How to Achieve Financial Freedom: Definitive Guide (7 Steps) (2024)

In this in-depth guide, we’ll explore:

  • What is financial freedom
  • How to achieve financial freedom
  • The psychology of money
  • 7 steps to get out of debt (once and for all)
  • How to establish clear financial goals
  • How to increase your earning potential on your path to financial freedom

And much more.

Let’s dive in …


What is Financial Freedom?

Financial freedom means having the resources to cover all of your basic needs without creating any additional stress, anxieties, or concerns related to your finances.

This definition is subjective because what one person needs to feel safe is different from another.

For example, one person might earn $60k per year and feel free. Another person may generate over $2 million per year and feel enslaved. (I’ve worked with many clients who fall in the latter category.) So it’s difficult to tie financial freedom to a dollar amount.

Here are four vital components of financial freedom:

  1. The ability to consistently generate income to cover all of your expenses and still save.
  2. The competence to manage your finances effectively.
  3. The discipline to follow economic principles and practices to cultivate long-term wealth.
  4. A psychological mindset that doesn’t get in your way.

Each of these pieces is vital. Leave out one of them and financial freedom becomes elusive.

How to Achieve Financial Freedom in 7 Steps

Here are seven steps on how to achieve financial freedom:

Step 1: Develop a psychological foundation for financial freedom.

Step 2: Get out of debt—once and for all

Step 3: Establish clear financial goals

Step 4: Upgrade Your Financial Education

Step 5: Cultivate Daily Financial Habits

Step 6: Increase Your Earning Potential

Step 7: Invest for Your Future

Now, let’s examine each step more carefully.

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Step 1: Develop Your Psychological Foundation for Financial Freedom

If you try to skip this critical first step, unconscious parts in your psyche will eventually hijack your efforts. This is not a do-this-once type of thing; it takes ongoing vigilance to pay attention to the different beliefs, attitudes, and emotions we associate with money and wealth.

Here are five psychological areas to pay attention to as you progress toward financial freedom:

  1. Understand the psychology of scarcity.
  2. Acknowledge that you are conditioned to spend, not save.
  3. Observe the biochemical experience of spending.
  4. Acknowledge subconscious programming about money.
  5. Address negative emotions around money.

Let’s unpack each one. As we do, consider how these forces might be operating in yourself.

1: Understand the psychology of scarcity

In Scarcity, Sendhil Mullainathan and Eldar Shafir break down how scarcity—the feeling of having too little—influences our behaviors and choices, leading to dissatisfaction and struggle.

When we lack something, it causes us to place our attention and focus on what we don’t have. Our focus is powerful because it can help us get things done, but when you’re focusing on one thing, you’re saying no to many others.

Focusing single-mindedly on managing scarcity for long periods leads us to what the authors call “tunneling.” This tunneling causes us to neglect other things of value; we fail to see the bigger picture.

In the context of finances, the mindset of scarcity taxes our mental bandwidth. In the experience of poverty, the focus is on the shortage of money.

To help reduce the effects of financial scarcity, break up your goals into short-term, manageable chunks and focus on them.

2: Acknowledge that you are conditioned to spend, not save

It’s important to understand that we’re conditioned to spend and consume from early childhood.

We are not conditioned or taught (for the most part) to save, invest, or generate wealth.

That is, presently the default “normal” position of society is debt and financial strife.

3: Observe the biochemical experience of spending

Cultural conditioning only works when it plays on pre-existing psychological and neurological mechanisms.

In the case of spending, similar to virtually all addictive and compulsive behaviors, the culprit is dopamine.

Dopamine is released in the brain in anticipation of a reward. This neurotransmitter gets triggered at the prospect of getting something, which is why online shopping can be so addictive.1Psychology Today

Here’s the real issue: we get a temporary neurochemical lift from spending, but not from saving.

Said another way, most people have positive associations with spending and subconscious negative associations with saving.

Remember, we move toward things that give us pleasure while avoiding things that bring us pain or discomfort.

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4: Acknowledge subconscious programming about money

Childhood programming is perhaps the most pervasive barrier to financial freedom.

You can know everything there is about creating wealth—and even be a high earner—but if you have unconscious aversions toward money, eventually, you’ll sabotage yourself.

