5 Simple Steps To Financial Freedom #Best Education Page #Online Earning

- How's it going today, guys?

Welcome to back to the channel,

hope you're having a great day so far.

In this video today we're gonna be talking about

the five simple steps that you need to follow

in order to achieve financial freedom.

Now, a lot of people way over-complicate this,

and it causes people to think that this is impossible,

they're never going to be able to achieve financial freedom

or improve their financial situation.

What I'm going to do i
n this video

is break it down into five very simple

and actionable steps that you can follow

if you're looking to improve your financial situation

and eventually reach a point

where you are financially free,

meaning that you aren't necessarily focused on money

as your sole issue or sole factor

when deciding whether or not you want to do something.

Now, this lesson right here

is something that is not taught in school.

I guess they are too busy teaching geometric proofs

and teaching you English as an English speaker

to be able to show you these basic financial skills.

This is a very important lesson,

and if you guys have not learned it before,

make sure you guys share this with somebody else

so they can figure this out as well

and learn these important lessons.

Number one, the very first thing you have to do

if you're looking to improve your financial situation,

reach financial freedom, or get out of debt,

is look at your current financial situation.

Now, the best comparison I can make here

is thinking about,

let's say your goal was to lose weight.

Well, we know if you wanna lose weight,

you have to eat healthier foods

and you have to have regular exercise throughout the day,

but why is it that you are doing that?

The reason why you are doing that

is because you need to burn more calories

than you are consuming.

If you're eating 5,000 calories a day

and you're only burning 4,000 or 3,000,

well, everybody knows that you're going to gain weight.

Trying to improve your financial situation

without actually looking at the numbers

is like trying to lose weight

without looking at the calories you're burning

or how many calories you're eating.

You're just gonna go out there

and eat whatever you feel like,

and you're gonna exercise whenever you want to,

and you're not gonna track anything,

and you're gonna hope to lose weight.

Anybody who's done that before knows

that you're not gonna lose a damn pound

as a result of doing that

because you are not tracking your results

and tracking how much you're eating.

Just the same,

you need to be tracking your financial expenses

and your income

in order to make sure that you are

saving money every single month,

or not living paycheck to paycheck,

or going into debt.

The method of doing this,

you guys can do this on Excel,

you can do this just like this on a lined piece of paper,

and all you're going to do

is you're gonna start by looking at the last three months.

Before you go out there and say,

"Oh, I don't know how much money I'm spending,"

well, most of us, especially young people,

are using debit cards or credit cards

for all of our purchases.

You can access, in some cases, six months or more of data,

so there's no excuse about not being able to find

how much money you're spending,

because it's all there for you,

unless you're somebody who spends 100% cash,

which is not going to be most people,

especially among the millennials.

I recommend looking at the last three months of data.

If you want, you can go beyond this,

which is going to be even more beneficial.

What you're looking at is how much income you're making,

your income from all sources after taxes

minus your expenses.

Now, we typically have two types of expenses out there.

Number one, we have our recurring monthly expenses

that are often nondiscretionary,

which simply means we cannot change them.

This is things like your mortgage or your rent

or your utility bill,

things like that that are fixed monthly expenses

that are around the same amount each month

that you really can't change.

Then we have discretionary expenses.

That's things like going out to the movies,

dining, entertainment, bars, alcohol.

Those are expenses we have control over,

and if you wanna take this one step further,

you can branch out and separate

your discretionary versus your nondiscretionary expenses,

which is ultimately going to help you figure out

where you can do some trimming.

All you're going to do is do the math here.

You take your income and you subtract your expenses,

and simply by doing that math,

that's going to tell you

if you have positive monthly cash flow,

meaning you're making more than you are spending.

If you have basically breaking even paycheck to paycheck

where every dollar you earn, you're spending it,

or in the worst case scenario,

you have negative monthly cash flow

and you are spending more than you are earning.

Let's say in November you earn 3,000 post-tax

and you had $2,400 in expenses.

Well, you were positive $600 that month.

Now, December, a lot of people have higher expenses.

They're discretionary expenses

because of Christmas shopping and holiday spending.

Let's say you earned again $3,000,

but you spent 3,800,

meaning you were negative $800 that month.

And then in January,

let's say it was the same exact expenses as November,

and you are positive $600.

That is exactly what you're going to do.

You're gonna look at the last three to six months of data

and determine whether or not

your income is exceeding your expenses,

and if it's not,

there's absolutely no way I can help you at this point.

Steps two through five are totally irrelevant

if you are not making more money than you are spending,

so that is your first goal,

is to figure out how to cut down on those expense items

and get yourself in a situation

where most months, if not all months,

you are cash flow positive.

If you've accomplished that

and you already have determined

that you are cash flow positive on most months,

if not all months,

step number two is to eliminate bad debt.

Now, not all debt is bad,

and you can be responsible with credit card usage

by paying off your cards at the end of every month.

That is not what I'm talking about, here.

I'm talking about any credit card debt you have,

or student loans or medical bills.

You need to start getting these paid off

before you begin investing in other areas.

There's two different methods

that people typically follow with this.

Number one is to simply pay off

the highest interest debt first,

and financially, that is what makes the most sense.

That debt is the most expensive.

You're paying the highest interest rate,

and you wanna pay back those amounts first.

Option number two is simply to pay off

the lowest balances first,

and the reason behind that is, psychologically,

it makes you feel like you're accomplishing something

to eliminate a piece of debt entirely,

and that's going to get the snowball going.

A lot of people call that the debt snowball.

I believe that's Dave Ramsey's method there

that he talks about a lot,

is starting with the lowest dollar amount first,

because that's gonna make you feel

like you're accomplishing something.

So, if you had these debts here, for example,

let's say you had a Best Buy credit card

with $900 on it at 18%,

a Walmart credit card with 500 at 19.5%,

a Discover card with $2,000 on it at 25%,

and then you have some medical bills

from some dental procedure, 4,000 at 11%,

and then you have student loans,

you know, $50,000 at 8%.

What order would you do this in?

Well, if you were following the strategy

of highest interest debt first,

you would start with your Discover card,

because that is the highest interest that you are paying

across all of your debts.

But if you're following the debt snowball approach

and paying the lowest balance first,

you would knock off that Walmart card.

That's gonna be the easiest one.

What you're looking to do

is pay off the high-interest debt that you have,

and then the only forms of debt

that I can understand not paying off immediately

before following these next steps would be your mortgage,

because that's typically 3% to 4% interest,

if you have a low-interest auto loan

or low-interest student loans.

You don't necessarily have to be debt-free before investing,

but you wanna make sure

that your high-interest debt is paid off.

It doesn't make sense to be investing money

earning an 8% return,

meanwhile, paying out 25% to somebody else.

Your goal here is to pay off

your high-interest debt first,

and then step number three,

which we're gonna talk about soon,

is going to eliminate that future need

to go into debt through the use of credit cards.

Okay, so the third thing you're going to do

after your high-interest debt is under control,

your credit cards are paid off,

is you're going to put $1,000 in a separate savings account.

Now, you might be asking me,

why don't I just put this in my,

already the savings account that I have,

or the checking account that I have?

That is because you want this to be

a separate amount of money,

because this is called your emergency fund.

It should not be confused with your savings account

or your checking account.

This is your emergency fund

that you're only going to dip into in a dire emergency.

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