Friday Finance: recap of the 10 steps to freedom

This is an extract from The Poor Man’s Guide to Financial Freedom: A Realistic, 10-Step Manual to Building Liberating Wealth on a Small to Medium Budget.


In the truest sense, freedom cannot be bestowed; it must be achieved.

– Franklin D. Roosevelt

Let’s finish by recapping each step and figuring out where you are and what you still need to do.

Review of the Introduction

Many people lack any level of financial freedom, even if they have a relatively high income, because they are unable to manage their money.  They live paycheck to paycheck, borrow heavily, and an unforeseen incident can cause disaster.  They feel that they are on a treadmill that they can’t get off, even for a moment.  Many wealthy people have had to file for bankruptcy because they could not get their finances in order.

By following the steps in this book, you can achieve a much greater degree of independence and financial freedom.

There are different levels of financial freedom.  Level 1: you are out of debt and don’t need to fear a financial emergency or losing your job.  Level 2: you could afford to take a year off work if you wanted to.  Level 3: you would be able to work part-time or on-and-off.  Level 4: you only have to work if you choose to.  Level 5: rich. 

This book explains how to reach Levels 1-4, but sadly not Level 5. 

Did you figure out which level you are aiming for, and in what timeframe?  If not, think over this some more.  Many people merely want to reach Level 4 in their old age so that they can enjoy retirement, and that’s fine if that is your goal. 

Remember, existing government pension and other benefits must have an asterisk after them due to unsustainable public sector debt in many countries.

Step 1: Don’t Get Into (More) Debt

You should avoid buying consumer items on credit, and instead save up cash for big purchases.  We listed some possible exceptions to this rule.

Are you now living within your means, or are you still living on credit?  If you are borrowing for any everyday living expenses, reread this chapter and make the necessary adjustments.  You must avoid getting into debt (aside from those exceptions) in order to achieve any level of financial freedom.

Step 2: Make a Frugal Budget

We looked at how to manage your weekly or monthly expenses, and I recommended some apps that make this easy to do.

Have you got a budget figured out?  Have you adjusted so that you’re now able to put more into savings, or into debt repayments if applicable?  If not, you must go back and figure out how to put together a budget.  This is the step too many people neglect, and it is probably the primary cause of people’s lack of financial freedom.

Step 3: Save an Emergency Fund

This chapter explains why you need an emergency fund, how much it should be, and where you should save it.

Do you have readily available cash to live on for three months if you are still in debt, or six to twelve months if you have no consumer debt, in case you lose your job or face some other catastrophe?  If not, you cannot reach Level 1 of financial freedom, and any unforeseen problem could knock you back into debt.

You cannot skip this step, nor can you put it off.  If you have already started putting your money into long term investments but do not have an emergency fund, pause your investing immediately and complete this step first.

Step 4: Get Out of Debt

We looked at how to list all your debts in order and pay them off systematically, starting from the one with the highest rate of interest.  For those struggling, there are debt counselling services available in various countries that can help you to get your situation under control.

Have you paid off your debts, or sorted out a good plan for doing so?  If not, you need to go back and complete this step, otherwise you will not get any closer to financial freedom.  Remember that a mortgage can be an exceptional case depending on your circumstances.

Step 5: Increase Income

We went over ways you might be able to increase your income.  Some suggestions were conventional while others may have been surprising.  Did you succeed in making an extra buck?

While this step is not essential, increasing your income is the most powerful way of reaching financial freedom faster, so long as you’re using it to increase savings or debt repayments, not to increase spending.  Reread the chapter if you’d like to see those ideas again and reassess whether you might be able to try some yourself.

Step 6: Protect What You’ve Got

Most people will need some forms of insurance to protect themselves in the case of problems that your emergency fund will not cover.  Remember to get professional advice, as covered in Step 9, before you take out any policies.

Step 7: Plan Your Life

This is where you figure out what your financial goals really are, aside from just to avoid getting evicted from your home or getting roughed up by Tony the Bulgarian.

Do you have short or medium-term expenses you need to save for, like a car for work or deposit on a home?  Have you figured out your long-term goals, especially for retirement?  If not, go back to this chapter and think about it again.  Use the calculators listed there to help.

If you don’t know where you’re going, you may be going in the wrong direction.  Make sure you are clear about your goals, while accepting that they will probably change over time.

