How to Achieve Financial Freedom- Millionaire Habits to Grow Your Wealth — Celebrating Financial Freedom
By: Dr. Jason Cabler
Tags: Habits, Wealth Creation, Financial Freedom, Finance, Money

Achieving financial freedom. Anyone can do it. I know it sounds like an impossible goal, yet the number of new millionaires continues to grow every year, without fail.

It makes no difference what your financial position is right now. If you do the right things going forward, you can reach financial independence in just a few short years, depending on how diligent you are.

In this article, I’ll show you all the basic steps you need to get financial freedom for you and your family. Plus I’ll recommend some great resources at the end to help you accelerate the process. Most of these I’m doing myself, and I’m well on my way to financial independence!

What is Financial Freedom?

Ever had that pit in your stomach when you realize your car needs a huge repair? I know, I’ve been there too. How are you going to come up with that kind of money? It’s enough to stress you out for weeks, and drain your bank account to the point that you have to put the repairs on a credit card, which you didn’t want to do. But what choice did you have?

But what if an emergency expense like that was just a minor blip on your financial radar screen? Instead of getting an ulcer and going further into debt, you pay the bill and move on with your life. Your financial situation didn’t really change, and you’ve totally forgotten that if ever happened after just a few days.

That’s what financial freedom feels like!

There’s More to It

But there’s more to it than just easily being able to pay for things you need. Achieving financial freedom is also about being able to do what you want with your life.

You don’t have to stay in that soul-sucking job you hate just because it pays well. You have the freedom to do what you love, even if it pays less (or doesn’t pay anything at all).

It’s about the ability to make daily decisions without having to stress about money. It’s about being able to make major life decisions without them having a huge impact on your finances, because you’re prepared for pretty much anything financially.

You have total control over your finances, but your money doesn’t have control over you!

What Financial Freedom is Not

Achieving financial freedom is definitely not a get-rich-quick scheme. Even though you see plenty of get-rich-quick stories in the media, they are much rarer than you think. In fact, most people that get rich quickly don’t stay that way very long. There is one simple reason why. It’s because they didn’t develop the long-term discipline and habits it takes to gain financial freedom.

You’re not gonna get there overnight. But when you exercise the wise financial freedom principles below, you’ll be sipping Mai-Tai’s on the beach while your peers are still elbow deep in credit card debt and working long hours to pay it off every month.

So, let’s get started…

First, You Have to Stop Living Paycheck to Paycheck

Unfortunately, the vast majority of people live paycheck to paycheck. I’m not talking about just the poor and middle class either.

According to this article at Marketwatch.com, up to 74% of U.S. workers are living paycheck to paycheck. Also, as many as 1 in 4 families with income of $150,000 or more live month to month.

This is definitely NOT what financial freedom looks like!

So, how do you start solving the living paycheck to paycheck problem and start setting yourself up for financial freedom? Read on grasshopper…

Live Below Your Means

The definition of living paycheck to paycheck is that you use all the money you make just to pay the bills and maintain your lifestyle. So, the first thing you must do is commit to living below your means if you want to achieve financial independence.

Believe it or not, this is how most millionaires get their start.

Yes, I know it’s not sexy. But if you have no seed to spare every month, how can you expect to plant it into good ground and eventually get a harvest?

Change Your Habits- Learn to Say No

You’ll have to start reevaluating everything you spend money on. The word “no” is going to become a big part of your vocabulary from now on. You will have to root out where money is getting wasted, and cut your cost of living.

For some, that may mean packing your lunch everyday instead of going out. For others, it may mean cutting out the cable bill and getting a cheaper car. Only you can decide what you want to say no to.

But just because you need to change your spending habits doesn’t mean you can’t have any fun. Who wants to be miserable for decades so they can achieve financial freedom later? Not me!

So don’t feel like you have to sacrifice all the fun stuff. Spend money on things you love and that add joy to your life- and cut costs relentlessly on everything else.

Get on the Same Page with Your Spouse

Studies show that the majority of millionaires cooperate well with their spouse when it comes to finances. When both spouses agree to financial goals and work at pulling in the same direction, it’s a tasty recipe for financial freedom!

Keeping finances separate, lack of cohesive financial goals, and a general lack of agreement about finances does not bode well for building wealth. Find ways to work together as one unit (financially and otherwise) and you will much more easily create wealth over the long term. Below you’ll find a link to my Marriage and Money page.

Change Your Mindset

You’re also gonna need to change your mindset about money. Money is not just something you spend, you will need to invest it if you want to gain financial freedom.

You’ll have to change your mind about the role of debt in your life (more about that below) and understand the differences between wants and needs.

You’ll need to learn to speak differently about money and change your internal dialogue

Changing your mindset also means understanding that even though you may work hard for your money, It’s a tool that should work even harder for you. You have to save it, invest it, and be a good steward of it if you want it to multiply.

Next, Know Your Numbers

Once you have your mindset in place, and you’re committed to leaving the paycheck to paycheck life for good, you need to start practicing the habits millionaires use to grow their wealth. That means you gotta know your numbers.