How do you know if you have negative associations and beliefs about money?

First, look at your financial situation. If you’re currently in debt, this is one clear sign.

Second, consider the economic circ*mstances of your parents during your childhood. If they struggled financially, you observed and absorbed their beliefs and emotions related to money.

Cultivating financial freedom is chiefly a process of unraveling these unconscious programs and freeing yourself from your past. This process can spontaneously unfold as you develop emotional awareness.

5: Address negative emotions around money

Many of us have negative emotions like guilt and shame related to money. Often, this guilt arose from religious programming that told us that “money is evil” and “only bad people are rich.”

Let’s look at two common ways negative emotions influence our ability to experience financial freedom.

Example 1: Guilt and shame about being in debt

Creating debt is as simple as adding extra pounds to your body.

We’ve all made poor financial decisions. We’ve all spent money on things we know we didn’t need (or even really want).

The majority are in debt. In the United States, for example, 73% are in debt when they die—an average of $62,000 in debt.2CBS News

Whether we’re conscious of it or not, a part of us feels guilty about this debt. The guilt is there, sitting somewhere in our body, nagging us, making us feel bad, and draining our energy.

Example 2: Guilt about having money

There’s a certain level of annual income and net worth that’s “okay” for most people, but if you begin to stretch beyond it, you start to pull back because of these suppressed emotions.

Unrecognized guilt and shame associated with having money prevents many individuals from staying open to new opportunities. Because of these emotions, they fail to develop critical skills or learn how to better manage their finances.

Or, you could be holding the belief that only “bad people” have money, or something similar, and this unconscious guilt about being bad limits your financial freedom.

How to Release Negative Emotions About Money

The problem with our aversion tactics is that they tend to reinforce the behaviors that created the guilt in the first place.That’s why compulsive spending behaviors stick around.

We start to feel regretful about making a purchase (buyer’s remorse) and then to avoid the feeling, we seek another dopamine kick. “Hey, let’s go shopping!” (Or play a video game, or eat junk food, or check social media, or drink, or watch p*rn, etc.)

The alternative is simple:

  • Stand and face your guilt and shame. Let the emotions pass through you.
  • Fully own your mistakes.
  • Accept yourself and your current limitations.
  • Breathe it all in and feel yourself rooted in your body.
  • Resolve to change your behavior by setting up the conditions (environment) to support different behaviors.
  • Finally, take action right now. (Not “someday” or “after I…”)

Integrating emotions including guilt, shame, fear, inferiority, and superiority is vital if you’re committed to realizing financial freedom.

Step 2: Get Fully Out Of Debt

For most people, debt is the monster that guards the gates to financial freedom.When individuals use debt for “lifestyle spending,” it creates a dark hole in their financial future.

For the average individual, debt is the destroyer of future wealth.

When you’re in debt, you have a massive opportunity cost in not starting and adding to your future savings and investments.

Instead, you’re focused on paying off the debt (or just maintaining your current level of debt), which means you don’t have the funds to invest.

Compound interest is working against you. If you’re incurring finance charges and adding to your credit card debt each month, your amount owed is likely compounding (growing) too.

For these two reasons, debt is the destroyer of future wealth.

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7 Steps to Get Out of Debt

Let’s break down each step:

1: Panic

What? Did I say panic? Did I mean “don’t panic”? No.

If someone says “Don’t panic,” it means you should panic. If you have panic in you, there’s no point in denying it.

Instead, acknowledge it, feel it, and welcome it. It’s just an emotion. If you’re afraid of the panic consuming you, get into your center first so you can approach negative emotions from neutrality.

If you need to feel guilt, shame, fear, anger, or whatever else, just touch it. Don’t let it overwhelm you, just open enough to it so that you’re fully present with the emotion.

Negative emotions cause the most problems in our behavior when we don’t acknowledge them. After we do, they lose much of their power over us.

2: Set up your financial dashboard

Become fully aware of where you’re spending your money each month. The easiest way to do this is to plug all of your financial accounts into an aggregator like or some alternative.

Your goal: zoom out to get a clear, objective picture of your financial situation.

