Simple Steps to Financial Freedom

Simple Steps to Financial Freedom

You may have heard that money doesn’t buy happiness and the person that told you that probably had a lot of money, but they aren’t exactly wrong. I think what’s closer to the truth is having money’s not everything not having it is. Kanye West said that. And while I don’t always take financial advice from rappers, Kanye’s got a pretty good point. When you don’t have money it becomes the source of a lot of pain, frustration, and anger. It consumes your life and becomes the lens with which you see the world. “Hey, how much did that cost?” “Oh, that must’ve been expensive.” “Hey, I think you owe me 20 bucks. You can… you can pay me later. That’s… Venmo?” When we don’t have it, every problem seems to revolve around money. And while being rich won’t fix every problem in your life, stacking up some money seems like a worthwhile pursuit. When you become financially free, you will no longer make every decision solely based on money. You don’t take the job just because it pays better, you don’t have to look at the price of organic groceries to make sure you can afford them, hell, you can take Uber Black to the airport …every once in awhile. Imagine being at a place where you never had to worry about money again. And maybe not even that far Imagine a place where money wasn’t the major stressor in your life and on your relationships. The steps to get there are simple, but it’s not gonna happen overnight. So let’s get started. Step one: create an emergency fund. Save a thousand dollars and put it into an emergency fund that you’ll only use in dire circumstances. I remember reading a story from Dave Ramsey from someone who literally put their emergency fund inside a frame with the words “break glass in case of emergency.” Hold up though. Emergencies don’t include beer money, vacations, or even an engagement ring. It’s a… it’s a minimalist ring. This money should only be used if, and when, shit hits the fan. When your car breaks down, when you need to replace your water heater, basically when your life would otherwise become completely derailed, that’s when you go to the emergency fund. Why create an emergency fund? Because everything that can go wrong, will go wrong and instead of borrowing money from your family again, or pulling out your credit card, pushing yourself further into debt, you’ll have something to fall back on. The great thing about the emergency fund is that it starts to give you that feeling of financial freedom. For the first time maybe in your adult life, you have some room to breathe. This step is the quickest way to finally start to gain some control back in your life. Step two: pay off your debt. About 80% of American adults are in debt and we’ve just accepted this as the status quo. Maybe we bought shit we didn’t need to furnish an apartment we couldn’t afford, or purchased a new car when we could’ve bought used. For me, one of the biggest problem with debt is that it restricts your monthly income. So when you’re paying five to seven hundred dollars, even more on your mortgage, student loans, your car payment it severely restricts the amount of money you can save. The other thing I’ll say is that you’re gonna be saving thousands of dollars in interest if you’re able to pay off your loans quicker. Forget about cutting back on your daily lattes, this is where you’re gonna take the biggest step toward financial freedom. Let’s say you have a hundred thousand dollars in student loans at a 5 percent interest for a twenty year term if you only pay the minimum for the entire period of the loan, you’ll end up giving the bank over a hundred and fifty eight thousand dollars. This kinda feels like an emergency. So what’s the best way to pay off your debt early? There are a couple takes on how to do this. You could tackle the high interest loans first. Each loan is a different amount with a different interest rate. By the numbers, the smartest decision is to attack the highest interest rate first, then take them out one by one. Another option is called “The Debt Snowball.” It takes into account human behavior. By tackling the smallest loan first, we’re able to knock it out quicker, which helps build momentum and motivates us to pay off other loans. So when I first got really serious about paying off my debt early I brought everything and organized it into a spreadsheet like this. I would log in a couple times a week sometimes I would log in every single day and just visualize what it would be like to pay off some of these loans. And I would just delete them, one by one, like a madman, like somebody who’s completely delusional, and I would keep an eye on my monthly payments because I knew that if I could get them low enough, then I’d be able to move out of my parents’ house. So this is what drove me. I started to have hope again. I started to feel like there was a light at the end of the tunnel and I would actually eventually be able to pay all this off. Step three: create a runway. What would it feel like to have six to twelve months worth of expenses in your bank account at all times? Imagine the kind of freedom and stability you’d have knowing that if you ever got injured, lost your job, or you couldn’t find anymore clients, that you’d be taken care of for the foreseeable future. This is why having runway is so important. Open up a spreadsheet and take account of all your monthly expenses. Rent, groceries, internet, insurance, Netflix, your phone bill, etc. So pulling all of this information into my spreadsheet was an amazing way for me to start to see what’s the absolute minimum that I needed to survive on? And as a freelance filmmaker with my income varying widely, this was a really powerful number to have. Okay, now for some tough math. Multiply that number by six months to get your first target runway goal. The next goal after that would be to get twelve months of runway. This number now