8 Phases to Financial Freedom to Live the Life You Want | Sabrina Ana Maria | Skillshare

8 Phases to Financial Freedom to Live the Life You Want

Sabrina Ana Maria, Your Personal Finance Motivator!

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10 Lessons (22m)
    • 1. Introduction

      1:51
    • 2. Phase 1: Start preparing for the future

      2:40
    • 3. Phase 2: Improve your credit score

      8:51
    • 4. Phase 3: Have a sustainable emergency fund

      1:34
    • 5. Phase 4: Attack debt

      0:41
    • 6. Phase 5: Ramp up savings

      3:36
    • 7. Phase 6: Finish off your debt

      0:33
    • 8. Phase 7: Secure your retirement

      2:33
    • 9. Phase 8: Invest as you please

      1:25
    • 10. Conclusion and Project

      3:52

About This Class

This course will help you on your journey to financial freedom. These 8 phases are my steps to achieving the goals and having the life you want. 

We will be going through each phase in details and what action steps need to be taken. No matter your current financial situation, it’s important to establish where you starting point is to begin your journey.

Helpful links for you - down below!

Debt 101 Guide available here: 

https://www.sabrinaanamaria.com/products-services/debt-101-how-to-get-started-on-your-debt-free-journey

Sign up for a 1-on-1 consultation here:

https://www.sabrinaanamaria.com/products-services/consultation

Discount Codes:

https://www.sabrinaanamaria.com/discount-codes

Need personal finance advice? Contact me - I’d love to help!

  • Website: sabrinaanamaria.com
  • YouTube: Sabrina Ana Maria
  • Personal Finance Instagram: @__financiallyfree__

Email: [email protected]

