How To Start Your FINANCIAL FREEDOM Journey In Your 30s, 40s, 50s (NEVER TOO LATE) – Updated April 2023
We recently had a question from Timi within our YouTube Channel community tab:
So today, we want to share with you exactly how to start your own financial freedom journey and create a personalised plan 📝 that actually works.
This information applies to anyone, whether you are in your 20s, 30s, 40s, 50s and beyond.
More specifically, it will apply to anyone who feels that they're starting this journey of financial freedom a bit late.
Especially, if it feels like you need to address your finances urgently due to your own personal situation.
We have identified 9 unique steps that you need to follow step-by-step, all the way towards creating your own personalised plan for financial independence 😀.
We are going to be sharing specifically for our flagship program, FIRE Superpower, which can help you implement these 9 steps with the resources and tools.
From within that program, although there are more tips to go through per step, to keep this post as succinct as possible, we are going to share only two tips at each step.
Let's now explore these ideas for the nine steps that we believe that you need to take, to not only create your personalised financial freedom but to practically begin to go on that journey for yourself.
To make this really fun, when Mary and I created this program, we came up with really fun names for each step.
This is to help us and other people remember these very different stages on their journey towards financial independence.
9 STEPS TO FINANCIAL FREEDOM FOR BEGINNERS
Here are the 9 steps that you should take:
Step 1 – DARE: From Fear To Financial Independence
So this is where you're daring to go from fear to independence.
Tip 1 – Get Your Heart Right
The first thing to do at this stage is to get your heart right for financial independence. What we mean here specifically is:
- What is your core motivation?
- And what is your why?
This is really what underpins a lot of what will become quite a long journey ahead as you work towards your own version of financial independence, perhaps by yourself or with your partner (if you've got one).
Tip 2 – Share The Journey With Partner And Family
This is all about how to get your partner on board, and also how to communicate your journey with your family and your friends.
For example, this could involve you including a third party to talk about your money, goals, desires with your partner.
Practically for us, when we did this ourselves, we did this via our church.
So our church had recommended that we speak to somebody who would talk to us about money, what we thought about money, our values, and things like that.
This was to make sure that Mary and I were both on the same page when it came to what we saw as our goals financially and why it really mattered to us.
You could also do this via a financial coach or somebody who you maybe find inspiring, who is perhaps ahead on the journey towards financial independence and you want to learn from them.
They could act as that third party to help you and your partner (if you've got one) move forward.
Step 2 – SEEK: Learn Key Foundations
Tip 1 – Building Wealth
The first thing you want to think about here is the five keys to building wealth 💰.
What we talk about here are:
- Cash Flow
All those five areas are connected to each other.
They are absolutely critical in your understanding to be able to help you use the income and expenses in your life to create a buffer and for that buffer to flow into helping you create assets and pay down liabilities.
Tip 2 – Power of Compounding
The second thing is the power of compounding and the rule of 72 for doubling your money:
Here you need to understand how compound interest works, and how your money is doubled, depending on your rate of return from your investments.
For example, according to the rule of 72:
A 7% return on your investments means that your money will double in 10.2 years, i.e. 72 divided by seven equals 10.2.
This is very important for you to be able to know how your money would work for you.
It helps you start to imagine how to put your money to work.
Step 3 – EMBRACE: Understand Where You Are
Tip 1 – Your Financial Joy State
The first thing to really understand at this stage is, what is your Financial Joy State?
This is a tool that we created ourselves and the Financial Joy state looks at your financial life beyond money itself.
It covers various categories, I'll point them out below so you can understand what we look.
So you're looking first at understanding today from the perspective of how are you…
- Tracking your expenses and income?
- Budgeting consistently?
- Tracking your net worth?
These questions are the bread and butter that we typically talk about in this section.
Dealing With Storms
Beyond understanding today, next we talk about dealing with storms.
- Have you prepared for emergencies?
- How much insurance do you have in your life?
- Have you done any form of estate planning?
- And have you written a will?
Things like that will come under dealing with storms.
Dreams For The Future
Next, you're talking about dreams for the future.
In addition to that, thinking about other people as you proceed on this journey towards financial independence because it is a long term goal.
And then finally, work, life and what we refer to as joy balance, because this is not just about putting money away, and investing.
You also need to have good balance in making sure that you are having fun, and that this journey is enjoyable.
It's not just about the destination that you getting to, but also who you are becoming along that journey.
So your Financial Joy State is essentially a score.
