decisions you made? By understanding the things that make us make bad financial decisions, we can try and avoid making the same mistakes in the future.

You are in control of your life and your decisions. Make your decisions from here on out in line with your goal of financial freedom. People can give you opinions, but you have control over whether those opinions have power to influence your decisions.

Get the right mind set.

You CAN be successful at accumulating wealth. You CAN get out of debt and you WILL save money. Change your mindset from the things you want to do to the things you NEED to do.

People's motivation changes a lot when they NEED to do something. You NEED to eat to survive. You NEED warm clothes to survive the winter. You NEED to pay off debt and save money to become financially free. Imagine that every decision you make is a life or death decision towards your financial freedom.

Do you NEED to pay $100 to go watch the football game at the stadium or can you just stay home? Do you NEED to have 20 different pairs of shoes? Could you survive with 10? 5?

Every time you go into your local coffee shop to buy your latte, espresso or cappucino, ask yourself do I really NEED this or would your money be better spent in an investment that will make money for you in the future? It seriously is that easy.

Get honest with money.

This is a continuation of the above step. It's becoming aware of what you are spending your money on and whether or not it is really worth it.

I find the best way to be honest with my money is to avoid credit and debit cards and keep cash in my pocket. Once my cash for the week is gone I am done. That means I cannot go see that movie or eat out at some restaraunt. If I had the money in my pocket I could, but when the cash is gone it is gone.

The next point in our financial freedom plan will help you get real about where you spend your money and how to cut expenses.

Make a bugdet and STICK TO IT.

Write down every single purchase you make to the penny. Get a little notebook and carry it with you. The candy bar, the coffee, the donut, the shampoo, toilet paper, gas, etc. Write it all down even if it costs you 25 cents.

Do this for a week and see how much money you spent on neccessary items like gas for work, your mortgage, toilettries, and food. Now see how much money you spend on extras like movie tickets, DVDs, concert tickets, eating out, computers, and coffee.

You may be shocked by what you find when you write everything down.

Now, create a budget. This is where you decide how much you are going to allow yourself to spend on something like coffee a month. Can you cut that out or reduce the amount of money you spend to save money?

Creating a budget helps to keep you in line with your spending. So instead of going on a $500 clothes shopping spree, you know you have so much money a month to spend on clothes. The hardest part is sticking to it.

Being on a budget is tough. It takes a lot of discipline.

Your friends want to go out to eat but it's the end of the week and you spent all your money. You have to say no, or invite them over for a pot luck dinner. Of course emergencies come up like your car breaking down, but you NEED to control money in places where you can.

Put yourself first. Make your goals count before the intentions and goals of others.

Break free of debt.

About 43% of Americans spend more money than they earn a year. Many have credit card debt in the tens of thousands of dollars. If you are one of the many people who are sinking in debt, then the time has come. You must battle down your debt.

Now that you know the mental mindset you need to have and have your budget worked out from our financial freedom plan above, this makes finding ways to save money easier. Do you NEED those new sneakers or would putting an extra $50-$100 towards the principal of your loan be a wiser idea?

The best way to go at your debt is to find your highest interest loans or credit cards and pay those off first. Trying calling your credit companies to negotiate a lower interest rate and do not take no for an answer. Ask to speak to a supervisor or a line manager. Keep calling back and asking. If creditors can pester you about paying them money, then you can pester them about lowering your interest rate, especially if you are paying an inflated one.

When you pay off a loan, you take the money you were using to pay off that loan and put it towards paying off the next loan. You continue to do this until all of your debt is paid off. This may take you years to accomplish and can seem like a daunting task, but watching your loan amounts decrease quicker will let you know you are going in the right direction.

Save everything you can.

Once you have paid off your debts and have your budget in place, you should have a lot more money to save and save you should.

It is often recommeneded that you save up to 3-6 months of living expenses in a bank account is case an emergency like losing your job occurs. This will keep you on your feet hopefully long enough to find another job.

Make sure that you pay yourself first. Set up an automatic withdrawal from your savings account to deposit money into another account or an investment account weekly or monthly. I automatically deposit money into my index fund investment bi-weekly from my savings account. When the money is automatically depositted, there is no way to spend it.

Do not trust that you will deposit $50 every week. Just have it done automatically and that will make sure you are investing in your future.

Invest in what you Know.

You need to find ways to get your money to work for you. You do this through investing in assets. Some people buy rental property, some people invest in stocks or forex, others in bonds or index funds. The key is to stick with what you know.

You may not know stocks, but say you are a doctor. You may know of some great medical supply companies that you can invest in. You would have more knowledge about those companites and the products they make than you would know about computer software perhaps. A construction worker might know more about companies the make tools, machines, or construction vehicles to invest in.

If not, you can always invest in an index fund that invests in a variety of stock companies, thus providing diversification all in one asset. The S&P 500 is one such index fund.

Think outside the box.

Or think outside your town, state, or country that is. As you get closer to completing your financial freedom plan, you need to ask yourself whether or not you want to decrease your cost of living by moving out of state or even out of the country.

A number of people are retiring in different countries these days because the cost of living in places like Mexico or Thailand is much lower than New York City. Many can live comfortably with a nice house, a maid, and a landscaper for half of what it costs to live in the US.

Not only is the cost of living cheaper, the cost of medical insurance is also cheaper. With medical insurance costs growing exponetially, moving out of the country for cheaper insurance has been a great option for many people. The care in many developed areas like Mexico are just as good as that found in the United States.

Prepare for the plunge.

The last step in a financial freedom plan is to plan for when you take the plunge. You would figure after all this planning, saving, and investing you would be ready to say good-bye to the 9-5 work week. You may be surprised to know that many people who are able to retire and have already achieved financial freedom delay taking the plunge for years.

Why?

Nobody likes big changes. Jumping into an unknown is a big change. This is why you should plan your free time before you take the plunge. Will you take up a musical instrument? Would you like to volunteer at a senior or community center? Do you want to live a year in a country you love?

When you have things planned for the day you are financially free, then it makes taking that final step in your financial freedom plan that much easier.

So what are you waiting for? Take the plunge towards financial freedom.