Transcripts

1. Introduction: Hello, everyone. Welcome to my skill share. Of course, today we're going to be going through my eight phases to financial freedom. If you've heard of Dave Ramsey, you know his baby steps with a little bit different at the end. I have a different desired outcome for you and have a little bit of different ideologies. So I definitely wanted to let you know what I use with my clients when I'm consulting them on their personal financings. And I think this is really great way to track your progress and make sure that you're going on from face to phase two. Phase The reason why I like to use the word phases because it's a distinct period or state in a series of events. Or it's also known as a process of change or development and that IHS really why was George work fees? And I think it's really important for us to pick these up because it is a development. It is something that you're gonna work on, and you're gonna get better at and move next one next one and every phase you move up. He's a phase where you've developed, you've become better with your money. And I really think that this is the path to financial freedom on also following this path as well, if you haven't been in any of my other classes. Hello. My name is Sabrina and Maria. I'm a certified financial education instructor. So I am certified and taught to help you learn by age illiteracy, which is something that is not taught in schools and something I'm incredibly passionate about because I feel like no one really gets chopped financial literacy. You get taught when you fail, and then you learn something from it. And that's great, cause, you know, we all have to learn from our failures. But, you know, money is serious thing. So I'd rather you not failing brother and me take all my failures and all my lessons and bring it to you so that you don't have the same mistakes that I did. And you don't get differed on your goals because you had to fail to learn something to improve. So I'm gonna give you all of the tips that I can on this scale share page. And today we're gonna be going through those eight days. Is 2. Phase 1: Start preparing for the future: Phase one is to start preparing for your future. So there's two parts as part one is that you're going to open up. Ah, high yield savings account. If you do not have a high savings account, definitely check out Ally Bank Discover those will have 1.6% interest. And if you have anything with cheese or TD bank or Bank of America, check with your interest rate is I'm sure it's probably around 0.1 which is what Chase has . I don't know. That's what I used to have from my savings account. But 0.1 toe 1.6 is going to be a huge difference as you start accumulating your savings. So definitely open that up. If you're doing it online, like Discover or Ally, which I both use then who do it within a matter of maybe 10 minutes. And within that first part, once you open that up, we're going to start saving one month of expenses Now, why one month? Why not 316? One year? We're going with one month because in the event that something happens, I want to make sure that you have one month of a cushion right now when I'm filming this and when this should be posted, We're still in the Corona virus outbreak time and things have happened to a lot of people. And for those of you that have had something happened, your job or something happen to your family. You know, you really need to have that cushion. So we're going to start with one month and we're gonna work our way to a larger emergency fund later. But I think having a cushion at first is more important than paying off debt because, like were, you know, experiencing now you know, you might need that one month cushion, So that is my top priority to make sure that you are prepared for any event in the future. The second part of Phase one is to set up a IRA or 41 cave to 5% of your income. Now, if you have a 41 K through employer where they're matching, then it's a lot easier for you to set up that 5% with your employer, and it's out of sight. Out of mind. However, if you don't have the opportunity to have it for one, keep your employer where they're matching and doing all those benefits. Then try to set up a Roth IRA. So do one over the other will work on expanding our retirement savings later in the phases , but I want you to have at least one of them that's contributing 5% of your income. And why is it so important? Because the best part about retirement savings is that you get to start so early and the compound interest and all of you know the time that you have until retirement is what's going to save us, one basically gonna guarantee, you know, an increase of your investment. So the key everyone says the key to retirement starting early. Now, yes, you might have debt, but this is so crucial that that's why I'm only setting. You took 5% but we need to start starting. Small is better than not starting at all 3. Phase 2: Improve your credit score: now face two is all about improving your credit score now. Eventually, we're going to pay off debt. But I am personally someone that doesn't think that is the worst thing possible. I think if you use it properly, you can get really good rewards and benefits and you really have the system. However, other people want you to just eliminate all of your debt. That's the next step. Just get rid of everything and cut up your cards and never have to deal with it again. That's not really what I'm striving to accomplish for myself, and I don't want you to accomplish. There are a lot of things that are required to look at your credit score, and I don't want you to not have a credit history. And this is so important. Improving your credit scores incredibly valuable because I work in the insurance industry and I worked specifically in personal lines. So I work on the insurance that you guys would be buying for your house, your car, your collections or jewelry or contents. Your excess liability you know, in case you get