3: Perform a quick analysis

Given your current debt, monthly expenses, and income determine how long it will take you to be debt-free, given specific scenarios. (If you have a mortgage, leave this out of the equation—for now.)

When I had $45k in credit card debt in my youth, I determined exactly how much money I needed to live on and then what it would take to be debt-free.

I mapped out over a 1-year, 2-year, and 3-year plan. I was young and determined, so I opted for the 1-year goal.

Performing this financial analysis revealed how much I needed to earn each month and also how little I had to spend.

I negotiated with myself, determining that I was willing to sacrifice comforts in the present if it meant that I could create a better life for myself after that.

Your goal: set up your short-term financial goals (which we’ll cover below).

4: Consolidate your debt

Competition between credit card companies is fierce as many businesses are fighting for your finance charges and interest payments.

Many companies offer zero percent APRs on spending and balance transfers for a defined period, often 12 to 15 months.

If you avoid the temptation to take advantage of this no-interest financing with additional spending, these cards can be a short-term blessing—as long as you pay the minimum monthly balance.

Your goal: reduce your current finance charges as much as possible while you pay down your debt.

Note: It’s important to know exactly when the zero percent APR promotional period ends and to either ensure you zero out the balance or transfer the funds to another card before this date to avoid a hefty finance charge.

5: Set up automatic payments

The science of self-control highlights the power of automation. Every decision you make uses mental energy. Every action that you need to remember takes a psychological toll.

There’s no reason you should ever incur late charges from your credit cards. By setting up auto-payments, you eliminate the need to expend energy on making payments and ensure that you never pay late fees.

Finally, there’s a psychological benefit to automation: you’ll be less likely to use your credit cards as a method of financing your expenses.

If you can’t pay off the full amount each month, determine from your analysis in Step 3 exactly how much you can afford to pay down your debt. By setting up these automatic payments, you’re also encouraging yourself to stay accountable to your plan.

Quick Tip: Did you miss a credit card payment recently? If you haven’t set up automatic payments and failed to pay the minimum due, you probably incurred a fee of $25 to $35. If you haven’t already done so, call the company and request to have this payment removed as a courtesy. If you usually pay your bills on time and explain to them that you’re setting up auto-payments so this won’t happen again, they will likely accommodate your request.

6: Find ways to pay off your debt faster

Looking at your financial dashboard, what expenses can you reduce or eliminate temporarily to pay down your debt? Do you have subscriptions to anything that you don’t use or need? Can you eat at home more often?

Your analysis in Step 3 assumed a fixed income. But what if you can raise your income level? Finding ways to increase your earning potential is usually the fastest way to get out of debt and start building wealth.

We’ll explore different side hustle ideas below. Our opportunities are limited only by our imagination. Skill and knowledge come next.

7: Track, measure, and acknowledge your progress

Check in at least once a month with your financial dashboard to monitor your progress.

Stay open to new opportunities. When you begin to take your finances into your own hands, there’s a shift in internal energy and outside forces often conspire in your favor.

As you pay down your debt as aggressively as you can, acknowledge your progress.

You don’t necessarily have to celebrate it, but internally confirm that you’re building positive momentum toward financial freedom.

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Step 3: Establish Clear Financial Goals

Why are you investing your time to achieve financial freedom?

Knowing your why is very important. You need to know your financial goals and what you believe these goals will give you.

There are two things I’ve found most helpful when it comes to setting goals related to money:

  1. Connect with and clarify your Future Self before you establish your goals.
  2. Establish short-term financial goals—from 90 days to 12 months.

Goal setting is an arbitrary process unless you’re centered and clear about your Future Self. That is, it’s important to clarify your vision for your Future Self first.

Then, you can determine the financial aspect of your vision and assess how much you need to earn and accumulate to realize your vision.

How to Establish Short-Term Financial Goals

When you don’t believe you can achieve your goal within 90 days to 12 months, you might need to break the goal into several milestones.

For example, if you’re currently in debt, your first objective might be to eliminate all your credit card debt within 12 months.

If you don’t believe that’s possible, then maybe your goal is to consolidate your debt and reduce it to a specific dollar amount within a predefined period.

Examples of Short-Term Financial Goals

You can follow a similar process to setting financial goals with student loans, mortgages, saving, investing, and so on.

