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The 10 eternally true steps to financial freedom

Whoever you are and wherever you come from, there are 10 steps you can follow that, given time, will secure you a wealthy future.

You’ll need to cut you cloth to suit your own position, sure, but don’t fool yourself – these steps have applied throughout the ages, across civilisations, and they certainly apply to you.

There are no excuses. Got a well-paid job? You still need to know where your money is going or it will trickle through your fingers. Three hungry kids to feed? That’s treble the reason why you should stay out of debt, not an reason to give up.

You can cure your money woes, and turn your financial fears into dreams.

Excited? Let’s go!

1. From now on, you’re good with money

No ifs and buts, no saying “I’m terrible, I don’t know where it goes…” Take responsibility for your finances and you’ll be happier, more determined, and, in time, richer. By reading Monevator.com you’ve already shown you’re ready to change. It starts now! (More)

2. Take stock of You, Yourself Ltd

You need to work out what you’re worth in financial terms, where your money is coming from and where it’s going. Then you need to work out where you’ll be in a year, five years, 10 years, and 30 years. Finally, the fun bit – deciding where you want to be. (Note: ‘deciding’. It’s up to you). (Click to learn how).

3. Get rid of debt. Really! Everything except the mortgage

Your debt makes other people rich. You’re not borrowing from anyone other than your future self, who will be poorer, less financially secure and/or live a less abundant life because you wanted something now, before you could afford it. You can’t save while you’re in debt, and it grows like a weed. Kill it! (More on debt)

4. Discover the secret all successful savers know

You believe it’s hard to save money? Some of us find it easy, simply because we have a few tricks that change how we view our outgoings. The key is to allocate a certain percentage of your salary every month to savings. It goes out the moment you’re paid. You won’t miss it – it was never yours to spend. It’s yours to save, and given time and determination that will make you rich.

5. Splash out on a rainy day fund

Before you put a penny into the stock market or any other kind of financial investment, get some cash savings. Then, when the boiler blows up or you need new glasses, your financial plans aren’t derailed and you don’t go into debt. Having cash in the bank feels great, and you’re even paid interest for the pleasure. Try to save three months’ salary so you can cope if you lose your job. Six months’ worth is even better.

6. Buy what you want – but cut out the crap

To remain financially motivated over the long haul, you need to know what you’re saving for – only misers love money for its own sake. So what’s it to be? A secure retirement? A holiday home? That classic sports car you buy without a penny of debt? Your daughter’s wedding? Personally meaningful goals will help you save, but you’ll need to sacrifice some of the small stuff to get that big prize. It’s time to stop the waste – the surplus shoes and doomed electronic gadgets that steal money away from what you really want.

7. Commit to long-term investment in the stock market

If you want your money to grow comfortably faster than inflation over the next 10, 20 or 30 years, you’ll need to invest in the stock market (possibly via a pension). Markets go up and down over shorter periods of a few years, but over the long-term shares have always risen. By drip feeding in your funds, you can smooth out the highs and lows. A low-cost index tracking fund that spreads your money across the main market is the best way to begin. Indeed, it may be the only stock market investment you ever need.

8. Own your own home (when you’re ready to)

Why does your landlady rent a home to you? Because she believes she’ll make a profit out of it, either because your rent at least covers her mortgage and maintenance costs, or because she thinks property prices will grow faster than the difference. If you buy your own house, you can pocket this profit yourself, tax free. One downside is property currently looks an expensive, risky investment. But it won’t forever, and most generations have done very well from property over the past 100 years.

9. Work hard and smart to create multiple income streams

Ideally, you’ll run your own business to really reap the rewards of your labour. However full-time entrepreneurship isn’t for everyone. The second best way to enjoy the benefits is to set-up extra revenue streams that supplement rather than replace your salaried job – anything from a hobby that makes money or an investment property you rent out, to the royalties you get from a book you wrote about local celebrities. Get a second income stream, then try to get another.

10. “Never, never, never give up”

Money is daunting. Here in the UK we don’t like to talk about it, despite being one of the richest countries in the world, and with some of the world’s most insatiable (and heavily indebted) consumers. Perhaps that’s you, or someone you know. Whatever your circumstances, you’re setting off on a road to somewhere better. Some readers will start in debt and end up in a comfortable retirement. Some will start with modest savings and finish their days rich. And let’s be honest, a few who take this road and stick to it could still find the future difficult, and maybe wonder why they bothered; unlike James Stewart in It’s A Wonderful Life, they’ll never see the even worse outcome that would have awaited them if they’d condemned their old age to true poverty.

Fact: tragedies aside, we’ll all get old and need someone to look after us. But we can start by looking after ourselves. Sure it will take guts to stay on course, with all the temptations and challenges life throws at us. So let’s remember the words of Winston Churchill, the greatest British Prime Minister of all time: “Never, never, never give up”. (And he got the cigar, after all).

I’ll expand over each of these points in the coming days. Subscribe to Monevator.com to make sure you don’t miss a step!

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{ 4 comments… add one }
  • 1 Aleks August 16, 2010, 4:01 pm

    This is a great post. Especially working smart, in addition to working hard, has proven the most difficult part for me to overcome (actually I have not overcome it yet, but I am working on it). I believe we are creating a specific inner reality for ourselves as we grow up, about what we believe that life should be, and how we perceive the world. Breaking out of that inner reality, and seeing the alternatives and the endless possibilities, is perhaps the most difficult part. At the same time, I am so greatfull about the rise of blogging communities on the internet, it lets people explore multiple points of views, experiences, alternatives, and ideas.

    Cheers, Aleks.
    .-= Aleks on: 10 Months After My First Post =-.

  • 2 Jeremy Day November 3, 2010, 1:41 am

    Wish I had some of this advice a while ago… Especially the advice about buying a house… But I am recovering and ready to get back on track here soon…

    Thanks,
    Jeremy
    .-= Jeremy Day on: Self Knowledge Enables Financial Wealth =-.

  • 3 Lenita February 1, 2013, 12:32 am

    I’m getting my financial house in order and this post is AWESOME!!!!! Thanks!

  • 4 Maryam November 22, 2014, 8:46 am

    Great advice, like my dad’s but with an up to date approach. I only came across this excellent site via the superbly mustacheoed Mr Money Mustache but of course that blog has a stateside approach so I am really keen on this Blightyfied blog.
    One area MMM has discussed which I would like to hear Monevator blog about is the multiple income stream question. No doubt more money flowing in is good, but time to think about exactly what the effects are going to be is just as important: the time it will involve to generate and maintain that stream, the tax that will be paid on it, changes to tax brackets as income goes up, costs involved in generating and maintaining that second income, if it is a small stream then is it worth all the above or would you be better off saving more or cutting down on something (like your car or cable tv)? Just having the time to think about these things is a luxury but a necessity to really think through a decision which might ultimately cost you more in the long run. Looking forward to lots of new posts!

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