becomes your baseline; it’s like an extended emergency fund. Except I wouldn’t put twenty two thousand dollars in a frame above your bed, I think the bank might be a little bit safer. Step four: start a retirement fund. Retirement funds are one of those things that you know you should do, but you haven’t done yet, but eventually you’ll get to it, but you probably never will. Retirement funds are those things that your friends talk about sometimes and whenever they do you just smile and nod, but really you’re thinking, “fuck you, Brian, you’re a piece of shit. I don’t care what your stocks are,” and then you think to yourself, “what’s a 401k I’m gonna look that up.” Personal finance is often about making short-term sacrifices for long-term gain. By saving a little bit each year you’ll be able to set yourself up for a dignified retirement. First, compound interest is the shit, and here’s why: So you have a lot of money, like you have ten thousand dollars, and then over the course of a year, that money is making money because you’re investing it into stocks and stuff and then you have more money at the end of the year so then the next year you’re making more money on top of that money and then that money’s making even more money and then the next year you’re making even more money. I’m just gonna do a quick illustration so it’s not as confusing. Say you put ten thousand dollars into a 401k receiving a ten percent annual return at the age of twenty if you never touch that money until you turn seventy years old you’ll have over 1.1 million dollars in the bank all that from simply putting away ten thousand dollars. Use a compound interest calculator online to see how much you could retire with based on your yearly savings. Alright, so for me personally, I invest at Vanguard, I invest primarily in low-cost mutual funds about ninety percent stocks, ten percent bonds. Now I chose this fund because it’s essentially a snapshot of the U.S. economy. So since 1923 when the S&P started it has produced a return of around ten to twelve percent, and that’s basically what this fund is giving me. Now that’s over the long run, we’re not talking about a five year period. So when you invest in the long run you’re not checking your Vanguard account every day, every other day, you’re putting your money in, you’re making sure you have everything set, and then you’re checking it maybe in six months, maybe in a year but you’re not stressing out every time that the stock market’s shaky. When 2008 hit, a lot of people lost money, but if you’re investing in the long term, that’s not gonna matter at all, because in thirty years, you’re gonna eventually make your money back. Now there are many many variables that will factor into your own investment strategy, like your age, your income, how much money you’ll think you’ll need when you retire, how much risk you’re willing to tolerate. Please do your research before investing. I’m not your financial manager, investor, or fiduciary. Read up and make a decision based on your life circumstances. This is not a definitive blueprint. If you’re a freelancer and you can’t stomach that much risk, or you’d feel safer if you had five thousand dollars emergency fund from the very beginning, then do that. Or maybe you can actually handle the extra risk and you decide, “I don’t wanna build six months of runway, I wanna actually start investing in my future and my retirement right now.” Then do that. I personally liked the idea of paying off my debt first, and then moving to my retirement fund, but for a lot of people if you’re not able to pay off your debt that quickly, you may want to actually start your retirement fund now, especially if you have a 401k-match with your company because then you’re gonna be able to take advantage of the compound interest. I wouldn’t have been able to pay off my debt if it wasn’t for reading books like Dave Ramsey’s “Total Money Makeover” or Ramit Sethi’s “I Will Teach You to be Rich.” I recommend reading one personal finance book a year, or listen to one of a hundred podcasts on the topic. This will help you rest your priorities every year as we can sometimes get distracted by shiny objects. Once you’ve got a solid emergency fund, pay off your debt, padding your bank account with runway, and you’ve got your retirement fund started, you’re on your way to financial freedom, and it won’t take finishing your retirement fund to finally realize that having money’s not everything. Is this an awkward time to ask for money? As you guys know, if you watch my channel a lot, I usually end my videos with a Patreon pitch. It’s how I’m able to make these videos ad-free, but before I do that today, I wanna be very clear, if you do not have the money, if you are trying to pay off your debt, and you’re trying to cut down as many expenses as possible, if you feel stressed out about buying a cup of coffee, please please please please please do not contribute to my Patreon this is not reverse psychology or anything, I truly want you guys to kick ass, I want you to do amazing stuff, and I want you to not feel stressed out about money, and I don’t want you to make bad decisions with your money. That said, if you do have the money, if you do… if you feel so inclined and you’re feeling great about it, I would love it if you would consider contributing to my Patreon account. I’ve been working my ass off to try to make really great videos and extra podcast episodes to add value to you guys, so these are some of the things that you can get from it. If you wanna support my channel I’ve set up a Patreon account, but I’m not just asking for your money. I’ve created tiers that get you access to content like my Patreon-only AMA podcast, and I also make videos on minimalism, filmmaking, and business. Learn things like how to grow an audience, or how to tell a great story through film. As always, thank you guys so much for watching, and I will see you next time.

