Everybody in this world, whether they’re willing to admit it or not dreams about financial freedom, but it’s one of those elusive things that most people don’t end up achieving. Most people associate financial independence with winning the lottery. But, what if there was a way to pick the right numbers and almost guarantee a win for yourself? What if you could create a plan for your life that would guarantee that you would never have to worry about money again. Warren Buffet once said,

Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.

Learning all the nuances of personal finance and mastering the game of wealth can take time, but that doesn’t mean you cannot start by taking the first step today. Why wait? Someone once said, “the more you sweat in peace, the less you bleed in war.” My advice to anyone who is overwhelmed with managing their finances and doesn’t know where to begin is to take it one step at a time. Pick one aspect of your financial situation and figure it out slowly. You do not need to fix everything in one day. This stuff just takes time.

I plan to write a Savings Guide so that the readers of my blog can follow a simple plan, but I’m going to go into quite a bit of detail in this post so grab a cup of coffee and sit down and read this post in its entirety.

The first point that I want to drive home is that you need to focus on your financial freedom every single day like you’re stuck in prison. Have you ever watched one of those shows which are based on a true story where some guy was locked up in a maximum security prison? And all he did 20 hours a day was study the prison and focus on an escape plan? And guess what? In all of those stories, the guy escapes and achieves freedom (albeit for a few days until he’s caught again, but that’s not the point). The point is that you need discipline if you want to achieve financial independence. If you want to be able to wake up and not feel anxiety about money, if you want to know that you and your family are going to be ok no matter what, you need a plan, and you need to focus on it every single day. The discipline to achieve financial freedom is what most people are lacking. A lot of folks read books, watch a TV show about some billionaire, or listen to some podcast about how someone achieved financial freedom, and they think “wow, that’s all he did.” All I have to do is x,y, and z and I’ll never have to worry again. Then they go to bed and forget about everything they learned, and they’re back to square one with their life, their boring job and “working for the man.”

The truth is that if you want to achieve financial freedom, you’re going to need to change a bunch of things and embark on a new journey. You will need to make a 180 turn. Because chances are if you’re reading this post, you probably (just like me) made some mistakes that cost you dearly, and you’ve made a decision to learn everything you can about personal finance. So, my friend, you’ve come to the right place. That is the reason I created this blog.

Most people will tell you that when they were growing up, nobody around them talked about money. Most will tell you that no one taught them how money is made, how to keep it, and how to invest it. All people hear when they’re growing up is “money is hard to earn,” “do you think money grows on trees,” and on and on. You probably heard the same bull.

The truth is that money is not hard to earn, and if you have some patience, a solid plan and you’ve thought deeply about some things regarding money, you can set up a plan, follow the plan and make it a part of your life so that you never have to worry about money ever again. And you don’t have to be a genius to do this. You don’t have to be a “financial guru” to achieve financial freedom.

Most people only learn about personal finance when they have either gone completely broke or when they’re on the verge of going broke. You don’t need to allow your situation to get to such a point before you start learning about these things. Yes, these things were probably not taught to us in school, and no one is teaching this stuff in school even today, but there is no reason why we shouldn’t read blogs, books and educate ourselves on this topic.

Learning about personal finance is one of the most rewarding and responsible things you can do for yourself (and your family). If you make it one of your missions in life and you’re able to master the art of making, saving, and investing money, then you never have to worry about it. It will always be there (no matter what happens). Unless the world is destroyed (God forbid), you will be fine. Just take the time to follow some of the things I’m going to outline in this post, and you will be able to achieve that elusive financial independence that most people can only dream about.

Take everything slowly. Don’t try to change everything immediately. Instead, keep a journal and give yourself a few weeks to implement all of these action items that I am going to outline below. Discuss it with your spouse or significant other and bring them onboard as well. You want them to know that you are thinking seriously about the future and that you are going to make some changes in the way the finances are handled so that you can plan for a better future. The last thing you want is to have someone important in your life tell you that they’re upset with your new way of handling the finances. You just want this to go smoothly, and finances can be a sensitive topic, so make sure you’re bringing them along for the ride and encourage them to contribute their ideas as well.

