10 Steps to Financial Freedom (That Actually Work)

Achieving financial freedom is a goal that many have a burning desire for, but it can seem like a crazy big task when you're standing there, right at the start.

But, with a strategy in place, you can actually achieve your dream of being financially independent. 

In this article, you will get 10 valuable tips that I myself use diligently on the road to financial freedom.

But before we jump to the 10 steps…

Have S.M.A.R.T goals

Achieving financial freedom requires you to have a clear plan and strategy in place. This should include setting goals that are:

• Specific
• Measurable
• Achievable
• Relevant
• Time-bound

As you can see, these make up the acronym S.M.A.R.T, which is a system about creating great goals that increases your chances of success.

Your strategy should also contain any scenario analysis of potential obstacles or challenges you may encounter along the way. And how extreme should your savings be? Do you go full "FIRE", or do you afford a little extra along the way?

I myself have occasionally driven periods where I have been very 'squeamish', but I have found that the best for me is a more balanced approach. After all, we have to live in the present too, not just in the future.

But the most important thing for you is that you find out how much money you need to be financially independent.

The FIRE movement
FIRE is short for Financial Independence Retire Early, and is the name of a community of savers who aim to become financially free with the help of a frugal lifestyle, extreme savings and investment.

Achieve financial freedom in 10 steps

Furthermore, you can see the 10 steps you can take to achieve your dream of financial independence.

1. Define what being financially independent means to you

Financial freedom means having enough passive income or savings that you don't have to work for a good old fashioned salary to live your life. 

If you are financially independent, you live on your own terms, so that you can follow your passion and goals. 

In order words, the freedom to simply do what you feel like!

We are all different and have different desires for our lives.

I myself have a dream of being a full-time private investor, while at the same time having the freedom to travel around with my girlfriend and see different countries and cultures. What is important to you?

The answer to that will have everything to do with how much money you need to save.

But how to calculate how much you need?

The 4 percent rule

The 4% rule is a principle often used in the FIRE movement. This principle is based on the fact that you can withdraw 4% of your portfolio (typically stocks or mutual funds) each year and still have a high probability that your money will last 30 years or more.

This is not a guarantee, but rather a guideline that can help you plan for early retirement and ensure you have enough funds to maintain your desired lifestyle.

You find the amount you need by multiplying your annual total expenses by 25.

2. Set a specific financial goal

In order to achieve financial freedom, it is important that you have a specific sum in mind.

If you have an annual consumption of $24,000 today, you know that this sum is what you minimum must be able to take out of your portfolio each year to cover all expenses.

If we use the 4% rule, and multiply $24,000 by 25, you will need a portfolio with a value of $600,000.

Then you will be able to withdraw $24,000 each year (4% of 600,000) to cover your expenses, without having to work or generate extra income.

3. Create a budget

One of the first things you need to do to have any chance of becoming financially independent at all is to address your current financial situation. 

You need to get an overview.

This means to create a budget for to create an overview of income and expenses. This will help you see where your money is going and identify areas where you can cut back or save more.

There are often many more of those tiny expenses than you might think, and although many experts recommend cutting down on coffee, canteen food and such pickpockets, it is primarily the bigger costs such as the price of insurance, electricity, interest and possibly rent I would start to reduce.

Perhaps you see that you can have a much higher savings rate than you previously thought?

4. Increase your current income

One way to become financially independent faster is to increase the income you have today. 

This may involve negotiating a higher salary at your current job, changing jobs, starting a side business , or invest in income-generating assets such as rental properties or dividend shares.

5. Reduce your expenses

As mentioned: if you reduce your biggest expenses, you have already made a good start on the road to financial freedom!

Therefore, check whether you can save money on:

• The mortgage
• Interest on other loans
• Price of insurances
• Subscriptions
• Electricity
• Rent (for example, can you find something cheaper elsewhere?) This was a move my girlfriend and I made a few years ago, when we wanted to be able to save more of our salary, so that we could buy a home ourselves sooner.

Tips: get loans with lower interest rates via uScore (Defero)

uScore is a useful, Norwegian-developed app that allows you to check your credit score for free and offers you loans with interest rates adapted to your finances. Here you can save a lot of money on interest costs, so download the app for free today.

6. Start investing

A popular way people in the FIRE movement is adopting to achieve the goal of financial independence is to invest in, say, stocks, and then live off the returns by either taking the dividends or withdrawing 4% of the portfolio each year.

So, start by starting monthly savings in mutual funds and/or shares. It doesn't have to be huge sums all at once, but try to have as high a savings rate as you can.

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I have written an article where I show you two different principles you can use in your savings, to save as much as possible.

But set up a separate buffer for emergencies before you invest. There is a severe setback for the interest-on-interest effect if you have to sell off stocks and other investments to pay for a broken washing machine or another unforeseen bill. Yep – been there.

When it comes to investing: be sure to diversify your portfolio and get the right tools to increase your chances of making the right investments.

There are many ways to invest. I myself like to invest in individual shares - and typically quality companies that like to pay dividends.

You can check out two articles I've written about dividend stocks, if you want to get started:

• Solid monthly dividend paying stocks
• Best dividend stocks on Oslo Stock Exchange

7. Stand the course

Achieving financial freedom takes time and discipline. It is important to stay focused on the goal and make smart financial decisions along the way.

So, be tough!

Don't let setbacks or possible temptation throw you off course. With good persistence and a clear plan in place, you can achieve the financial freedom you dream of.

8. Learn something new, constantly

In order to make informed financial decisions, it is important to educate yourself about personal finance and investing. 

Read books on stocks, entrepreneurship, and so on. See if you can find any interesting digital courses, or watch YouTube.

My tip is to get an audiobook app where you can listen to a bunch of valuable specialist books that will help you along the way. You can check my article on best audiobook app to see 5 different apps I have tested.

One of my favorite audiobook apps is Storytel, which I am very pleased with. It's rare they don't have a book I'm looking for!

Check out my free resources

Below you can download some free tools I have created, which will help your investment decisions and finances.

Here you'll find resources on saving, investing and other areas that improve personal finance for both beginners and advanced learners.

9. Automate your finances

To increase your chances of success with savings, it's smart to put money aside the moment it enters your account. 

With automatic savings in your online bank, you have a personal 'robot assistant' who does the work for you, and transfers the money from a salary account to a savings account or share savings account on a specific date each month. 

Another tip could be to 'hide' this account in the mobile app, so that you are not tempted to transfer the money back from the savings account when you are standing by the candy shelf at the store after a long day at work.

Automation can help you build wealth almost without you even having to think about it.

10. Have the right people around you

Building financial freedom can be a challenging journey, and it is therefore important to have good support along the way. 

Consider joining groups of like-minded people with the same goals as you, or find a mentor who can help you stay on track and overcome any obstacles that may arise. 

Remember that you don't have to do everything alone!

By following the 10 steps in this article, you can start working toward financial freedom right now.

It may take time and effort, but the freedom that comes with financial independence may be the carrot that makes it worth it.

So, again…

Remember, having a clear plan and strategy in place, as well as seeking support when you need it, can be the key to staying on track and working towards your goal of financial freedom. 

Ultimately, it is you that plays a role in whether you achieve it or not.