No, it’s not sexy. In fact, only nerdy people like me would think keeping track of financial numbers is fun. But if you’re not a numbers person, don’t worry, it’s not that hard to do. Once you get into the swing of things, keeping up with your financial numbers takes less than an hour a month.

Start Doing a Monthly Budget

Yep, believe it or not, most millionaires do a monthly budget. It’s absolutely the best way to get total control over your money. When you establish the habit if giving every dollar a name and telling it where to go, it’s a total game changer for your finances!

You cannot get control over your finances if you don’t know where your money is going every month.

I can tell you from personal experience, when Angie and I started doing a written budget every month, our finances finally started making sense. We know where every dollar goes, and nothing gets wasted.

Best of all, we never spend more than we make!

I’ve written extensively about budgeting, and you can find all my posts about it on the CFF Budgeting Page.

This highly rated course takes you by the hand and leads you step by step into ditching the paycheck to paycheck lifestyle for good. By the end of this easy to follow course, you will have complete control over your finances and establish the habits millionaires use to achieve financial freedom.

Pay Yourself First

But when you make saving money a priority, you practice the millionaire habit of paying yourself first. This means deciding ahead of time how much you want to put into savings every month. Most experts (including me) recommend 15% of your income.

When your paycheck is deposited, the first thing you do is take that percentage off the top and put it into savings and/or investments.

Of course, if you’re a tither like me, the tithe takes first priority. In that case, pay God first, then pay yourself second.

Pay Off Your Debt

Believe it or not, most millionaires never use consumer debt. That means no credit cards, co car loans, etc. In fact, I believe consumer debt is the number one reason so many people live paycheck to paycheck. Whenever you use debt to fund your lifestyle, you lose.

People who are financially free (and those who will be one day) understand this.

It doesn’t matter if you have a high income or you’re income is very low- you CAN get out of debt. You have to make a plan and be diligent enough to work it to completion. It may take months or years to get it done, but debt freedom ultimately sets you up for financial freedom.

Track Your Net Worth

Think tracking your net worth is only for rich people? Think again. You need to know your net worth, even it’s a depressing negative number.

It’s important because the more you know about where you stand financially, the better decisions you’ll make. Even if your net worth is negative, you’ll see it get better and better as you pay off debt and put money into investments.

Even though I have plenty of savings and investments, my net worth didn’t make it into positive territory until I was in my mid-forties. Mostly this is because we had a mortgage on our house for many years that was much greater than the equity and other assets we had.

How Do You Calculate Your Net Worth

Calculating your net worth is simple. All you have to do is subtract what you owe from what you own. What you owe are things like:

Your mortgage balance

Credit card bills

Outstanding car notes

Any other money you owe.

What you own are things like:

The equity in your home

What your vehicles are worth

Your investments (401k, IRA, real estate, etc.)

Money in bank accounts

Jewelry, etc.

The best tool I’ve found to keep up with your Net worth automatically is Personal Capital. It’s free to sign up and use. Using it provides you with a ton of information about your net worth calculated for you automatically in your own personal dashboard. It’s my favorite online personal finance tool!

Sign up with Personal Capital here for free.

Third, Protect Yourself

As you achieve financial freedom, you need to protect the wealth you’re building from unforeseen circumstances. You need insurance that covers you when life happens. Of course, an emergency fund is essential, and you’ll also need other insurances to keep you solvent in the event of a crisis. Let’s take a look at what you need below…

Build an Emergency Fund

A cash emergency fund is crucial to your financial well-being. Why? Because there is always a financial emergency lurking around the corner. It’s not a matter of if, but when it will happen.

Maybe the transmission goes out on your car. Or your refrigerator dies. Or your kid breaks his arm. Or you lose your job. You need to have cash quickly available to deal with it instead of going into debt. As I mentioned above, debt is a loser’s game. The more you self-insure against the inevitable disaster, the better able you are to achieve financial freedom for your life.

I (and other experts) recommend a $1,000 cash emergency fund while you’re in the process of getting out of debt. After that, you should have at least 3–6 months of expenses in cash for an emergency.

Get Insurance

Other types of insurance are also critical to guard against potential disasters that will seriously derail your wealth building goals. Here are a few insurances you’ll need below.

Life Insurance

Of course, you won’t need it for yourself, but it’s incredibly important for your family. Life insurance will help your spouse continue building family wealth, pay off the mortgage, send the kids to college, without taking a huge hit to their lifestyle.

You’ll want to get term life insurance equal to at least 10x-15x your yearly income. Stay away from whole life policies at all costs!

Disability Insurance

Disability insurance is a must, especially if you’re a highly skilled worker in a specific field. If you get ill or injured and can’t work, disability insurance pays you a portion of your present income tax free until age 65 in most cases.

Homeowner’s Insurance

Believe it or not, some people skimp on this one. Houses burn down, tornadoes and earthquakes happen. Just this week a massive tornado hit my hometown of Nashville, and one of my wife’s student’s house burned down unrelated to the tornado. Not having insurance on your home will set you back years, if not decades in your quest to achieve financial freedom.