100 thoughts on “Simple Steps to Financial Freedom

  1. If you're looking to get started on your path to financial freedom I'd recommend reading the books below. I wouldn't have been able to get out of debt or make this video without them. Let me know any other great resources that have helped you…

    The Total Money Makeover:
    I Will Teach You to Be Rich:
    Money Master the Game:

  2. Just read a book called Unscripted. It’s better than that crap, you don’t have to be 70 in order to have a million dollars.

  3. Think of it, in this way:

    How would you be living life without the need for money? Money not being a problem, or Money not even existing?

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  5. Last year, I came across this video and learned so much. This is how I learned how to do spreadsheets to budget my expenses and savings. Because of this video, I was able to kind of get my shit together and was able to save some money. I'm happy to say I met 90% of my savings goal for half of the year and since I started, have been more conscious about how I spend my money and what I spend it on. 🙂 Thank you for the amazing content, Matt! 🙂

  6. Ah I wish I could make all of you believe that money doesn’t really buy happiness. I have enough money thanks to my family but I am clinically very, very depressed. It depends on the person and yes, having money makes some things easier but believe me, it does not make you happy.

  7. What is this? So in a word, to have financial freedom and do not think about money, you need to have so much money to pay all debts and save almost a year salary just in case? How? You can do it if you won't spend any money, and will it from a canister, or you need to have a lot of money to do all steps, but if you have that big amount of money, why you need Financial freedom? lol

  8. im on O.W i only make 400$ per month
    due to the ways my brain is wired i cant work
    saving moiney for anything is impossabl;e
    cuz i have to still eat every month sadly im forced to use food banks

  9. the 1k down votes are people with money who doesn't want people without money to know the secrets on how to save money lol

  10. Holly shit, Americans are dumb, you can study in Europe at some of the best colleges in the whole world at 1/3 of the cost it takes to study in America (USA). And plus you would have a great life experience.

  11. So… save money? That's your whole thing? Save lots of money? What if you're only making just enough to live on, without any extra? I don't have any debt, but I also save so little that it would take 15 years to save up 6 months of runway. What's your magic paper cutout say about that?

  12. I've watched your videos before but something was different about this one. It made me wanna sub to you, which I did. So, thanks for the video and congratulations on a new subscriber! lol

  13. so basicly i just have to pay my debts and save some money to have no money issues. i actually would like my time back for this.

  14. I have 23 different bills every month – his spread sheet looked heavenly 4:46 Ahahaah that list is missing Flex Spending, PyCharm, Loans, gas, YouTube Red, Starbucks (shoot, for got – my list is now 83 Ahahahaha)….

  15. Thanks for the advices! Just did an Excel with all expenses and now I can just check where I need to cut! Good work!

  16. 401k? Mutual found?wtf. Debt is not always bad if you use as leverage, and you say 10k =1m in50 years, did you calculate the inflation?, you need real money books start with less I don't know Robert kiyosaki even Donal trump books 😂,

  17. Pretty repetative just like many other videos. Most of your videos are highly original, this one is an exception, you can do better…no new content that isnt available in 10000 other channels.

  18. Just finished Dave Ramsey's The Total Money Makeover! Very quick, light, and informative read! My goal is to have $5000 saved by the time I start college next year.

  19. while everthing is correct….but u forgot one very important step, be charitable because God knows better than u…whatever u give wholeheartedly with kindness, God will make it 5 fold, 10 fold…..
    i used to be extremely poor until i start to donating ….n then everything turn 360 degree….
    im not very rich now but at least i able to get out from poverty to financial stability with everything i need and abundance

  20. Money dosent buy happiness…but it sure the fuck bought me an Audi 2019!!! Now im broke as shit…hahahahaha.

  21. This example of your quality video + amazon links + Patreon (~2000 Paterons @ a minimum of $4/mo each!) shows a nice blueprint for amazing passive income. This is far more valuable than most other videos on the subject. Did I miss any other income streams? Oh wow.. Also with The Amount of subscribers you are making good money with YouTube. This is very encouraging, yet feels very far out of reach…

  22. Ok, this isn't 1980. Where the hell can I find a 10 percent compound interest retirement fund??? Put a link!!

  23. My biggest struggle with finances is digging up $$$$ i hid in my closet but theyre in a different currency and exchange rate is terrible. Sigh

  24. i'm 18 got away with my first semester of college debt free but that's it Have $2,100 in "oh Shit" money and $150 in total

  25. The only step in my opinion is to start creating multiple sources of income. Diversifying the portfolio rather than putting all the eggs in one single basket.. nurture it and repeat.

  26. Speaking of organic fruit/veggie prices, pro financial tip #1 should be: Don't buy organic fruits and veggies. There's no benefit to you, you're just spending more money.

  27. 6:30 it's worth noting that due to inflation, that ~1.2million dollars would have about the buying power of $850k of todays money, due to inflation.

  28. Steps to financial freedom: Create videos with obvious advice like "dont buy lattes every day" and "save money" , get a good haircut and ask people for free money.