For example:

  • Short-term saving goal: Save an extra $2k in an emergency fund account by the end of June.
  • Short-term investing goal: Open an IRA and set up $250 automatic monthly funding by Friday.
  • Short-term spending goal: Cut food spending by 10% by the end of next month.
  • Short-term earning goal: Start earning an extra $1k / month with a new side hustle within the next 180 days.

Whenever possible make your goals fun and creative. If your financial goals inspire or amuse you, you’ll have less resistance to achieving them.

Step 4: Upgrade Your Financial Education

Cultivating wealth requires basic financial aptitude.

I graduated from the University of Michigan with a concentration (major) in economics. I had close to a 4.0 GPA (straight A’s) in this major and yet I still managed to be $45k in debt within three years after graduating.

How is this possible? The reality is that there’s virtually nothing in our formal education system that teaches us about personal finance. Personal finance is a critical topic for adults, and yet, we receive no formal training.

So as I developed my plan to get out of debt, I simultaneously began a self-directed financial education that took numerous years.

I read over fifty volumes on personal finance, investing, wealth mindset, and tax strategies. I also attended every financial seminar I could find.

Investing in Your Financial Education

Popular books on wealth, achievement, and personal finance in the “self-help genre” include:

Think and Grow Rich
The Wealthy Barber
Rich Dad Poor Dad
How to Be Rich
The Millionaire Next Door
The Wealthiest Man in Babylon

These books helped change my views about money, saving, and investing. They shifted my thinking about wealth in constructive ways.

Note: I haven’t read any finance books in many years, so I’m sure there are more recent titles that younger generations may relate to.

Step 5: Cultivate Daily Financial Habits

In The Better Angels of Our Nature, Harvard researcher Steven Pinker provides data suggesting the reason why the majority of people die with debt: most people tend to undervalue how long they will live.

That is, we tend to devalue our Future Self. When we don’t value our Future Self, we inherently demonstrate this lack of value in our behavior by focusing too much attention on pleasure in the present:

  • Spending more than we should,
  • Consuming more than we need,
  • Avoiding exercise,
  • Overeating, and
  • Adopting loads of other bad habits.

Managing money is a skill. Those who have this skill, develop it through education first and then establishing constructive habits.

The Animal Self versus the Future Self

The topic of dopamine goes together with addiction and impulse control.

In Willpower, psychologist Roy Baumeister made us aware that we have limited reserves of mental energy or willpower each day (called ego depletion).

In each moment, you have an animal self looking for pleasure and an Inner Self trying to support a healthy future.

When you shift your orientation toward your Future Self, it becomes easier to make decisions toward financial freedom. Here are some of the shifts that begin to unfold naturally:

  1. You avoid spending money on nonessentials.
  2. You now value saving and investing for the future.
  3. You begin to look for ways to increase your earning potential.

Establishing supportive habits related to finances or any area of life requiring making daily decisions and small incremental changes.

Positive Financial Habits Can Be Cultivated

Baumeister’s research reveals that self-control is the single biggest determinant of success—including wealth.

The good news is that willpower is like a muscle and you can increase your level of self-control around money.

Also, you can learn ways to automate aspects of your finances to overcome willpower limitations.

See my guide on How to Change Any Habit.

Step 6: Increase Your Earning Potential

You can increase your earning potential through a career promotion, marketing your skills, investing, starting a side hustle, and growing a business.

Side Hustle Ideas

Adding an extra stream of income from a side hustle is an excellent way to accelerate your path to financial freedom.

If you’re looking for a side hustle, here are a few ideas:

1: Rent out an extra room

You can use sites like Airbnb, Vrbo,, and Homestayrent out rooms, apartments, and extra homes to millions of travelers.

2: Sell your stuff

Need to make quick cash to pay off your credit cards? Cleanse your home of everything you don’t need and sell it on eBay or Amazon. Books, collectibles, whatever.If you get proficient at it, you can create a service selling other people’s stuff for a commission.

3: Sell your crafts

Do you have a hobby of making a craft like stationary, metalwork, or jewelry? Join over 7 million sellers and open up an online storefront on Etsy.

4: Be a virtual assistant

Become a virtual assistant for services like BELAY and Fancy Hands.

