The 5 Steps to Financial Freedom

Financial freedom is closer than you think.

Titus Owen
Finance as a Skill
8 min readDec 17, 2022

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Plant growing out of a pile of pennies
Photo by micheile dot com on Unsplash

Are you sick of worrying about finances?

You are not alone. According to a study done by the American Psychological Association in 2022, 65% of Americans said that finances and money were significant sources of stress.

I was in the same boat around 2019. I was in over my head with student loans and my spending habits were not where I wanted them to be.

I scoured the internet for anything that would get me out of financial hell. After long days and nights of looking into money and how I viewed it. I came up with a 5 step plan to get me to financial freedom.

That’s right, freedom. I want to be financially free. I want to be free from the worry of money. I don’t want to be so stressed out and reliant on a job for my livelihood that one recession could take me out completely.

If you feel the same, please follow me along with the 5 steps to Financial Freedom that I will lay out in this article.

Step 1: Changing Your View of Money

This is a crucial step for anyone serious about achieving financial freedom.

The average American has roughly $96,000 in consumer debt alone, according to a 2021 study from Experian.

That is a lot of money to owe somebody else. If that’s the average it is pretty easy to see that Americans in general have a skewed sense of how to utilize money. I know I did.

One thing that I had to realize is that if I spent more money than I made, I would go into debt.

I know, I know, what a novel concept, but this whole money thing does not come easily to me. I tend to find myself distracted by the shiny object, and falling deeper into the instant gratification cycle. It is very very easy to spend more than you make, especially when no one has taught you how to avoid things like high-interest debt.

My view of what money is had to change drastically. So, I decided to come up with a new definition for my money that has worked for me:

Money is a representation of value.

How much do I value something? How can I quantify it? The world has agreed to represent something’s value with currency.

Now with money existing online, for the most part, the meaning of money has been muddied even further. It’s incredibly difficult to get a person to care about a number on a screen, versus a stack of cold hard cash.

I would suggest your first step in financial freedom is to release whatever your current definition of money is. You can come up with your own by narrowing down what money isn’t.

For me, Money is NOT security. You could be alive one minute with all the money in the world, and be dead the next. Money will not help you on a deserted island where what you need is food, water, and shelter.

Money can get you these things, but it is NOT these things.

I had to get to a point where what I was really after wasn’t money. What I was after were the things that money could get me. It meant a deep long look at myself in the mirror and asking myself these 3 tough questions.

  1. What do I want?
  2. Why do I want it?
  3. How can I get it?

These questions, in my opinion, were the key to letting me get going on my financial journey.

I want to be in a position where I am free to give my time, attention, and money to whatever I please. I don’t want just a giant pile of cash to swim around in and do nothing with.

I want it because I feel like that is what humans are here on this planet to do. In answering this question, it is easy to get way off the track. Try to keep it simple. It could be as simple as I want to help my family or wanting to be loving to others. These are some good “Why’s”. Think about your “why”. This, as it is said, can get you through any “how”.

Now lastly, how do I do this? Well, I need to have freedom in 2 key areas. Time and Money. So I work towards financial opportunities that don’t require much time, try to be as productive and focused as possible when I am working, and grow my finances instead of shrinking them.

If you can define your What, Why, and How, you can set yourself on a journey to changing what money means to you, instead of seeing yourself as a slave in bondage to it.

Step 2 — Cut and Save

Now once you have a new definition of money, and some financial perspective, you can put these things into action.

Cut out anything and everything that does not get you to your goals. Eating out at lunch every day? That’s gone. It is not going to get you anywhere. Just a sugar crash in the mid to late afternoon. Are endless vacations planned? That’s gotta go too. I’m sorry, but you do not need to go to Mexico for the 2nd time this year.

And this doesn’t have to be horrible or such a high-stakes game. It can be fun to say no. Seriously, try it out. Next time, when your drinking buddies ask you to go to the bar for the 18th weekend in a row, just say, no I’m alright. It is liberating.

Here comes the second part. You should be saving as much as you can. Don’t get me wrong, it is okay to spend money. That’s what it’s for, but try to recognize when you’re going too far. Moderation is key, in all things. For example, I like to eat out. I love going to a fancy restaurant and buying the nicest steak they have, but do I need to do this 4–5 times a week?

Hell no. Nobody does.

But I don’t need to cut it out completely if that’s something that I truly value. I can make it a once-a-week thing and make it a big occasion if I want to. Spending 50 bucks once a week and incorporating that into my budget is a whole lot better than spending 250 bucks a week and not knowing where all my money went when it’s time to pay the rent.