Health Insurance

Unfortunately, medical debt is the top reason most people declare bankruptcy. Not having health insurance is a sure recipe for disaster. Even if you’re young and healthy, you never know when a car crash or other accident could send you to the hospital with permanent injuries. You must protect yourself against a health disaster!

Car Insurance

Same as with the others, one accident can total your car and send you to the hospital with serious injuries to you and others. In addition to it being the law in every state, it’s just a smart thing to do to protect your wealth building abilities.

Next, Grow Your Money to Achieve Financial Freedom

Getting rid of the paycheck to paycheck lifestyle, knowing your numbers, and protecting yourself are a good start, but if you want to make it to financial freedom, you have to grow your money. Fortunately, there are a lot of great ways to do it!

Get a Side Hustle

Whether you want to get out of debt faster, or grow your investments bigger, I always recommend a side hustle. Whenever you can make extra money exclusively for saving and investing, you will seriously win with money!

A nice side job making just a few hundred extra dollars a month can change your family tree forever! Investing that money and watching it grow will set you up for financial independence faster and bigger than you could have without it. Imagine retiring 10 years earlier just because you invested all your side hustle money for years! I’ve written a ton of posts on side hustles and money making ideas you can find at the link below.

Invest Your Money Wisely

To grow your money exponentially, it’s imperative invest it. Some investments are more risky than others, and in some cases you might even lose money. But in the long run, investing your money wisely is how you achieve financial freedom for the long term.

There are literally hundreds of ways to invest your money, but you don’t have to get fancy to make it grow. Most millionaires grow their wealth with plain-Jane vanilla investments that anyone can do.

Stocks and Mutual Funds

Believe it or not, most millionaires build their wealth through stocks and mutual funds inside their IRA’s and 401k’s. In most cases, financial freedom is not built by flashy investments with a lot of risk. It’s much more likely you’ll build huge wealth by simply contributing to your retirement plans month in and month out for decades.

The stock market is nothing to be afraid of. You don’t have to be a Wall Street wizard to make money in the market. You just have to be wise.

Investing in stocks and mutual funds is not hard, but you do need to understand the basic principles of investing. The more you educate yourself about investing, the less mistakes you’ll make over the long run. Believe me, I’ve learned from experience!

Here are a couple of my top articles on investing you can check out:

Real Estate

Investing in real estate is probably my favorite way to build wealth. I prefer long term buy and hold real estate investing. Yep, it’s another boring investment strategy that has built mountains of wealth for a ton of people.

You can invest in land, rental houses, apartments, commercial property, house flipping, and many other types of real estate that produce rental income and/or appreciation over time.

I have a little rental house that’s been an incredibly good investment for me. Not only does the house go up in value every year, but my tenant faithfully sends me well over $1,000 a month to live in the house! I hired a property manager to take care of all the details, so I only spend literally 2–3 hours a year dealing with this moneymaker. My goal is to have a dozen more just like it!

Here’s a link to a series of posts detailing how I got started with my first rental property:

Invest in Yourself- Read, Improve Skills, Grow Career

Absolutely the best investment you can make is in yourself. The more you invest in your financial knowledge, career related skills, and overall personal development always pays off. You’ll move up in your career, make more money, invest better, and have more opportunities available that others just won’t get.

You will be able to create financial freedom more easily when you consistently invest in yourself.

Create Financial Freedom by Being Generous

One concept I continually stress to those that want financial freedom, is that you must be a giver. I know that giving seems completely counterintuitive to building a huge pile of wealth, but from my perspective, it’s absolutely essential.

In fact, it’s a natural law that when you give, it comes back to you multiplied in many different ways. It’s good for your pocketbook, it’s good for your soul too, and it’s good for those on the receiving end of your giving too. Everybody wins! If you want to get more in depth on the subject of giving and why it’s so important to your success, visit the CFF Giving page for all of my blog post on the subject.

Conclusion- Be Patient, Financial Freedom Will Come

Although you often hear stories about people getting rich quick, it doesn’t happen very often. And when it does, the wealth usually doesn’t last. This happens because the basic habits and mindsets for building and keeping wealth were never put in place. Thus, the quick fortune dwindles away over time.

Achieving real financial freedom happens over many years, even decades. It takes plenty of discipline and patience to make it happen. But when you consistently work at it, not only will you retire rich, you’ll do it long before your peers ever do.

To achieve financial freedom, it’s going to take some sacrifice. Along the way you’ll be tempted to slack off, especially if you hang with people who don’t share the mindset and habits it takes to achieve multimillionaire status. But stick with it for the long haul. I guarantee it will be totally worth it!

Resources

These are three of my favorite books about building wealth. They’ll teach you exactly how anyone can achieve financial freedom when they are willing to put in the work.

Everyday Millionaires: How Ordinary People Built Extraordinary Wealth―and How You Can Too Thou Shall Prosper- 10 Commandments for Making Money The Millionaire Next Door: The Surprising Secrets of America’s Wealthy