Steps to Overcome Financial Hardship

Introduction

• The average American has a negative net worth.
• Average U.S. minimum wage employee will earn over $1 million in their lifetime, median income earners $3 million.
• The key reason for staying poor is poor financial decisions.

Six Steps to Financial Freedom

Buy Nothing Challenge

1. Objective: Cut unnecessary expenses drastically.
   • Disconnect credit cards from online shopping.
   • Only pay for essentials (rent, insurance, utilities, groceries).
   • Adopt austere habits to save money.

Shift in Mindset

2. Objective: Decide to become financially healthy.
   • Transition from a victim mindset to a victor mindset.
   • Recognize and tackle debt head-on.

Understand Debt

3. Objective: Address and understand debt.
   • 35% of income often goes to pay debt.
   • Recognize mortgages, car payments, and credit cards as debt.
   • Focus on paying off high-interest debts first.

Savings and Emergency Fund

4. Objective: Save for emergencies and learn to save consistently.
   • Start with a small emergency fund ($1,000-$5,000).
   • Expect unexpected expenses.

Debt Repayment Strategy

5. Objective: Pay off debt strategically.
   • Use psychological win approach: pay off smallest debts first for quick victories.
   • Focus on consumer debt before mortgage or car loans.

Investment and Income Increase

6. Objective: Invest wisely and increase earning capacity.
   • Invest 15% pre-tax income in long-term growth assets.
   • Automate savings and investments.
   • Consider education investments for skill enhancement.
   • Work extra shifts or side jobs to increase income.
   • Compound interest and consistent investing is key.

Additional Strategies and Mindsets

Cost Reduction

• Downgrade car and housing expenses.
• Live below means to increase investment capacity.

Gamification of Savings

• Visualize how small savings contribute to long-term wealth.
• Understand long-term impact of regular savings.

Financial Habits

• Check accounts daily to stay informed of financial status.

Long-Term Financial Goals

• Pay off mortgage and other fixed costs to free up income for investments.

Work and Lifestyle Balance

• Short-term intensive work periods can reset your expectations and capabilities. (e.g., 30 by 12 challenge)

Philosophical Considerations

• Decide whether to appear rich or actually become wealthy.
• Understand the importance of sacrificing current luxuries for future financial freedom.