This video outlines an effective strategy that – if followed – will lead you to financial independence. I know it works, because I’ve used it myself. I graduated college 8 years ago – and since then, this approach has led me to becoming totally debt free, to pay off a 250 thousand dollar home in 5 years, and just last month – to reach the million dollar net worth milestone. So let’s get into it.

To be clear – this is NOT a get rich quick video, and I’m not selling you anything. This video is about a specific lifestyle and approach to finances – about setting a solid foundation for your outlook on finances that naturally leads to good results. So lets go. 

1. Adjust Your Mindset

This is the most crucial and likely the most difficult step. What I mean by this is to fundamentally change the way you think about money. An simple example might be how you view the concept of  “spending less money” – when most people hear this, they immediately get this cringy feeling of skimping, sacrifice, scarcity, or some other form of a negative vibe. 

Instead of envisioning this negative, limited lifestyle, you should view spending less money positively – knowing good disciplined decisions about spending money now…quickly leads to a much more abundant, free, and flexible lifestyle. 

Something else to think about here is evaluating your willingness to go into debt. Things like gifts, clothes, vacations, gadgets – these should be totally off limits to debt. These are things you plan and budget for – not things you go into debt for. Even seemingly more expensive things like vehicles and education is on my no-debt list. 

I bought my first car when I was 16 for $1500 cash. Fixed a few things on it and loved it as my first car. I don’t drive that same car now, but I’ve still never gone into debt for a vehicle. When I was 18, I moved out and went to an affordable, but reputable school. My mom gave me $1,000 for college…and I was very grateful for that, I also had a half tuition scholarship for 2 semesters. So…I worked the WHOLE time I was in college – ended up getting kind of bored of school halfway through so did a semester abroad in Austria – paid cash for that – and in the end paid for 4 years of undergrad, and 2 years of grad school. Loved college, had a ton of fun – and still graduated debt free. And this kind of thing is possible for anyone as long as you have the right mindset toward money. 

People go into debt for the dumbest reasons – thinking that its “normal” – and its totally crippling to their finances, and just sets you back more and more. You should not go into debt for almost anything – and especially for things that don’t give you an immediate cash flow – so for me, there would be an exception there for things like starting or buying a business, a great real estate investment, and things like that. 

Overall, stop conforming to a consumerism mindset and culture you see on TV, in your family, or in your circle of friends. Financial independence is…possible for anyone – including you, doesn’t require you to make 10x more than you make now and doesn’t require you to spend nothing or live so cheaply that you’re miserable.

One of my favorite quotes about wealth summarizes the ideal mindset well:

Wealth is most often a result of a lifestyle of hard work, perseverance, planning, and most of all self-discipline.

The Millionaire Next Door

Adjust your mindset. 

2. Determine Your Goal

In my opinion your goal shouldn’t start with mathematical calculations on how much money you need for early retirement or how much money you want to make in the next year or five years. The most important metric for me is whether or not your money allows you to live the life you truly want. 

So what is financial independence to you? For most this is having enough income from solely passive sources – a business, investments, real estate – to reasonably live for the rest of your life without having to rely on actively working. But we all know everyone lives differently and people may want to live differently later in life than they do now, so there is a huge amount of variance there. Start with your life goals, then create financial goals around that. Then start planning specifics on how to get there.

3. Streamline Your Expenses

Number 3, streamline your expenses. Simply minimizing your expenses might not be the best route or might just cause you to give up on making real, long lasting changes. A few quick tips on what it means to streamline your expenses. 

Yes, you need some form of a budget. You have to assess your current financial situation honestly and know where and how the money flows in, and where and how the money flows out. I’ve personally never used a formal budget, but…I love apps and spreadsheets for other personal financial analysis, so I know they work and if an app or spreadsheet will get you there – use them. Identify your biggest expense problems – and fix them. 

Another streamlining tip – stop spending on anything that has low or no value to you – in other words – inject some form of minimalism into your buying habits. It’s a good thing to spend less on stuff, it’s a better thing to spend nothing on stuff you don’t truly value. We all know we buy things because it makes us feel good. Start transforming that emotional boost you get from buying something to an emotional boost for having the discipline to NOT buy something. 

When it comes to expenses – start on the essentials – housing, transportation, food, and clothes. These are the areas you’ll likely find the most opportunities. After the essentials, focus on your regular habits – there is a lot of money floating around in your subscriptions, your coffee, your alcohol, and in eating out and going to bars. 

What expense do you have that seems like its the hardest to control? 

4. Maximize Your Income

Number 4 – maximize your income. There is no doubt that your income is a huge factor in becoming financially independent. You shouldn’t try to just save your way to financial independence. Controlling your expenses is the foundation – maximizing your income is the accelerator.

Get a raise at your job – I was in college the first time I asked for a raise and I was so nervous about how to approach it. In the end I just confidently stated my contributions to the company and said “so I think I deserve a raise”. I ended up getting double the raise I expected – just for asking. It might not be as hard as you think. 

Don’t be afraid to get a new job – sometimes we get stuck in our comfort zone or get afraid to branch out to pursue a new career path or to try something new. If you are not happy with your job, and especially if there is limited potential to increase your income – take a risk and get into something you like more and pays you more. 

Start a side hustle – there are almost infinite ways to make money and not all of them require your full dedication. And oftentimes a side hustle turns into a full income or new business. We’ll review good ideas for side hustles in another video. 

Real Estate – don’t jump into this one without knowing what you are doing, but also don’t write it off. A good real estate deal can be great way to supplement your income. There are unlimited resources out there about getting into real estate, analyzing deals, and making money with property investments. 

Start a low startup cost business – there are so many good business ideas out there that require relatively low startup costs. Technology and the internet has made it possible to start a business with a fraction of the money it would take…even just 10 or 20 years ago. 

5. Invest Early and Often

And number 5, invest early and often. The truth is that almost no one becomes financially independent without planning ahead, and investing early. And I mean investing in any type of asset that generates income – including a business or real estate. But since investing in the stock market is one of the easiest ways to get started, I want to summarize a couple important points here. 

First, have an emergency fund. This isn’t investing, but for many of us, its sort of the official start of our investment plan. At minimum, a thousand dollars. A more ideal emergency fund would be 3-6 months of living expenses. 

So now you are ready to invest – the first thing you should do is to leverage all the free money you can – yes free money. This would mean contributing at least up to the company match of your 401k, 403b or 457 plan. 

An HSA is triple tax sheltered. Max it out.

If your company has an ESPP – an employee stock purchase program – max it out. Sell immediately if you are worried about having all your eggs in one stock. You’ll get taxed at your regular income bracket in that case, but even 75% of free money is still free money. 

Next, max out all the tax advantaged accounts you can. This would be your 401k or equivalent, HSA, and also an IRA. Although all these accounts have limitations and rules – these are special accounts that provide unique tax benefits that other investment accounts don’t allow for – and it can make a big difference in the long run. 

Then finally – if you have leveraged all the free money you can, and maxed out your tax advantaged accounts – focus on a normal, taxable brokerage account. Although this account isn’t tax advantaged, there are still benefits to having a taxable account. 

So in summary, adjust your mindset, determine your goal, streamline your expenses, maximize your income, and invest early and often. This is a tried and true formula to financial independence, early retirement, and true freedom.