Think Deeply About Your Income:

We as humans are weak. Most people are not obsessed about their financial goals. Most people do not keep a close watch on their financial accounts. In fact, financial matters can be a cause of stress and anxiety for a lot of people. If you’re reading this and you can identify with it, then that’s ok. I used to feel this way too. One day, I realized that money is just a tool for massive change in the world. If you control $100,000.00 then you control the power to make $100,000.00 worth of change. That’s all it is. It’s just a tool. There is absolutely no reason to stress out about it.

Imagine if you were an airplane mechanic and you had a few airplanes that you worked on regularly. You also flew these airplanes from time to time, and sometimes you enjoyed doing some crazy aerobatic maneuvers in them. One day, a friend shows up with an aircraft that you have never seen before. You’ve never worked on this airplane, and you don’t know anything about it. If your friend requested that you go flying with him and show him some aerobatic moves, you would probably be a little cautious and would want to perform some thorough checks on the aircraft before you went flying in it. The reason is because you don’t know anything about the airplane. You have never worked on it, and you have never flown in it.

So, the point that I’m making is that your bank accounts, your 401K account, all your financial accounts are like those airplanes that you should know inside out. If you work on something every day, if you know the ins and outs and you know exactly how it works, you’re not afraid of it. It would not be the cause of anxiety and stress. But if you’re unsure, if you don’t have all the knowledge and if you’re out of touch, then that could be cause for some concern.

The moral of the story is, start spending time understanding your financial situation. Spend time checking all your accounts and running a tight ship when it comes to your main bank accounts. Monitor the money that comes in, keep a close eye on the money that goes out, and make it a habit to check your main accounts once a day. You need to set up automated systems that allow you to do this quickly on a daily basis. If you look at the state of your financial affairs on a daily basis, you will eliminate all the anxiety and fear that is associated with the act of doing that, and you will ensure that you have full control over your money.

When you embark on this journey to take control of your money to ensure that you can retire early, it is very important to understand the nature of your main source(s) of income. Most people have one source of income. And quite often that source of income is a job. If your main source of income is your 9-5 job, then you are in a very vulnerable situation. I know some of the people reading this will say “I have a very secure job”, and the truth is that while many people think their job is secure, a job is nothing but just that, a job. And if you can do the job, there is someone else who can too. You’ve probably heard that saying that “no one is indispensable” and it is absolutely true. So, if your main source of income is your 9-5 job, then you need to reconsider your plan and think about creating a passive source of income for yourself.

What is Passive Income?

Passive income is a pipeline of income that you can create for yourself which doesn’t require you to show up everyday and work on it in order for the money to come in. Some examples of a passive income sources could be a laundromat business, a cafe, a car wash, a blog, or any type of business that can run without you having to actively work on it every single day. Now, all of these businesses will require some level of involvement. You will need to spend some amount of time solving issues in the business, removing roadblocks for your employees, filing taxes and just taking care of basic stuff. But, you can take a vacation for a month or two and the business will still run. That’s a passive business. The money comes in like clockwork. You want at least one source of passive income so that you are not completely relying on your 9-5 job.

Another great example of a passive source of income is rental income. If you own a rental property (or properties), you can make a fat sum of money every single month without doing anything. All you’ve done is park your money in a house which someone is renting from you. They’re basically paying off your mortgage for you and your property keeps appreciating in value over time. Rental income can be one of the best passive sources of income. If you want to learn more, read my post on how to master the art of passive income.

Creating one or more streams of passive income for you and your family is something you should start working on immediately. This won’t happen overnight and will take time, energy and a lot of focus. So, start today and take the time to come up with a plan and then keep moving forward. In a few months or years, you will have created a passive income source that could last for years and who knows, maybe it could even allow you to completely quit your day job.

Pay Yourself FIRST!

This is something that most people forget to do. You must NEVER forget to pay yourself. No matter what your situation is. Whether you work at a 9-5 job or you run a small business or you run a large corporation. Make sure you pay yourself first. This means, you NEED to set aside money each money that automatically goes through the automated system you have set up so that it can flow from your checking to your savings, spending, and investment accounts. There could be multiple stops for the money. The path that the money takes once it’s deposited into your checking account can be something that you decide, but you need to take the time to design that and you need to make sure you take the time to set it up in an automated way. If you don’t do this, you’re just leaving yourself wide open for financial disaster. Remember what I said earlier, we as humans are weak! That’s why people fall into temptation, that’s why people make bad decisions and that’s why people go broke. You need to save yourself from yourself and take the time to set up your financial life in a way so that you cannot and will not destroy it. This is what builds discipline and you need to make sure you do it starting today.

