Build Wealth and Gain Financial Freedom!

Congratulations!  If you’ve reached this step, you’re now living the good life!  You have zero debt and no payments of any sort.  Can you imagine what you can do with your life now?  Anything you want!  You’ve been investing 15% of your income into retirement and threw everything else at the house to pay it off as quickly as possible.  Well guess what?  It’s paid off!  You’ve been dedicated, disciplined, and intentional with your money so that you could be so close to accomplishing your goals of financial freedom and retirement.  Now what!?!

3 Steps to Building Wealth

You’re going to watch your net worth begin to skyrocket.  Now that you’re in this final step you’ll continue contributing the 15% you have already been saving towards your retirement but you’ll also begin to add your house payment and the extra money you were throwing at the house to your retirement and other investments.  Here’s how you want to go about investing:

  1. MAX OUT YOUR 401K– You’re allowed to contribute $18,000 in 2016.  If you have the money, DO IT!
  2. MAX OUT YOUR ROTH IRAIf you qualify for a Roth IRA, you should max out the $5,500 allowable contribution after you max out your 401K.
  3. INVEST IN STOCK INDEX FUNDS– I’ll go into this in depth in a future post but an index fund is a type of mutual fund who’s portfolio of stocks is built to mirror a component of a market index, like the Standard and Poor’s 500 Index (S&P 500).  You’ll want to invest any money you have left over after investing in your retirement accounts in stock index funds.  Look for index funds that mirror the entire market (or at least the S&P 500) while I write a more thorough review of index funds and recommendations for you.

If you can come up with enough money out of your budget to follow these 3 steps, you will become wealthy extremely fast.  If you can’t do all 3, it’s not a problem.  Work your way down the list and do the best you can!  Can’t max out your 401K?  That’s o.k., contribute as much as you can and work on building up your income so that you can invest more money.  The same goes for all of the steps!  Even if you’re on step 3, you want to increase your income so you can invest more money.

Gaining Financial Freedom

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So how much do you need to save to consider yourself financially independent?  25 times your annual expenses.  If you can save 25x your expenses and only withdrawal 4% of your money every year, you will be able to live off of this money forever.  This is the reason you need to keep your expenses as low as you can.  The higher your annual expenses are, the more money you need to save.  For example, if I spend $40,000 per year and wish to continue spending $40,000 per year during my retirement years, I will need to save $1 million ($40,000 x 25=$1,000,000).  Now you can withdrawal 4% every year.  You’ll have $40,000 to spend and the rest of your money will continue to grow.  Don’t worry about the details right now, just start to invest and continue to read these articles.  This blog is mainly about lifestyle transformation and attitude adjustments in how people think about finances.  You’ll learn common sense for your personal financing and investing over time and see that you will change as you save and grow financially.

Remember, you need to know that you’ll never become financially independent if you don’t keep your expenses low.  If you made $5 million per year and spent $4.9 million of it you would never achieve financial freedom.  Keep your expenses low and save as much as you can.  This will make you rich!

*Leave a comment to let us know how your investing is going!  Do you have ideas other than what is listed here that’s working well for you?

**If you like talking about Money, Paying Off Debt, Building Your Net Worth and Retiring Early…This is the place for you!  Subscribe to receive emails of new blog posts!!!

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