You score yourself across all the categories and work out your total figure across all categories to see where you are.
This helps you to understand what that financial joy state looks like for you at this very moment in time.
Tip 2 – Calculate and Grow Net Worth
So the second thing to consider is how to calculate and grow your net worth.
This is one of the key metrics to calculate and track each month on your Financial Independence journey.
As the saying goes:
“What gets measured gets improved”.
It is also important when you think about your net worth, to think about what the makeup of that net worth is.
What is the proportion of liquid assets you have in your net worth?
Things such as your investments in Stocks and shares ISA that you can access quite easily…
… compared to illiquid assets that you might have on your net worth, such as your investments into property, pension, which you can't access until retirement.
Step 4 – DREAM: Set Goals For Your Financial Independence Journey
Tip 1 – Financial Freedom Number
This is all about setting short term and long term goals. It is important to consider
- what is your financial freedom number, i.e. how much is enough for you.
So a rough calculation is 25 times your annual expenses or dividing your annual expenses by 4%.
But to be prudent, aim for something between 3% and 4%.
e.g. Assuming your goal is to earn income of £2,000 a month to cover your lifestyle expenses, then your freedom number is (£2,000 x 12)/4% = £600,000.
However, this 4% rule needs to be re-considered for your own personal situation. We'd suggest being super prudent and aiming for up to 3% withdrawal rate i.e.
(£2,000 x 12)/3% = £800,000 in accessible assets from which you can draw an income in retirement (or early retirement if you prefer).
You can use the above calculation to work out what your number should be roughly. The question then becomes, how do you make it happen?
Tip 2 – When Can You Retire And The Gap To Fill?
So you already know what your freedom number is, the question then becomes understanding:
- Where you are now?
- Where are you trying to get to?
- What is the gap in between that you need to fill?
That gap you need to fill will be driven by a number of inputs, for example, if you know that that number is, say £500,000.
How much money do you need to start investing every single month?
What assumed rate of return (a realistic rate of return) after taking into consideration fees and inflation?
And on top of that, over what period of time are you going to be investing that money in order to then fill that gap?
Again, as mentioned, this bit can get quite complicated.
We've got various workbooks, spreadsheets, videos within the program itself.
If you're really interested in getting deeper into it, feel free to check out the program to take a deeper dive for yourself.
Step 5 – DESIGN: Plan Your Route To Financial Independence
Tip 1 – 5 Paths to Financial Independence
There are multiple paths to financial independence, but we currently focus on 5 of them because we have tried and tested them ourselves:
- Stock market investing
- Property investing
- Creating an online business
- Career maximisation
- Becoming 100%, debt-free and mortgage-free.
So the point here is that you need to design your route by choosing a path that works for you.
Tip 2 – Personal Financial Independence Plan (PFIP)
This is a commitment document in the form of a simple PDF workbook, where you sign and make a pledge to go on the Financial independence journey together (if you have a partner).
It lays out:
- Your Financial independence number
- Why it matters to you
- What your strategy is, etc.
All the things that we've been talking about so far are then documented and written down because if you don't write it down, it means nothing.
That document will be very important as a communication tool, particularly, if you are in a relationship.
It will help you to remember why you got started on this journey because the road ahead can be tough, let's be real.
When it does get tough (and it will), you go back to that document and reflect on it as it's a good resource for you to fall back on and be reminded of your why.
So a Personal Financial Independence Plan (PFIP) at this stage is something you need to absolutely have in place in order to begin to take practical leaps towards your own financial independence journey.
Step 6 – SPARK: Develop Your Mindset
This is all about developing your mindset. This is so important for the journey for the financial freedom journey.
Tip 1 – 7 Qualities You Need to Reach Financial Independence
I'm just gonna share two of them and the first one to share is the need to focus.
You likely would have come across the acronym FOCUS as:
Follow. One. Course. Until. Success.
So many people are looking for many shiny objects. They are looking for get rich quick schemes and various ways to achieve their goals a lot faster.
In actual fact, a lot of people end up making a lot of mistakes, because they just do not focus on a tried and tested, solid strategy.
The second quality to mention is the quality of perseverance as things will not happen overnight. You will
- not have promotions in your job overnight,
- your side hustle will not become a success overnight,
- investments will not compound overnight,
But over time, through perseverance and patience, you will start to see wealth actually being built, because of that core quality of perseverance on your journey towards financial independence.