sued all these things, as in funder that works on it. Every single day is based on your credit score. I only work for one company, but I'm sure that other companies use the same. And I know that when you try to wrecked on apartment or you're trying to buy a house, your credit score and your credit history is so important. So I really want to make sure that we focus on improving the score first on. We may not be able to get rid of all the debt now because that takes a lot of work in a lot of determination, which I know you will have. But I want to make sure that our credit score is sound in case you do have to make a decision like maybe you're in extenuating circumstance where you need to get out of the place that you're in, because maybe it's unsafe. Maybe you need to go somewhere, and you need to have an adequate credit score to get an apartment. So this is why I really want face to be you improving your credit score and I'll go through how we're going to do that. So there's two parts of this one first part is we're gonna get your credit usage down to 25%. If you don't know what that would mean in terms of your credit utilization doesn't check out online Freecreditscore Place. I love using credit card. I think it's very easy using the app and the online on your computer website is really easy . So they'll tell you what your credit utilization is. It's the percentage of credit that using compared to the amount of credit that you have available So the golden rule is toe have it under 30% because that puts you in a different category the same way your credit score goes from, like, excellent, too good Teoh Okay, too bad or whatever. 30% is where you get into that really good spot. So not only were gonna go to 30 we're gonna go to 25 because I want to make sure you're in that threshold and that way that counts for the highest impact on your credit scores. We're gonna focus on improving that. So you're going to strive. You're gonna push until you get to that 25% and all you have to do is obviously taking all the credit that you have available and you're multiplying by 250.25 What about before? Now? To do this there multiple methods you can use. You can use the debt snowball method. You can use avalanche method debt. Snowball is basically you're focusing on paying off your debts from smallest amount to largest amount. This is the most psychologically motivated because, obviously, you know, looking at something that's $500 just look at something. $10,000 looks a little less intimidating, and we're going from smallest to largest. So once you pay off one that's maybe 500 the next 1 600 like, Oh, wow, I just did it 506 100 not to back just a little bit more, and its most the most psychologically motivating Dave Ramsey uses this. However, the avalanche method is different. The avalanche method is based on ordering your debts in terms of highest interest rate to lowest interest rate. This basically mathematically, would mean that you are paying less birth. This would mean that mathematically you are paying less Teoh your debts because if you contributed the same consistent amount and you attacked him with highest interest, you wouldn't be tacked on as much interest as you would if you did it any other way. It's mathematically you would pay off your debts quicker. However, this is under the assumption that you're consistently paying off debt that you're consistent with your debt payoff journey because your $10,000 debt versus your $500 debt might have the highest interested. So you might have to start with 10,000. And if you're not making that much of a chip, you might get discouraged. You might use your card again. You might, you know, you might not be strict on, you know, the contributions that you made toward towards the journey, so that might not be the fastest wife. This is obviously a bunch of other factors. How are mathematically? If you paid the consistent amount, you would pay less if you did. Avalanche. Now, my method that I personally used and I also used all my clients. I have paid off $15,000 in debt in one year, and my clients have paid off hundreds, almost thousands, off their debt using this method, and it's my personal method. It's a little bit of avalanche. It's a little bit of snowball, and it also takes your minimum payments into consideration, which I think is so important because if you're paying $200 to a card that's really putting a dent in thing the decision that you could make, maybe you don't have enough for your food. Or maybe you'll have enough for rent. My method takes all of these three factors the interest rate, the amount they're paying every month and the amount of the balance into consideration. However, the standard ways are snowballed tablets, so try those if you want. If you're interested in mind, you can check out my debt guide. And if you have any questions, just let me know. So, like I said, Part one is getting your credit utilization down to 25%. And then Part two is We're going to making consistent on time payments every single month, and we will not be closing any cards that we finish up paying off. Here's why, in terms of minimum payments, you might not be able to pay off the entire balance. I mean, that's what everyone tells you. Don't You should be paying off your balance every single month. That's a smart way. But we've made decisions probably some of you watching have debt and you made decisions, and now you're kind of like you dug a huge hole for yourself, and now you can only get by with the minimum payments, so that's fine. But we want to make sure that your payment history is great, so don't forget to make those payments. Now. If you're trying to attack one debt so hard that you're missing minimum payments on the other ones, that is definitely not beneficial. So make sure that you have enough to make minimum payments on all of them. And then any extra money goes to the deaths that you want to pay off in the order that you prefer. And also, once you pay off a debt, do not