5: Be a helper

Sign up at Thumbstack and help people move, build furniture, clean, and do other stuff around the house.

6: Be a tutor

Grow a tutoring business using services like WyzAnt or VIPKID. Or create content for educators at Teachers Pay Teachers.

7: Leverage your design or programming skills

Do you have graphic design skills or programming that businesses and others might need? Enter the talent pool on sites like Fiverr and 99Designs.

8: Develop your freelance career

If you have skills in programming, writing, designing, translating, selling, marketing, law, or finance, you can tap into the many freelance marketplaces online like Upworkand Guru.

9: Become a blogger

This side hustle is significantly more difficult than most people realize. But if you’re disciplined and you stick with it, blogging can become a profitable endeavor. There are many different ways to make money blogging including affiliate commissions, digital advertising, and selling your products and services.

10: Sell your ideas online

If you have specialized knowledge and a desire to share it, you can enter the “thought leadership” space with blogging, podcasting, and publishing (print and digital). This side hustle combines with many others and requires a wide range of skills and discipline to make it profitable.

11: Start an e-commerce business

While it might take minimal skill to start an e-commerce business using a platform like Shopify and WooCommerce, it does take some experience to market your website and drive qualified traffic that converts to sales.

12: Develop a niche website

You can create a specialized website that attracts a specific type of reader/customer (e.g. car enthusiasts, musicians, outdoor adventurers).This website can include product reviews (with affiliate partners), product comparisons, and editorials. If you attract a big audience, you can also generate income with digital advertising, lucrative sponsors, and drop-shipping e-commerce.

13: Launch a coaching practice or consulting agency.

There are over 100,000 life coaches worldwide and even more business coaches. You can get coach training through an organization like the International Coaching Federation. If you have expertise that other business owners want, you can start a consulting practice.

How to Evaluate Side Hustle Ideas

Your available time is finite. When you’re saying “yes” to one thing, you’re saying “no” to many other things.

So it’s useful to evaluate these side hustle ideas carefully:

  1. What skills do you already have?
  2. In what areas can you add the most value to others?
  3. What skills are you willing to develop?
  4. Which side hustles are most interesting to you?
  5. What side hustle ideas seem the most lucrative to you?
  6. Are their side hustles aligned with a full-time business you’d like to develop?

If you evaluate your options with a long-term horizon, say five years out, you’re more likely to make a decision based on your Future Self.

Step 7: Invest for Your Future

Years ago, I published an in-depth guide on investing on this website. However, I removed it because most of the principles and strategies that worked 20 years ago are questionable today.

If you’re tuned into the current macroeconomic and geopolitical climate, you probably understand why. If not, well, let’s just say that the third-party risk associated with banks and brokerage firms is a far bigger concern today than it was in the past.

I’m not a financial advisor so this is not financial advice. But I consider hard assets like gold, silver, and real estate more secure investments than stocks and bonds as we head into the turbulent future.

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Understanding Your Asset Allocation is Key

The key to managing your money is to know where you’re allocating your spending and investing each month.

Start with the amount of money you’re earning each month. Then, break down your expenses into categories.

For example:

  • Fixed expenses (rent, utilities, food, transportation)
  • Savings (dream funds, house payments, vacations, emergency fund)
  • Extra spending (movies, clothes, restaurants)
  • Investments (IRA, 401k, stock portfolio, real estate, precious metals, Bitcoin)

Figure out your fixed expenses to determine what’s left over.

For example, if 60% of your monthly income goes to fixed costs, your spending allocation might look like this:

  • 60% fixed expenses
  • 15% savings
  • 15% spending
  • 10% investing

Determine the asset allocation that’s best for you. The key is to figure out the approximate percentages upfront so you can automate your money distribution and know where you’re spending each month.

Diversify Your Portfolio

The secret to reducing your risk and generating consistent positive gains is to develop a diversified portfolio.

In traditional stock investing, for example, you diversify based on factors like:

  • Market sector (industry),
  • Market capitalization (size),
  • Location (domestic vs. international companies),
  • Income stocks (companies that offer dividends vs. those that don’t), and
  • The number of stock holdings.

Each way you diversify your portfolio, you strengthen it by reducing your risk and exposure to specific factors.