Tip 2 – Develop a Winning Attitude
You develop a winning attitude when you start to focus on the things that are going on well in your life instead of dwelling on the things that are not going so well.
You Become Your Thoughts.
If you develop a positive attitude, you create positivity around you and this is so important.
Make no excuses! Just get on with it and just do it!
Step 7 – MOVE: Choose Your Vehicle
We been learning so much along the journey so far. Now it's time to take action and choose your vehicle.
From Step 5, we suggest stacking these strategies and implementing at least 2 of them.
We bring these strategies to life within FIRE SuperPower
Let's pick one of the 5 strategies from Step 5: Stock Market investing.
Tip 1 – Passive Investing Strategy
Choosing your vehicle in this context could mean picking a passive investing strategy as a key thing to focus on.
This is where we look at things such as you investing in index funds vs ETFs.
Here is a comparison video to watch:
Tip 2 – Build A Simple Global Portfolio
It is important that you create a simple global portfolio without local bias.
This is important because it gives you the opportunity to earn returns outside of the UK.
It's also important but diversification.
Step 8 – LEAP: Set Off On The Journey
Previously, you chose your vehicle to help you begin that journey, now you are really starting to take off.
Tip 1 – Make Your Investments and Automate
So the first thing to consider here is to start making your investments and automating them.
Enough learning, time to actually start investing your money, choose your platform, open up a Stocks and Shares ISA (and/or SIPP) and automate your investments.
Tip 2 – Explore Passive Income Ideas
The second thing to consider here and this is a unique advantage is to explore a passive income idea.
This is where you start to play the game, very differently.
You are now relying on ideas beyond just your day job as a way for you to accelerate your journey towards financial independence.
This is one of my favourite elements of the journey to Financial Freedom and I love it so much because it truly engages your level of creativity.
Step 9 – THRIVE: enJoy The Process
Tip 1 – Have Fun and The Freedom Lifestyle
Number 1 is about having fun and living an optimal freedom lifestyle.
It's important to have fun as you build wealth because it can get very boring.
In addition, it's also important to optimise for a simple lifestyle and prioritise what's important to you.
For us, one of our core whys for aiming for and achieving Financial Independence was location independence and the desire to travel.
It's our way of having fun and growing as individuals.
Check out this recent dream trip where we travelled across 3 countries (St Lucia, UK, Spain) in 1 month:
Tip 2 – Fast Track Through Personal Development
The other thing to share here is the importance of fast-tracking your journey towards financial independence through personal development.
This has been instrumental in our personal journey and powerful for developing the right mindset.
I'm talking about everything from:
- Reading the right books
- Getting coaching from the right people
- Joining masterminds,
- Hanging around with people of a similar mindset,
- Attending events, etc.
Anything that essentially means that you are actually growing as a person, because it's only by growing as a person that you see huge changes in your career, in the profitability of your online business, etc.
Your investments will get better because you've learned how to invest your money better and creating confidence, and so on.
To go deeper and create your Personal Financial Independence Plan, feel free to check out our popular 8-week program here.
Do you currently feel like you are starting this journey towards financial independence a lot later in life than other people? Let us know what your questions or concerns are.
Jump in the comments below and let's chat. We're here to answer your questions 😀
More on Financial Freedom >>
- How We Paid Off Our Mortgage In 7 Years
- 10 Reasons Why Most People Remain Poor
- Why Your Lack of Consistency Is Keeping You Poor
Here is the video version of this post >>
I had no savings or proper financial education other than living day to day. 4 years ago I came across your you tube channel and Facebook. I am now 58 I have saved put money in 2 ISA now. I went without. My goal is to help support my daughter buy a house whilst considering retirement. from following your free content I now opted in work pension. I learnt all this from your content. My next step is to do a retirement plan again I never thought of doing this. do your beginners investing course is on my list. I am reading Tony robbins money book to get a feel for investing. Your content has really helped me on my journey and has me thinking 🤔 what can I do next I move towards that. I am learning as I go along. I never done financial retirement plan before. I have worked out my expected expenses and unexpected ones. I can’t get over the great content you have put out there in the ether. I keep getting nuggets of gold information from your social media. There is so much to learn absorb. I started late just shows what’s possible with discipline patience. I am still learning where to go next from your free content. than you xx
The Humble Penny says
Thank you so much for sharing :). It is very encouraging even for me to read that you have made some progress from our content. It means a lot. As a next step, I’d say you should read this blog post: https://thehumblepenny.com/how-much-money-do-i-need-to-retire-uk/