close down the car because that will severely impact your age with credit. Your age of credit is an average of all the cards and debts that you have. So let's say you opened up a car yesterday and you've had a card for five years. That's the only other cardio five year card, and then you just opened up a new one, so your average before you open up this new one. Yesterday was five years because you had five years of a 10 year with your first account, But then you opened up one yesterday. So now we're gonna take the average of five years on one day, and it's gonna drop which side you're seeing this, but it's gonna truck your average down significantly, and the same thing happens when you close down a car. So if you are, let's say you have the five year card and then you have a card that you've had for one year . As time goes on, your average will increase because obviously it's a year and a day, five years in a day, the average will increase over time. However, when you close out that Carly you've had for one year because maybe you're thinking, Oh, I paid it off for not using in our whatever you're keeping that number flat one year, it's not gonna increase over time. It's gonna drag down that average for a long time. Even if you have a card for 20 plus years, you're still gonna have that one that's dragging down the average, so don't want you to close down any cards because that will severely drop it down. But keep in mind that if you stop using the card, they will close it down if you don't use it. So what I do is maybe when I get the notification, or maybe every couple of months, use that card for maybe you buying, I don't know a piece of candy or something small, something that you would have thought anyway. And then you just pay it right back off and still remains active. That is, they have to get in your life that credit as long as they possibly can. Now, of course, there are circumstances where you might need to refinance student loan or something like that. And that's what I recently did. A couple of months ago, it severely dropped my score by about 20 points because I had closed my first longest. The new loan had paid it off, and I opened up a new one, so it's lowering down my averages. However, for me, that was a better decision because I could afford the monthly payments. There's a little bit more comfortable in my budget, so I made a decision. Personally. It was a lower interest rate, but it liked it. However, just keep that in mind 4. Phase 3: Have a sustainable emergency fund: So now we're on to face three, which is to have a sustainable emergency fund. You already opened up an emergency fund. So you already that that started without one month in phase one. And you already have a pretty decent credit scores. If you need to do something like rent an apartment, are you? Get a car, you need Teoh. That's all set up for you. But now we're gonna go back. We're gonna stop on the debt. We're gonna go back to the emergency fund and make sure that it's sustainable. So there's two parts of this work. We are going to set aside a 10% off our income to be automatically transferred to your emergency fund. Now, in phase one, you already had a emergency fund set up with the high interest savings. Now, we're just gonna make sure we have 10% automatically going to it from our income. You do this to your employer, they let you have multiple payment elections on your paycheck or as soon as you get the money and you put 10% away into your emergency fund. But make sure that these air automatic that waits out of sight. out of mind. Now, the second part of this is you're going to do this until you have three months of expenses . Any extra money that you were paying towards debt to get to that 25% that's gonna go over to your emergency fund. We want to make sure that we're ramping it up to three months of expenses as soon as we possibly can. That way, this is more sustainable for you in the long term. Now, after face three, you're still gonna have 10% going to your emergency. But we're not getting rid of that. However, the extra money that you find, the extra money that you get from side gigs and whatever is that. That's what's adjusted. But you have to have 10% starting now, and we will not be getting rid of that 10% 5. Phase 4: Attack debt: So, Faith four is now. We're gonna go away from putting all of our extra money market fund and we're going back to attacking debt. So you already have your debt at under 25%. But we're going to attack it and get at 20 now, Like I said, that you were not getting rid of the 10% that is going towards your emergency fund that is in place in your budget forever and maybe later You want to increase it, but we're keeping it at 10. We're not removing the 10 so every extra penny that you have besides, over that 10% is going to death. Now all of this includes everything besides your mortgage. So this includes credit cards. It's include student loans were doing everything of besides your mortgage. 6. Phase 5: Ramp up savings: now, once you have to face five, you've done incredibly well. At this point, you have three months of expenses being your savings account. Your debt is basically gone besides the mortgage, So now we're gonna ramp up the savings again. We're going back to saving. So I like to go back and forth because you don't want to exclude paying off debt. And you don't want to exclude, you know, beefing up your savings account. They're both equally important. So that's where we're going back and forth and small increments. But now the debt's paid off. We're gonna bring up this 80 part one of this is bring a set. Are 41 K or Roth IRA. Whichever type of retirement account that you set up Phase one, we're going to go from 5% of our income to 10%. So here's where we really ramp up. Here's where your retirement is secured and you're gonna live the life that you want to live. So ramp that up from 5 to 10% now. The second part of this is we're gonna have savings accounts for the personal goals