The ultimate guide to financial freedom

In this guide, I will show you the steps you have to take to reach financial freedom.

What would you do if you didn’t need any money at all? Would you look for another job? Stay at home with your children? Take care of your parents? You can do anything you want if you don’t need a job for your income. This sounds like a dream that can never happen in your life. But if you start building a passive income, you can actually realize this dream eventually.

The steps:

To reach financial freedom, you need to change the way you think about money. You can do this in number of steps. It does take a while, but it’s totally worth it!

  1. Make a list of your expenses, your income and your debt.
  2. Save money
  3. Make money
  4. Build an emergency fund of € 1,000
  5. Pay off all debt (besides your mortgage)
  6. Build an emergency fund of 6 months worth of expenses
  7. Build up a passive income / pay off your mortgage

Step 1:  Make a list

You need to be aware of what comes in and what goes out in order to get out of your problems. You can make a list using google sheets and put everything on it. The easiest is to calculate everything to monthly numbers. If you have payments that have to be made quarterly or yearly, calculate it to the costs per month to have a complete overview. While you go through the next steps, you should keep this list updated to always know where you stand and to see how the changes you made affect your expenses and income.

Also make a list of all your debt, starting with the debt with the highest interest rate.

Step 2: Save money

There are lots of ways to save money. When you want something, you should really think about it before buying. Do you need it? No? Then don’t buy it! If you can teach yourself to always take a week to decide about a purchase, you will stop impulsive buying, which saves lots of money. To help you do this, you can start a buy nothing challenge like I did. This makes you aware of your spending and makes you think about your purchases instead of buying something and regret it later.

Household expenses

Always look for cheaper options for all of your household expenses, like energy, healthcare, insurances, your house and your car. Even if you can save only a few euros which doesn’t sound like a lot, every euro saved means less stress at the end of the month and paying off debt sooner.

Car(s): do you really need one or more cars? Maybe you can trade your big car for a smaller one that uses way less gas. Have you checked your car insurance? Are there cheaper options?

House: While moving isn’t cheap, it could potentially save a lot of money. A smaller house usually means a lower energy bill and less maintenance costs. Living closer to your work could mean you can sell your car or at least use it way less. This can save lots of money.

Groceries

Check what’s at sale and plan your meals around that. Also go to different stores for the best price. Of course don’t spend much on gas for going further, because then you don’t save anything and might even make it more expensive.

For example: we live in a little town with 1 small supermarket where the prices are higher. If we just need a few things, we get it here, because it costs us about 3 euros of gas to go to the next town with bigger and cheaper supermarkets.

Clothes

Do you really need another pair of jeans / sweater / dress / t-shirt / pair of shoes? Go through your closet and look what you already have. You can also look for second hand clothes on Facebook marketplace for example.

Toys

Children don’t need tons of toys. They love to play with stuff that isn’t even a real toy. Like cardboard boxes or pots and pans. You can also look for second hand toys, it doesn’t have to be new. My two boys play a lot with cars, but not all cars survive their play. Because of that, I prefer cheaper toys so I don’t really mind if somethings breaks once in a while. We have lots of toys that were only 50 cents or a euro.

This article is about things to do when there is nothing to do, like in a plane or a car. But the list can also be used to play at home without the need for toys.

And this article lists 100 free or cheap things to do with your kids.

Daytrips

Going out with your family doesn’t have to be expensive. There are so much things to do, like go to the beach, the woods, play and have a picnic in the park or go to a playground in the neighborhood. Maybe you can make a quiz to search for signs, buildings or special objects around town and then let the other family members take the quiz.

Bills

Pay your bills in time. This way you don’t have to pay additional fees for paying too late or the costs for a collection agency.

Cancel memberships

If you have memberships you don’t use, like for the gym, cancel it. A gym membership costs easily about € 30 per month, this means that you are trowing away € 360 a year! Memberships tend to be automatically extended, and usually can only be cancelled monthly or annually. But even though the subscription runs for the remainder of this year, cancel it now for next year so you can’t forget to do it.