For example, small-cap technology stocks might offer the highest returns in bull markets, but they also tend to be the most volatile. By creating a mix of stocks, you can “weatherproof” your portfolio so that it outperforms the market regardless of current conditions.

Many investment experts suggest you build a portfolio of at least 20 companies with a range of market capitalizations and industry sectors to increase diversification.

Finally, how you diversify your portfolio should be evaluated based on factors including your age and investment goals. If you’re under 40 and have a long-term investment horizon, you may decide to build a more volatile portfolio weighted with small capitalization stocks in fast-growing industries.

If you’re older and more risk-averse, you might focus more heavily on income-producing large capitalization stocks.

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Asset Allocation for Investments

You can apply the same asset allocation process to your investments.

These investments may include:

  • IRA or 401k
  • Income-producing stocks (dividends)
  • Growth stocks
  • International stocks
  • Precious metals (gold, silver)
  • Bitcoin (or other cryptocurrencies)
  • Real estate

Asset allocation helps you reduce risk via diversification. The percentages for each allocation will depend on your age, level of risk aversion, and knowledge of various markets.

The Unspoken Relationship Between Self-Actualization and Money

As psychologist Abraham Maslow discovered many decades ago, self-actualization is a quality of positive mental health.

Most individuals pursuing higher achievements and financial success are driven not by personal growth, but by what Maslow called basic human needs, such as esteem needs like status and winning.

The majority of those who pursue personal development goals are also mainly driven by status-seeking motivations.

That is, for most of us, our desire to “grow” is masked by the drive to achieve. There’s nothing inherently wrong with this as long as we’re honest and not deceiving ourselves.

Now, does this mean you can’t self-actualize and make lots of money at the same time? Of course not.

But the more energy you’re spending on money-related pursuits, the less energy you have to develop yourself.

Self-actualizing individuals are mainly focused on pursuing their interests and developing themselves. That is, they are busy actualizing their potential.

Why Financial Freedom is Relevant for Self-Actualization

But, it’s very challenging to pursue authentic self-actualization when you’re struggling with money, or if you don’t have your finances in order.


A lack of money triggers unmet basic (neurotic) needs.

  • When you don’t have enough money, you are concerned about your biological needs (like quality food).
  • When you can’t afford a home or are stressed out about paying your rent, you’re not meeting your safety needs.
  • Your belonging needs are in question when your social group is advancing in their careers and you are not.
  • Your self-esteem is under attack when you’re not achieving at the level of your peers.

Also, as we showed in Step 1, a part of us feels inadequate or insecure if we’re struggling with debt and unable to generate wealth.

All of these external pressures draw our attention and energy. This attention and energy are what we need to direct inward for the self-actualization process to switch on and build momentum.

To summarize: In most cases, financial freedom (at least to a degree) is a precursor to self-actualization.

As such, getting your finances in order is a responsible use of your time and energy, regardless of your stage of life.

The Road to Financial Freedom

Financial freedom is everyone’s birthright. If you’re struggling with money, psychological reasons may include:

  1. Unconscious programming
  2. Limiting beliefs
  3. Spending habits
  4. Poverty mindset
  5. Negative emotions
  6. Insufficient discipline
  7. A lack of financial education

Spending money can trigger dopamine in the reward center of the brain. Saving does not.

But you can rewire your associations, change your orientation toward money, and adopt a new relationship toward wealth and financial freedom.

The steps to financial freedom outlined above can help you take control of your finances and make daily progress for your Future Self.

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Insights, advice, suggestions, feedback and comments from experts

What is Financial Freedom?

Financial freedom means having the resources to cover all of your basic needs without creating any additional stress, anxieties, or concerns related to your finances. It is subjective and varies from person to person. Four vital components of financial freedom include the ability to consistently generate income to cover all expenses and save, the competence to manage finances effectively, the discipline to follow economic principles and practices to cultivate long-term wealth, and a psychological mindset that doesn't hinder financial freedom [[1]].

How to Achieve Financial Freedom in 7 Steps

The seven steps to achieve financial freedom are as follows:

Step 1: Develop Your Psychological Foundation for Financial Freedom

  • Understand the psychology of scarcity.
  • Acknowledge that you are conditioned to spend, not save.
  • Observe the biochemical experience of spending.
  • Acknowledge subconscious programming about money.
  • Address negative emotions around money [[1]].