to one achieve in our life. So whether it's a new car. These bigger purchases, a new car, maybe getting braces, maybe going on a trip that would cause, you know, it's not just going upstate New York or somewhere and then coming back down, but not a small camp. Egypt. We're talking about the big trips, things you've always wanted to do. Your debt is paid off. Besides your mortgage, you have three months of expenses. This is where we're starting to live a little. We're starting to make savings for the things that we want to have. Like, because I don't want you to think that you're not allowed to live your life. You know, we're trying to live the best life we can the most responsible way. So this is we're gonna think of everything you want, and you're gonna create savings accounts for those things, whether you want to have automatic transfers, which I love toe have so that you contribute towards those goals. Feel how you want to do it, whatever works in your budget and make sure you do have a budget because that's so important. Now keep in mind the things I mentioned are larger goals were a phase five right now, which means probably a lot of time, has a lab since we started this journey. I don't want you to think that you have to wait until face five to enjoy your life. These are just more for the larger big ticket items throughout. Phase 1234 Threat your life. If you have something, you to 10 perhaps a wedding. Perhaps your friends getting married and you're going to his or her bachelor or bachelorette party. And that is something that's happening in June. You can't miss A You know, these are things you want to live your life, those air things you'll have individual sinking funds for I don't feel like you have to wait till base five. Teoh agreed. Anything? You know, I want you to live your life. I know that it's gonna be a process. I don't mind if my clients live their life. You know, you never know what days in your last. I don't want you to just think about money and paying off debt and not get to enjoy yourself. So I just want to clarify face five when you're saving our for large goals, things that you didn't need but Now you have the space to do it. If there are things that you want throughout your life that are a little bit smaller, maybe you want to save $300 to go on a weekend trip. And that's something that you're going with all your friends, and they're setting up something fun and you don't wanna miss India's. They're only doing this wants your friends are here from another country, families here from other country. Whatever the case is, it's OK to have these smaller goals as long as you have a plan for them. So you're budgeting for them in your budget and you're doing a sinking fund, meaning that you are contributing slowly to those goals. You're not just blindly using your card to use. These things were not going into debt any further, but as long as you save incrementally towards those goals, you're welcome to happen throughout the process. But figures five is specifically those bigger things that you weren't able to do earlier 7. Phase 6: Finish off your debt: no face. Six. You've already contributed. A big old Your emergency fund is sustainable at this point. It at least three months of expenses because we've had 10% going in there since phase three . Your debt is basically gone, except for the mortgage. Which is why this space Hey, six, we are attacking the mortgage. Now, this might take a longer period of time, but don't get discouraged. Your life is pretty much sense point financially. You have everything all set up, everything. Action now is going to the mortgage that you can make sure that you are completely debt free in the next step. 8. Phase 7: Secure your retirement: So now Phase seven. So excited you have paid off your home. At this point, everything's paid off. You are all set, your savings air good. And now we're going toe beef up at secure retirement even further so that you can live the life that you want with no stress and everything all set up for you. Now, this is what you're also going to do if you don't already have a rough IRA and you were having a 41 K for 10%. Then I want you add in also a Roth IRA for 5%. So now if you have a 41 can't rule Europe 15% total. You know the tempers and you're contributing to your four K and 5% IRA. If you already had one you never had for a one K should already be a 10% on your rock. But we went to push that up to 15%. So now your retirement is at 15% and your regular emergency funds savings is at 10. The reason why I have both is because I like to diversify a little bit. And with my 41 k it's managed through my employer and I, my employer has someone that's managing it for me, creating all those things, the world where you can create yourself. I have mine on Ally. I already had one because I just opened it up a while ago. But I can have Ally manage it for me or I could do it myself. So this is what provides a little more flexibility for you now is part of face seven. You have to have an idea where you want your retirement to be. You could definitely try Chris Holden's retirement calculator. Or I think Nerdwallet has retirement catheter. Definitely check it out and see where you think your retirement accounts should be at. Everyone says different things. So when I did the Chris Hogan won, it said I needed 4.6 million in my retirement because I clicked. I went through the quiz and I said, I want to travel because that's something I'd love to do And they said I needed 4.6 million . However, when I did the Nerdwallet calculator, it said I needed 70% of my pre retirement income and they were estimating about 2.4 million . So obviously That's a huge discrepancy, so kind of figure out what makes your retirement most comfortable for the life that you want to live. And that way you'll know kind of if you're on the right track in face seven, because it really depends on your life. There are people that once they retire, they want travel world there people