Step 8: Invest Wisely

This gargantuan chapter covered a lot of ground.  We considered your ‘risk profile’ – how comfortable you are with volatile assets.  We described the main forms of investment and their various alternatives.  To review, these were:

Defensive assets

– Cash and equivalents: cash, precious metals, and cryptocurrencies.  These are generally safe but offer lower returns, with the exception of cryptocurrencies which are still jumping around all over the place.

– Bonds.  These offer higher but still moderate returns.

Growth assets

– Shares and real estate.  Alternatives include peer-to-peer lending, royalties, laundromats and various other things.  These investments can offer higher levels of return but at a higher risk, and should be held for the long term (many years) so that you have time to ride out any loss in value.  Such growth investing over a long period of time is essential for reaching higher levels of financial freedom.


You need to diversify across these asset classes, and also within them.  Don’t put all your eggs in one basket.  Younger people or those more comfortable with risk should lean more towards growth assets.  The risk-averse or those nearing retirement should lean more towards defensive assets.  Most people will find that index funds suit them best.

This is the chapter most people will need to reread in order to get their heads around it.  Remember to seek individual advice before making any investment decisions.

Step 9: Get Advice

We looked at the potential benefits and pitfalls of getting professional financial advice.  Advisors who work on a fee-for-service basis are far better than those working on commission.  Advisors working for big institutions may have conflicts of interest.  Robo-advisors are also available, cheap, and may be suitable for beginning investors.

If seeing a human, find an advisor that suits you and watch out for the warning signs described.  Reread this chapter before going for a meeting with an advisor and write some notes about what you need to discuss.

Step 10: Record and Reevaluate

Keep a record of your investments, either on paper, in a spreadsheet, or using an app like Mint.  Review your investments about once a year.  Make changes if you need to rebalance or if your situation has changed.  Do not make changes out of panic or greed.

Final Words

How did you go?  Are you lying on a beach yet, or have you calculated that you should be within a reasonable period of time?  Or if you had other financial goals, are you well on your way?  Wonderful!  Have an extra pina colada for me.

There is always more to learn about personal finance.  I thought I knew everything because I’d reached Level 3 of financial freedom already, but my knowledge improved by conducting research for this book.  This is good news for you: if I reached Level 3 in about a decade by grasping the basics, then imagine how well you’ll do with even more information at your fingertips!  The learning journey never ends, for any topic.  Check out the links below as a jumping-off point for your own further reading.

Having read this book, you are better educated about personal finance than 95% of the general public.  Maybe 98%.  By putting these steps into action, you will move towards higher levels of financial freedom.  It takes time and discipline, but now you are moving in the right direction instead of running on the spot with debt, overspending, a lack of emergency funds, and high-fee investments.

I wish you all the best in your financial future and I hope you achieve everything you dreamed of.  If it takes a while to get there . . . well, you’ll appreciate it all the more once you arrive.

If you found this book useful, please recommend it to someone else who needs to get his head around money.  Also, I would greatly appreciate it if you could leave an honest review on Amazon or wherever you bought this book.

To celebrate your journey towards reaching financial freedom, let us conclude with one more quote:


– William Wallace, Braveheart

Also available on many other platforms.


  1. Kentucky Gent · November 6

    I am so deep into level 3 that I am on the cusp of breaking into level 4. My current housing cost is too high because I live in a great location downtown in a great city, but this is only temporary.
    When I downgrade my housing cost it should catapult me into level 4 permanently, depending on how badly societal decline affects my investments. Since I can’t model that, I don’t worry about it. Plus, my backup plan is simple – become a mendicant.
    Haven’t had a job in over a year!

    Liked by 1 person

  2. Hesse Kassel · November 6

    For normal people, who aren’t working in Africa or stuck on an island, holding so much cash for security is crazy. Holding cash instead of growth assets is expensive, maybe 6% expensive.
    Use the money to pay a bit in advance on your home loan (which has redraw/offset, right?) or buy shares (they can be sold almost immediately any time anyway).
    Then get a fee free credit card, an unused margin loan, stay on good terms with friends and family etc. People who do this only need a few thousand in cash as security during their earning/saving phase.
    Look at it on a spreadsheet. Over a lifetime it makes a HUGE difference.

    Liked by 1 person

    • Nikolai Vladivostok · November 6

      I see your point but I’m psychologically incapable of doing it that way, especially depending on others.
      Those with plenty of equity in their home might use that potential cheap borrowing as a hedge against a lower emergency fund.


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