Control Your Bank Accounts

You need to set up your bank accounts in a way that makes it easy for your to set aside money to spend, money to save and money to invest. You want to automate things like paying bills (although I would make sure to keep an eye on the bills being paid each month to ensure that they are not charging you extra). Trust me, that happens from time to time. There have been instances where I have set up a bill for auto payment and low and behold, they’ve overcharged and they always have an excuse. The easiest way to do this is to set up autopay and send yourself alerts when a bill is paid. You can do this on both ends. You can set up an alert when the money is debited from your bank account or processed via your credit card and you can also set up the bill in a way where the company sends you an email when the bill is paid in full. This is to make sure that you are being alerted on both sides and to be certain that you will never miss a notification. I would recommend setting up email alerts. Email alerts are always better than mobile alerts because there is a low chance that you will delete your email account or decide to change it. With your cellphone, there is a good chance that your cellphone gets damaged, stolen or simply stops working. You don’t want to have those important messages sitting on your phone. You want easy access to them via email in case you need to forward those messages to customer support for the bill or in any situation like that. Just be on the safe side and enable email alerts!

Do Not Keep All Your Bank Accounts With The Same Bank

This is a mistake that I see a lot of people making. Their Dad or Mom banked with X, Y, Z bank so they bank there too. And they keep all their money in one account. If they have a savings account, it’s with the same bank. This is not the right way to set up your accounts.

I’m not going to go into investment accounts in this post, but let’s assume you have a few investment accounts. Actually, let’s assume you have one investment account for this scenario. You want to set up your account in such a way so that when you get paid each month, you automatically take a large portion of the money (the percentage is for you to decide and the more the better) and funnel it to your investment account. You should not even see this money! It needs to go directly into your investment account where it will compound over time and make you a boat load of cash. You need to do this TODAY! Well, take the time to set this up properly but you need to start working on this ASAP.

The next thing you need to do is create another account from where you will pay all the money you owe. This account will be used to pay bills, student loans, etc. Make sure you calculate your total outgoing each month and add $100 extra to it as a buffer. You need to subtract this amount from your pay check and funnel it to this account as soon as your money comes in each month.

Last but not the least, you need to have an account you use for things like entertainment, dinners, lunches, and basically for things you want to do to treat yourself, your friends and family. You need to set aside another checking account for this and deposit the cash into that account as soon as your paycheck comes in.

So, for example this is what it will look like:

You make $6500 per month. For simplicity, we will assume you get paid once a month.

Financial Account #1: Your main checking account
$6500 balance (AT THE START OF EACH MONTH)
$4225 balance (AFTER MOVING 35% OF YOUR INCOME TO YOUR INVESTMENT ACCOUNT)
$2125 balance (AFTER MOVING MONEY TO YOUR BILL PAY ACCOUNT)

Financial Account #2: Your investment account
$2275 (AFTER MOVING 35% OF YOUR INCOME TO THIS ACCOUNT)

Financial Account #3: Your bill-pay account (rent, utilities, loans)
$2100 (YOU WILL NEED TO HAVE A BUFFER OF AT LEAST $100 FOR THIS ACCOUNT)

Financial Account #4: Your entertainment account
Technically, you’re left with about $2125 to do whatever you want..it’s up to you how you want to manage that amount. Do you want to blow all the money on clothes? travel? dinners? It’s up to you how you manage that amount, but I would recommend not spending for the sake of spending.

Make a list of things you like doing. Here’s an example list:

1. Going to your local coffee shop
2. Going to the movies
3. Buying books

Basically, take the time to make an entire list of things that you like doing that bring you real joy. I bet you will come up with things that don’t even require you to spend money. Like spending time with loves ones, taking your dog out on a walk, etc. So, come up with that list and when you need to spend money from the entertainment/fun account, just ask yourself whether the thing you’re about to spend the money on is on that list. Does it make you truly happy? If the answer is yes, then by all means go ahead! If the answer is “I’m not sure” or “No” then you need to make that decision for yourself.

If you liked reading this post, please share it with a friend who would benefit from the information as well.