like my grandparent's that just like staying home and cooking for the family and making sure they have enough money to give Christmas gifts. So it really depends on the life you want to live. So I definitely suggest checking out one of those to calculators and just putting that in line of faith 17 if you're in the right spot to the left that you want to live. 9. Phase 8: Invest as you please: now Phase eight. So everything is also cure. You're all set up. Your retirement set up. You are cruising. Faizi is probably gonna take so long to get to this point. These obviously we have a bunch of obstacles in the way life gets in the way. But once you get here, you are absolutely golden. Everything is set up for you. You are all set. But here is where you get to invest as you please. So whether you want to invest in this someone's company are maybe you want to get into real estate and you have all this extra money. You have your investments and you want to invest in real estate. Maybe want about commercial residential. You want to start renting things out. This is where you invest as you please. You relax. You do what you want and you just live the life that you want. That makes me so happy. That you can get to this point in your life Is that that's the life that you want to live. If you want to live the life where you don't have fear of, you'll have fear not having enough. If something were to happen you don't have the fear of not living the life you want to live when you can when you retire And some people like to retire early, so face seven might be you might be part of the fire community, the financial independence retire early movement, work. You want to retire at age 30 40. So face seven is very particular because it depends on when you want to retire. How you gonna retire? So base Evans. A little tricky because you have to decide what you want. But phase is that's all done. You live the life you want to live. 10. Conclusion and Project: that is it for all of my phases. If you're also interested in personal finance motivation Daily, definitely check out my INSTAGRAM account financially free. I'll leave it in the description below. I post there every day, and this is where he'll see more of me more off. You know that finance contact that finance motivation and you'll follow me along my debt free journey as well. If you wash a few of my courses, you maybe have an idea of the type of personality and who I am. And maybe if you're watching this and you know me from outside of skill share or YouTube, you wouldn't know that this is something that I'm incredibly passionate about. I always have the inkling to help people. That's just the type of person I am. If you check my any a gram or if you check my I don't know those like Personality test. This is really what I love to do, and I just I feel most myself when I'm helping others because that's just the way I am and especially with personal finance, that it's something that I'm very interested in, and I really think I could lend a hand with people. So if you want to let anyone know about you know either this skill share page or my YouTube channel or my instagram page or someone you know might need a personal finance consultation , then definitely prefer them over to me, I would really appreciate. I really want help people now for the project. What you're going to do is evaluate your debt and your savings. Where you out with your debt? How much did you have credit cards? How much did you have in separate loans? Haven't debt do you have in student loans? How much debt do you have left in your mortgage? Those numbers are really important because there's no way to see your progress if you don't have a starting point. And no one's starting point as bad. The fact that you have a certain point is your way, how to people that don't even want to look at their debt and don't want to think about it. So, having a starting point for that as well as how much having savings is crucial, and then you're going to determine what phase are you on? If you already have your retirement account set up and you already have one month worth of expenses and your savings account. You're all set your on to phase two. Keep checking and see how you progress over time. Like a said, no phases. Wrong. No starting point is wrong. You joining this course and you writing down where you're at is is just I'm so proud of you for doing that because it takes a lot to come to the truth and decide that you want to change your life. So no face is wrong. You know, we're on a path. We're on a journey. I always like to say strive for progress, not perfection. That is my favorite cool of all time. And that's what gets me going. I used to have severe anxiety. You know, I really have helped manage over the years, and any of you feel the same way. You feel the anxiety because you feel like you're doing something wrong or you're not perfect. And you really have to get past that point and realize you're striving for progress. You're striving to be better. You with every little decision that you make every day, a month, every year. So that is the project is figure out where you are and that way you know where you're going to be down the line. Now, of course, these are all really personal. So if you don't want to share what phaser at truly understand, this is your journey is my journey. It's completely yours. So feel free to upload. Maybe just a sheet of paper write down. You know where you're at phases You have any questions? Feel free to put them a project and I definitely you know, not critique but give you some of my advice on where I think you could strive to accomplish and where I think you could succeed. So it doesn't feel free. But of course, no need your journey. And I wish you all the best. And I hope you have a wonderful day. And if we're still in the time of coronavirus, when you're seeing this, I hope you're hemlines are healthy and safe. And make sure that you are always striving for progress, not perfection.