  29. One of very videos with financial tips that kept it real and truthful.
    I have older work colleagues (50-64yo), all of them earning same money but they are sooo different at managing money.
    They earn not much more than average wage in this country. Some of them are going paycheck to paycheck, barely spends money on hobbies or culture, they are saving monthly wage for nearly a year. And then there are some who are always doing something, they can easily afford their quite costly hobbies, culture, abroad holidays, new car,… and still are able to save money. Those two groups are on same wage (for very long time not just recently).
    Thing is as soon as you pay off all of the debt and have own place to live – than even average wage gives you a lot freedom – basically you only need to pay food, energy bill, maybe commute and maybe some sort of council tax. That leaves you with quite a lot of money left in your bank account.
    If you are in one many countries in the west and middle of Europe – you can be easily earning average wage/salary – something like above 2000Eur nett. You pay for food 250Eur, 200Eur for energy and other bills (some kind of city tax, phone etc.), maybe 200Eur for commute to work and you are still left with something like 1500Eur each month. So yeah when craving financial freedom you must get rid of debt and accommodation expenses.

    I honestly can't wait to this. I do have emergency fund, I don't have any debt, l have my runway. Now I have to finish my house (which should not take long and I do have half of the savings for it) and start a retirement fund. Then I would like to start making small constant amount of money just to cover my necessary monthly expenses (food, energy bills, insurance, phone, city tax) so all the income from work is for my fun, savings – that way I do not really need to worry about keeping my job and it should give me even more stability.

  30. Saving up for your retirement by putting your money in a company that was not around 30 years ago is not the smartest way to go, this is how many people lost everything in 2008

  31. Amazing content Matt! Really appreciate the great amount of effort that you make to bring us quality videos!

  32. Step five : Start a business or add value to people doing something you love , what is the point of all this if I have to wait till I'm 60 to taste full freedom

  33. I'm set for life.. yes sir, financial freedom baby, I have 1.2 million US, yeah took me sixty years of saving. I used to walk to work up-hill both ways, in the snow with no shoes. Yep them were hard times, never finished school, terrible at math, teacher would yell out "hey!! Bat!!, what's 2+2?… ah…22?, what a stupid bastard, he would say under his breath…but I didn't quit, no sir, I spent 7 years in second grade, but you know what, one day teacher yelled, … oh I was ready for him this time, … he yelled "hey Bat!! what's 2+2?… ah… 22? what a stupid bastard. ..OK folks I have to go finish counting my millions I'm going back to counting my pennies, I have one more jar to count…1.3 million pennies, 1.4 million pennies… yep, I'm a millionaire.

  34. I think that’s the one thing I’ve done correctly so far: I have an emergency fund. I’m working on a retirement fund at 22 years old but blundering through it without really knowing what I’m doing…
    Getting a credit card however was probably the worst thing I’ve ever done and introduced me to unnecessary debt. Now I have that and student debt. In the type of person who sees I have money and needs to spend it. Tip for those like me: use simple bank. It hides the money you can’t afford to spend so you’re not tempted to spend it 😅

  35. The age of compound interest was over 20 years ago.. I dont know why people keep mentioning it.. Stocks dont make much any more and all of the pension funds dont know where to put their money. Inflation rate is about 2-3% and the conservative rate which you get by investing in stocks and bonds is also about 2-3%

  36. Yeah, that's right start a 401K, I guess the financial crisis of 2008 taught you nothing. 401K's are a joke, no one should start one for any reason. Better to pay off your debt and work till you drop. Or pay off all your debt and be able to live off your Social Security. I intend to be able to live off $800 a month. F#ck a 401K or anyone who preaches you needing one.

  37. If only the stock market was as same as the one in Gta 5

    damn invest and sleep

    check your money then sleep
    then hang out with lamar
    come back home you made 50000 bucks from the 50 cents you invested


  38. I clicked on “The Era of Upgrades” and I accidentally skipped it onto this video. I thought that the intro was the intro of the last video 🤦‍♂️

  39. For the latest 25 year S & P 500 has approximately 7.5 % yield. Plus do not forgot about taxes.
    30 % in USA if I am not mistaken. So it is not so beautiful as it could expected.

  40. To finally realise that I can actually pay this off and not increase my debt by spending money I don't have is liberating. I mean it is the simplest idea: spend less money than you earn. But in practice it is harder. Still, I am motivated now! Wishing everyone good success and determination to get their finances in order 🙂

  41. In short terms, the key is as long as you manage your money properly, you wont have issues with it.
    Great video.

  42. One rule Im putting down for myself as I get older is "Don't Buy Useless Stuff and Only Buy Things You Need or Going To Use Often"

  43. Commenter : Social media bad. Nature good.

    Youtube : 👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍

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