Finances are an important part of any adult life.

Talking about money is considered taboo in many cultures, but below the surface it affects a large part of our lives.

We work for money, we fund our lifestyle with money, we need money to fulfill most of our dreams, we need money to do good in the world, we need money to build things and so on.

And then our financial status defines how free we are to do the things we like to do, with whom we like to do and when and how we like to do the work.

It has been said in many articles, blogs and videos that money means freedom.

So your goal today will be to chart a path from where you are financially to where you want to be to become completely free.

The destination is called Financial Freedom and has a number associated with it.

Financial Freedom Number = Your Annual Expenses * 25

This comes from the rule of 4% where it says that if you have the money, from which you can withdraw 4% every year for 25 years and not run out of the balance, then you have reached the state of Financial Freedom.

To me, this is traveling to a very far place. For example, if you are spending $100,000 per year today, then you will need $2.5M before you can be financially free.

This can take years and decades to get there.

What do you do then? The solution is simple.

When you want to go on a road trip or any kind of cruise or on an airplane to a very distant place, what do you normally do? You take breaks or hops in between.

Which means to go from A to Z, you will take hops in B, C, D, E, .. you get the point.

Or when you have to do a task which seems overwhelming, you can achieve it much easily if you break it down into smaller chunks.

In this blog, I will present a method to enjoy the journey towards Financial Freedom, and not have to wait for decades for the final goal.

Step 1: Where are you financially today?

Just like your physical position is defined by a 3 dimensional (4 if you consider time) axes, we can have coordinates for your financial position too.

I have defined this financial coordinate system for you to measure your financial picture today. Just like a company has a balance sheet and income statement, this is a simplified combination of the two for your personal finances.

Find these eight numbers from your finances today.

Once you collect these 8 numbers, you will know what your financial picture looks like.

It is true that it has lot of missing details, but mostly they are hidden in these numbers.

Knowing your physical position enables you to get a view of your financial picture and what you should be striving to improve.

If your financial picture is such that you have achieved financial freedom, then it may look something like this.

Your (total savings + total investments – total debt) will cover 25 * monthly (expenses, debt payment, housing cost).

And so you can kiss goodbye to the income if you are not wanting to work anymore.

On the other hand, if you are not financially free, then we can create a roadmap from these coordinates where we want to go.

There are several ways to reach financial freedom.

• Reduce your expenses to 60-80% of what it is today.
• Pay off debt and get rid of the payments.
• Downsize to a smaller house to reduce housing payment.
• Accelerate your savings by saving more per month.
• Invest wisely and safely to grow the investments.

But we cannot go there at once. The next step is to define the intermediate points that is more realistic for you.

Step 2: Finding an intermediate point and take the next leap

The intermediate point could be any measurable progress towards financial freedom.

Through this you are taking the next baby step towards a big goal. But it has to be measurable and realistic too.

Let’s work on the same 8 numbers and try to create few goals.

• If your debt payments are too high, how can you pay off debt to eliminate them?
• How can you increase your savings to cover at least 3-6 months of all expenses?
• In your investment value, can you reach the first $100,000 or the first $1000,000?
• When can you become completely debt-free, that is, your total debt will be zero?
• Can you increase your income by 30% in one year?

Thus you can see that these 8 numbers have a lot of power to define and redefine your financial state. When you focus on the levers that you can control and set a goal, you are making progress towards financial freedom.

Step 3: Finding the path to reach the next milestone

It is not enough to define the next milestone. You need to find a way to reach there quickly and safely.

Please note that quickly does not mean get rich quick. It means to create a plan and follow it diligently to get results as soon as possible.

For example, if your next milestone is to increase your total savings to 12 months of total expenses, then you can easily come up with a plan like this.

• What is the amount for 12 months of expenses+debt+housing?
• How much can you save per month?
• Can you reduce your lifestyle expenses if this becomes a priority?
• Can you increase your income through side hustles and save the extra?

Once you define the steps, you will be much more motivated to set it up to happen each month. For example, to reduce your expenses, you may start budgeting closely to eliminate any wasted expenditures.

The key here is to keep an eye on your next milestone and develop a financial discipline or automation to get there in a predictable amount of time.

Step 4: Define the next Leap

This is nothing but rinse and repeat.

You keep defining your next leap, as long as it is achievable and measurable.

This way of getting to the next step and always measuring your progress through these 8 numbers, will keep motivating you towards your journey to financial freedom.

The financial industry makes this a very arduous task by trying to project 20-30 years in the future, when the reality is that no one knows what will happen beyond the next five years.

Your job may change, your life situations may change, your outlook about financial freedom may change, your goals may change, and so many things can go wrong too.

This is why I think attaining Financial Freedom through a series of steps is a much more practical and achievable way.

Keep these in mind.

• You should be able to define the 8 numbers at any point.
• You should be able to define the next step, don’t get complacent.
• High Income alone is not enough, you have to look at the overall position.
• There are more emotional factors beyond just the numbers, acknowledge that.

Financial Freedom is a journey and is not a one time thing.

It will get redefined for you again and again.