Cut things out that you know are not helping you get to your goals, and save as much money as you can. Save until you have about 6–12 months’ worth of expenses under your belt in a high-yield savings account and do NOT touch it, barring an emergency of course.

This will be your Emergency Fund.

Step 3 — Destroy Your Debt

When I say destroy your debt, I f*cking mean it.

Do not add to it, and do not borrow more money. Do not listen to Robert Kiyosaki’s advice about debt, or about this idea that low-interest debt is good, at least not now. At this stage, you are not ready for it. Trust me. At this point, you should be looking to reduce your debt and not expand it.

Once you have saved enough for emergencies, take the money from your paycheck that you had been saving and put it towards decreasing your debt. Mainly consumer debt. Credit cards, auto loans, etc.

Demolish your debt. You do not want to owe anyone ANY money. I know I don’t. It is a source of stress that no one on the planet needs or wants. Once your debt is gone, it will free up your income (and significantly. Your savings rate will skyrocket and you’ll be well on your way to freedom.

Step 4 — Invest

Ideally, if you have a job that offers it, you would be investing, at least up to your company’s match percentage, in a 401(k). This is a good investment in the background while the previous steps are being taken.

I would consider also utilizing a Roth IRA. This is a great retirement saving tool, as it lets you pull out money from your account (after age 59 and a half) tax-free. Whereas a 401(k) is taxed when you take money out of it when you retire. I would do my best to max out your Roth IRA each year. The maximum contribution is $6,500.00 per year for most people. They allow an additional $1,000.00 contribution for those aged 50 and older, for a total of $7,500.00 per year.

Use your Roth IRA contributions to invest in the index or mutual funds. These are funds that follow the market and since their conception, they have returned on average about 10% per year. This will explode with the power of compound interest and your money will continuously grow in the background, while you search for ways to make more money that align with your goals.

These two retirement tools are going to be the bulk of your retirement money in my opinion. It should not be seen as a surefire thing. I mean you don’t even know that you’ll live that long, so I find it helpful to just have it growing in the background while I look for ways to increase my income in the present moment.

Aside, from your 401(k) and your Roth IRA, I find it helpful to set aside some money each month, for my personal-taxable investing account. You do not have to do this. I only do it for fun. I enjoy investing. I enjoy learning about businesses and their value. If you have no interest in these, you do not need to do this at all but know it can be fun, and it can be used to increase your income/savings. It does come with risk, however. Only invest money that you are willing to lose, in individual stocks.

A popular strategy is to do what is known as Dividend investing.

Dividends are profits distributed to shareholders by a company. Many companies do this to incentivize investment.

Dividend investing is a strategy that attempts to maximize these dividend payments from several companies and turn them into income. Note that if you use this strategy in your taxable account, the dividends are taxable. Dividends are either Qualified or Non-qualified and are taxed differently. Qualified dividends are taxed at 0%,15%, or 20% based on your filing and income status. Non-qualified are taxed at the same rate as your regular income tax rate.

Anyway, dividend investing can help you out immensely if that is something that you want to put your time towards. If not, no worries, just focus on your retirement accounts and check that off your worry list.

Step 5 — Increase Income

Now comes the best step in my opinion: Attempting to increase your income.

This step has so many ways to go off course, but it can be enjoyable to get lost in a side hustle or delve deeper into your hobbies/interests.

With the internet, there are an infinite number of ways to monetize your interests. Whatever you like and do in your spare time, you can make money from it. Seriously, anything.

At this point though, that may be a little too vague. Let’s start with something simple.

Challenge yourself to make at least $1.00 a day on your own (not from your current job). It’s not as easy as it seems. Seriously try it.

This challenge alone will take you down some interesting rabbit holes, from which you are bound to learn some fantastic lessons. I promise you, whether you succeed in doing so or you fail it doesn’t matter, it’s only a dollar.

I have used this challenge many times to get out of a creative rut and it leads me into some interesting spaces.

Through this, I have learned some great lessons and a TON about what makes money and what does not.

In conclusion, I hope these steps help you out. If you do all of these things, you will be in a much better position financially and you will be set on an exciting adventure where you will learn about who you are and what YOU value.

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Titus Owen
Finance as a Skill

Life & Career Planning Enthusiast. Writer. Optimist. I am passionate about helping people find purpose in their lives.