Step 3: Make money

You can make money in lots of ways, for example:

Find another job

If you have a low paying job, you could look for a job that pays more. But make sure it’s a job you love, because otherwise it only leads to more stress and make you unhappy, which we are trying to get rid of. If your dream job doesn’t pay much, just look for other options to make money.

Sell stuff

Go through your stuff and think about what you don’t use anymore. You can sell anything on Facebook marketplace or on other websites for second hand items. Do you still need the books you’ve read? Do you still wear all of your clothes? Are there toys that no one ever plays with? And how about bigger things, like a boat or a trailer you never use which sells for enough money to pay off a high interest debt?

Side hustles

There are lots of side hustles you can do, like walking dogs, babysitting, build websites, give online courses, help people with maintenance on their home or car. Whatever suits you.

Find more ideas here.

Rent out a room

If you’ve got a spare room in your house, you can rent it out using Airbnb. It’s a pretty way to make extra money and you meet lots of new people from all over the world. If you can rent your place out a lot, it might even cover your rent or mortgage costs! If you intend to do this, be aware that it might not always be legal to do, rules differ from country to country. Also check your mortgage terms.

Step 4: Build an emergency fund of € 1,000

When you are working on step 2 and 3, the difference between your income and expenses should go up in a positive way. The difference can be put on a savings account (preferably with a high interest rate, but that’s not easy nowadays). Build this up to € 1,000 for now to be able to overcome unexpected events. When the car breaks down and the repair costs you € 500, you can use this fund to save yourself from going into debt. Always fill your fund afterwards back to € 1,000.

Note: This money is not for your new Iphone or other shiny new toys you want to buy, this is only in case of emergency, for things that really cannot wait.

Once you have your emergency fund in place, you can start to pay off your debt.

Step 5: Pay off all debt (besides your mortgage)


In step 1, you made a list of your debt, starting with the ones with the highest interest rates. The debt at the top of the list is costing you the most, so we need to get rid of that one as soon as possible. Pay as much as you can each month. Every time you have paid off a single debt, you can add that payment to the next debt on the list and you can pay off the remaining of your debt faster and faster.

When you’ve got a lot of debt, this step takes a lot of time, but it’s definitely worth it! You’re on your way to a life without stress about money.

Step 6: Build an emergency fund to cover 6 months of your expenses

Now that you are free of debt beside your mortgage, you can build up your emergency fund further. The little fund of € 1,000 is very nice for unexpected events, but when you lose your job or other really big things happen, you probably need more than that. If you build up a fund to cover 6 months of your expenses, you don’t have to worry if you lose your job, because you can keep paying all the bills for 6 months. This gives you plenty of time to find a new job or make other changes to your life to fix the problems.

Step 7: Build up a passive income / pay off your mortgage

When you have gone through step 1 to 6, you can live without stress and are really set for a life where you never have to worry about money again. To be able to have options in your life, like work less to take care of the children or change to a job you love, but doesn’t cover the bills, you want to build up a passive income. If you build up a passive income that matches your expenses, you can call yourself Financially Independent!

There are many ways to start a passive income:

  • In America you have things like Roth IRA (individual retirement account). Since I’m from the Netherlands and we don’t have that, I can’t tell you anything about that. You can find lots of information about that online.
  • You can invest in peer-to-peer lending, which is what I’m doing. It comes with risk, as all investments do, but I really like this form of investing.
  • Another option is to invest in bonds and stocks. I don’t have experience with those yet, so I can’t give you advice in that area at the moment. When I dive on those, I will write a blog post about it and link it here.
  • Yet another option is to buy real estate and rent it out. This can be an apartment or a house in a city, but it can also be a holiday home. You can even use the last one yourself to save costs on your own vacation.

It’s all up to you how you want to invest. Just make sure to investigate your options and choose what feels good for you. And always fill up your emergency fund first, before putting more money into investments.

Remember: Only invest money you can afford to lose!

If you want to pay off your mortgage is up to you. Our own mortgage has a really low interest rate and that’s why we don’t pay it off early. We can make way more money by investing the money instead of putting it in our house. On the other hand, reducing your mortgage debt is a risk free investment which is also worth something. Always seek professional financial advise if you consider involving your mortgage (remember, I’m just a mom, no financial advisor, and what is good for my situation might not be the best in yours).