How Millennials Can Move Towards Financial Freedom in 5 Easy Steps

Are you satisfied with your financial situation?

Chances are that you wouldn’t be reading this post if you were. The typical millennial has student debt, car payments, and through the roof rent. It seems like everyone I know is buried in bills and has trouble making ends meet.

My situation wasn’t much different than the one described above until I read the best book of all time (in my opinion), The Richest Man in Babylon by George S. Clason. Within the span of this small book, so many important financial lessons are taught through narratives. The author lists “Five Laws of Gold” that all people should observe. First hand experience and the lessons I’ve learned from those in my life have proven each law to be true.

If you can follow a recipe, you can follow these steps. With the advice of this book and a teacher’s salary, I’ve gone from a negative net worth in the tens of thousands of dollars to a six figure net worth in under five years. By no stretch of the imagination am I financially free, but my life trajectory has been transformed by these 5 simple lessons.

I. Save at Least 10% of What You Earn.

“Gold cometh gladly and in increasing quantity to any man who will put by no less than one-tenth of his earnings to create an estate for his future and that of his family.”

Regardless of how much money you get in your paycheck, it never seems like enough to start saving. As many Americans do, my friend Mikey and his fiancee were living paycheck-to-paycheck. They wanted to buy a house and save for a wedding, but every penny was being spent on bills or other necessities. Whenever I see people in this situation, I always recommend that they read The Richest Man in Babylon.

Although 10% doesn’t seem like a lot of money, it adds up to something very quickly if you stay persistent. After Mikey read the book, he opened a joint savings account with his fiancee. They each agreed to put 10% of their checks into this account. Since starting this practice, I’m happy to say that they have saved up enough money for a down payment on a house.

Do whatever you have to do in order to begin saving 10% of each paycheck. This can be accomplished with minimal lifestyle changes. If you pay yourself first, you will begin to see your finances trend in the right direction. The best part is that once you’ve built this habit, it will become easier and easier to do. Think about all there is to gain from such a small sacrifice.

II. Invest Your Savings.

“Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.”

Once you’ve accumulated a significant amount of savings, it’s time to begin investing. While you might be able to stash a decent amount of cash away by saving, real wealth is built through compound interest. In order to reap the benefits of compound interest, you need to invest your money into asset classes that provide significant returns. Here are some examples of how you can begin investing.

1. Retirement Accounts

2. Real Estate

3. Index Funds

4. Start a Business

There are probably far more ways to invest than those listed above. I’ve omitted elaboration on any of the given examples because some people are more risk averse than others. If you want to begin investing, do your research. You can find plenty of free information online and books on these topics as well. Part of investing is taking the time to learn about your options, don’t skip this step!

III. Ask Mentors for Investing Advice.

“Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.”

Aside from retirement accounts, my first major investment was my home. Anyone who has read Rich Dad Poor Dad will argue that a home is not an investment, something I generally agree with. In this instance, however, I intended to buy a fixer-upper, live in it while making improvements, then for a profit (which I did later). Since I’d never purchased a home before, I did a bunch of research myself. Then, when the time came to buy, I asked for a second opinion.

After over a month of searching, I’d found the perfect property. It was in a nice town with great schools (always good for when you go to sell) and the property’s flaws were mostly cosmetic, so no need for major repairs. Before pulling the trigger, I asked my uncle who is a real estate developer to take a look at the house. When he started getting excited about it and ran some numbers, I knew it was a great buy. Despite doing my research, the second opinion made it far easier to pull the trigger because I’d consulted an expert in the field.

For those looking to make any significant investment, it is imperative that you ask for advice. Not everyone conveniently has an uncle in real estate--this should not deter you. Without my uncle, I still had a plan to receive excellent advice. I’d selected a real estate agent with market specific knowledge and previous experience with live-in flips. I didn’t know him before the home buying process, but by choosing my agent carefully, I was able to increase my odds of success.

This can be replicated by anyone willing to do some research. Using your connections, you can probably identify a relative, boss, friend of a friend with a proven track record of success and a willingness to help. Make sure you have this person in your sphere before making a big investment so that trust is established prior. Then, pull the trigger!

IV. Understand What You’re Investing In.

“Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.”

Let’s say you wanted to get into shape before the Summer. Would you ask your fat friend for workout advice?

Probably not. The same basic concept is true for wealth building. Ask competent people with proven track records for advice, not people with little to know experience (including yourself).

My first entrepreneurial venture was what I envisioned would one day become “LinkedIn for Teachers.” Problem: I wanted to create a complex social media website without knowing how to code. Solution: I spent $10,000 outsourcing this job to a coder in India. Nothing could possibly go wrong, could it?

Everything started off great and the website was well under way. Towards the completion of more complex modules, I began noticing tons of flaws in the product. I also hated the coder I was working with. In the end the website was a mess, I couldn’t acquire a user base, and I lost all my money. All of this could’ve been prevented with sound advice from someone who knew anything about tech...or anyone with half a brain, really.

Had I asked someone with business experience for advice, they would’ve first suggested finding proof of concept. Instead of dropping $10,000 on a website, I could’ve spent $10 for a domain name and creating a landing page to gauge interest. Although this was a dreadful experience, it was a great lesson in having competent people around me.

V. If it Sounds too Good to be True, then it Probably is.

“Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.”

The media loves stories about people who acquired vast amounts of wealth at a young age. Mark Zuckerberg and Kylie Jenner are two examples that come to mind. These people are the exception, not the rule. When starting out on the path to financial freedom, most people want to take shortcuts. News flash: true wealth building takes time.

Someone I know is eternally seeking fame and fortune. She’s drawn to the allure of striking it big on what I would call get rich quick schemes. Whether it’s day trading, cryptocurrency, or land speculation, she’s always swinging for the fences. Some might say that with enough at bats she will get rich, that’s certainly possible. So is winning the lottery. What’s more likely is that these high risk situations will not pan out in her favor.

Did you know that Warren Buffett didn’t become a billionaire until he was in his 50s?

It might come as a surprise to you that he didn’t obtain his wealth overnight. It took time and compound interest to build his fortune. This concept reminds me of the book The Millionaire Next Door by Thomas J. Stanley and William D. Danko. One of the main takeaways I had from this book is that most millionaires build wealth over decades. If we seek financial freedom, most of us will need to follow this model. Within this path, there are ways to accelerate wealth, but the point remains that Rome wasn’t built in a day.

Final Thoughts

If you adhere to the “Five Laws of Gold,” you will see your life greatly improve. The sooner you start this process, the sooner you will be heading towards financial freedom. Let me know your stories on this topic and how these laws are working for you!