Financial Freedom Steps

Introduction

• Importance of managing income wisely after payday.
• Focus on building wealth, not just spending.
• Common misconception: budgeting is all you need.

Key Concepts

1. Net Income

   • The income after taxes (government's share).
   • Importance of having your net income deposited directly into your checking account.
   • Avoid cashing checks at liquor stores (common financial traps).
   • Beware of payday loans: high APR (300-500%).

2. Emergency Fund

   • Save $2,000 in a separate savings account for emergencies.
   • This money must be liquid (easily accessible).
   • Inflation has increased the need for a larger emergency fund (previously $1,000).
   • Avoid using this fund for non-emergencies.

3. Pay Down High-Interest Debt

   • Prioritize paying off high-interest debts (credit cards, payday loans) after saving the $2,000.
   • Focus on debts with over 6% interest.

4. Invest 15% of Income

   • Invest a minimum of 15% of your net income.
   • Options include paying down low-interest debt (like student loans) or investing in stocks/real estate.
   • Use either the Debt Snowball (smallest debt first) or Debt Avalanche (highest interest first) method for paying off debts.

5. Save 10% of Income

   • Continuously save 10% of each paycheck after paying bills and investing.
   • Aim for 3-6 months’ worth of expenses in savings.
   • Build a savings cushion for added security.

6. Smart Spending

   • Understand the difference between needs and wants.
   • Prioritize needs (essential expenses) over wants (luxuries).
   • Use the 24-hour rule for impulse purchases to avoid unnecessary spending.
   • Evaluate spending habits; consider cost-saving alternatives (e.g., cooking at home).

Conclusion

• Buy Your Time Back
  • Identify tasks you dislike and consider outsourcing them (e.g., cleaning, cooking).
  • Aim for a higher return on investment for your time.
  • Consider side hustles or promotions to increase income and reduce time to reach financial goals.

Final Thoughts

• Engage with financial resources (like YouTube, newsletters) to enhance financial literacy and wealth-building strategies.