Step 2: Get Fully Out Of Debt

  • Panic (acknowledge and welcome negative emotions).
  • Set up your financial dashboard.
  • Perform a quick analysis.
  • Consolidate your debt.
  • Set up automatic payments.
  • Find ways to pay off your debt faster.
  • Track, measure, and acknowledge your progress [[1]].

Step 3: Establish Clear Financial Goals

  • Connect with and clarify your Future Self before establishing goals.
  • Establish short-term financial goals from 90 days to 12 months [[1]].

Step 4: Upgrade Your Financial Education

  • Cultivate wealth through basic financial aptitude.
  • Invest in financial education through books, seminars, and self-directed learning [[1]].

Step 5: Cultivate Daily Financial Habits

  • Manage money as a skill.
  • Shift orientation toward the Future Self.
  • Establish supportive habits related to finances [[1]].

Step 6: Increase Your Earning Potential

  • Increase earning potential through career promotion, marketing skills, investing, starting a side hustle, and growing a business [[1]].

Step 7: Invest for Your Future

  • Understand asset allocation.
  • Diversify your portfolio.
  • Apply the same asset allocation process to investments [[1]].

The Unspoken Relationship Between Self-Actualization and Money

Financial freedom is relevant for self-actualization as a lack of money triggers unmet basic needs, such as biological, safety, belonging, and self-esteem needs. Financial freedom is a precursor to self-actualization, and getting finances in order is a responsible use of time and energy [[1]].


Financial freedom is achievable through a combination of psychological awareness, debt management, goal setting, financial education, daily habits, increasing earning potential, and strategic investment. Understanding the relationship between financial freedom and self-actualization is crucial for overall well-being and personal development.

How to Achieve Financial Freedom: Definitive Guide (7 Steps) (2024)


How to Achieve Financial Freedom: Definitive Guide (7 Steps)? ›

Baby Step 7: Build Wealth and Give

You can live and give like no one else. Find out your current net worth, then keep building wealth and become outrageously generous, all while leaving an inheritance for your kids and their kids. Now that's what we call leaving a legacy!

What is baby step 7? ›

Baby Step 7: Build Wealth and Give

You can live and give like no one else. Find out your current net worth, then keep building wealth and become outrageously generous, all while leaving an inheritance for your kids and their kids. Now that's what we call leaving a legacy!

What is the 50 20 30 budget rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

What is the 30 day rule? ›

The premise of the 30-day savings rule is straightforward: When faced with the temptation of an impulse purchase, wait 30 days before committing to the buy. During this time, take the opportunity to evaluate the necessity and impact of the purchase on your overall financial goals.

How much is 3 to 6 months of expenses? ›

As a general rule of thumb, many financial experts recommend setting aside 3-6 months' worth of living expenses. So if you generally spend $2,000 per month on rent, utilities, food, gas, healthcare, and other necessities, you should try to save between $6,000 and $12,000.

What is the David Ramsey method? ›

The debt snowball method is a debt-reduction strategy where you pay off debt in order of smallest balance to largest balance, gaining momentum as you knock out each balance. When the smallest debt is paid in full, you roll the minimum payment you were making on that debt into the next-smallest debt payment.

What is Step 3 to financial literacy? ›

Step 3: Get Out of Debt

Getting out of debt might seem more like a goal than a step, but the truth is that leaning how to manage debt is a crucial part of financial literacy.

What are the 5 pillars of financial freedom? ›

The five pillars of financial planning—investments, income planning, insurance, tax planning, and estate planning— are a simple but comprehensive approach to financial planning.

What are the 8 levels of financial freedom? ›

This journey can be traced to eight stages: Dependency, solvency, stability, accumulation, security, independence, freedom, and abundance.

What is the 4 rule for financial freedom? ›

The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and take that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.

What are the 3 building blocks of financial freedom? ›

The main aspects in achieving financial security is budgeting, reducing expenses, eliminating debt, and increasing savings. These four aspects are the building blocks to financial freedom and will help you kick-start your financial success.


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