Gaining Financial Freedom – Ep. 2 | Live Life on Your Own Terms Series

Hi everyone!
Welcome back to our Live Life
on Your Own Terms series. We’re actually in Park City,
Kentucky right now. We’re just outside of Mammoth Cave National Park
at the Diamond RV Resort… …which is part of Thousand Trails.
We’ve got some pretty cool neighbors
here. It’s a really great day. It’s warm. We had to turn
the A/C off. We always have to make sure the A/C and
the fans are off when we’re filming. So if we start sweating,
I apologize. This is episode 2 of: Life
on Your Own Terms. Today, we’re going to talk about
gaining financial freedom, what does that mean and what are the
steps that you can take to get there. I’ll let Joe rehash the homework assignment that
we gave you guys last week and address that… …before we move into talking
about financial freedom. At the end of last week’s episode,
which I’ll link up here, we gave you a homework
assignment. That was to list out all of the things
you love to do, some of the things you don’t like
about your life. For us, that was working
for someone else. In the third column,
we had you start writing down some reasons as
to why you couldn’t live the life that you want. I think when we talk to people and they tell us “we
wish we could do that” and we say “you can”, the number one reason we always
get is “because we have children”. We completely understand that
that is a very valid reason as to… …why you might not be able to
live out of a motor-home. But,
one thing we’ve learned is that if there is
something you really want to do, you’ll figure out how to get over those
types of obstacles and do it. A perfect example is…
…there are a lot of RVers on the road
today with their whole family. They’ve got multiple kids, dogs,
everything in RVs our size. So the size of the RV doesn’t
limit what they can do… …and a lot of them
road-school. They’ll do it part-time so they’ll
take off entire summers… …take their kids around the country
or just do it for a semester. This is something they really wanted
to do, so they found a way to do it. We’ve also met people who are
still in the planning phase. Their kids may be in elementary,
junior high… What they’ve done is plan that by the time
their children are out of the house… …and off to college or whatever
they happen to be doing, they’ll be hitting the road. So they’ve given
themselves a runway of 5 to 10 years, let’s say, and said “in these 5 to 10 years,
here is what we want to do…” “…here is the plan and how we’re
going to make it happen”. And that’s kind of
what we did. We planned for about five years
to get on the road, and it took a lot of work, and we don’t have kids, so
that was one less obstacle for us to get past. But,
It was a lot of planning and financial
freedom was a big part of it. The second reason we get is people
will say “I can’t leave my job”. “I need my income, I have bills
to pay and everything else.” That kind of dovetails into our discussion
today about financial freedom. Financial freedom is the ability to
live your life however you want it… …because you’ve paid off your debts and
you’re not a slave to your job anymore. The first step of being financially
free is paying off your debt. First and foremost is any
unnecessary debt. Car loans or credit cards, those
really weigh you down. In order to be financially free, you need to
eliminate that debt from your life… …so that you’re no longer
a slave to your job. Because every month, those bills come due
and you have to pay them. So if those bills are gone, a lot more
of that money stays in your pocket… …and you can put it into savings and eventually
live the life you want to live… …because the money you’re earning is going
back to you. You’re investing in yourself. So how do you actually gain
financial freedom? I’m going to talk about the steps that we took
to get there. Hopefully that will help you… …be able to reach financial
freedom as well. The very first step, and
really important step, is being able to get a holistic picture
of your current financial situation. What that means is taking out a piece
of paper and a pen and writing down… …all the money that you have coming in, your job,
or multiple jobs, any investments that you have. Make a list of
all of that. Separately, make another list of
all the money that’s going out. Everything you’re spending money on from gas,
to groceries, to entertainment, travel… I’ll link to our latest
expenses report. You can see how we’re
breaking things down. We kind of bucket
certain items. You need to make sure that…
…you account for every penny that comes in and also every penny that goes out. If you give someone $10, that needs
to get written down somewhere. In another column, write down
all the debt you have. If you don’t have any
debt, that’s great. But if you do, make sure to include all your credit
card debt, school loans, car loan, mortgage. Then separately, make a list of
all the savings that you have. So if you have a
401k, an IRA, maybe a savings account or multiple savings
accounts where you’re putting money, write that out separately so you have a good idea
of what your savings look like right now. And it’s not just savings, look at any investment
accounts you have, money that is put into… …a company or other thing that is somehow
going to earn you a return. But it’s good to note which
of those assets is liquid, meaning you can run to the bank
and withdraw it all right away, and which are you not able to touch
without penalty until you’re retired. [A/C humming]
Sorry for the background
noise. We had to turn on the A/C. It’s
getting really hot in here. It’s either the hiss
or Leo panting. And I think you guys would
all prefer the A/C hiss. Now that you have an overview of what
your current financial situation is, it’s time to really focus on
budgeting and saving. In looking at your
financial picture, if the money coming in is greater
than the money going out… …then I would say you’re
in a pretty good spot. It’s very easy to take that extra
money that’s coming in… …and put it all towards your
debt and paying that off. However, if you’re finding that the money coming
in is less than the money going out, we really need to focus on what that extra money
is going to and how to cut that down. So as an example,
if at the end of this exercise you realize that your
household has $3000 coming in after taxes… …but you’re spending
$3500 a month, that means you’re spending an extra $500 going
into further debt and we have a big problem. Look at all the money that’s going out and figure
out what you can eliminate from that. If you’re going out after work to happy
hour and buying rounds all the time, you need to
cut that out. Figure out how much that can
save you every month… …to get you closer to being able
to spend less every month… …and have extra money to put towards
your debt and paying that off. Being able to itemize every penny that’s
going out is going to be very beneficial. And be honest. If you have a
household of three or two, you have to be really honest with each other
about where that money is going. And this isn’t a
one-time thing. You’ll need to come up with your budget, but
you’ll have to reconcile that every month. That means if you’re
using credit cards, going through your credit card bill and looking
at the all the money you spend… …and being able to break that
down into different buckets. But if you’re spending
cash, you better keep a list of where that money’s
going and how you’re spending it. You really need to be able to break those
chains from your debt and get free. There are so many little things and tweaks
that you can make in your life… …to cut down on the amount of money that you’re
spending, but still be able to enjoy those things. When we evaluated how much money
we were spending at restaurants, we realized that we could go out, buy fresh organic
food, make it at home and still be spending less… …so that we were saving
more money. You really have to change your frame
of mind and be a smart spender. Price checking when you’re at the grocery aisle,
buying stuff on sale, don’t go out to eat at restaurants, ordering
stuff to go instead of dining in… …using gas money to figure out the cheapest
gas price in your area, taking advantage of early
bird specials or… …if you know something is going to go on sale and
you don’t need it right away, wait to buy it. Certain things are good to buy in bulk and
taking advantage of that cost savings. Every little bit counts. We do go to Starbucks quite a bit and we have
a Starbucks app on our phone… …where we build points and
we get free coffee refills. Those add up. Imagine if
you drink a lot of coffee, you might as well make it work for you
and start earning points… …but making sure that you don’t get out of control
going to Starbucks all the time. That works for credit cards
as well. We put everything we buy on a credit card, but
we have credit cards that earn us cash back… …so at the end of the year, we’re getting 2% to 3%
back on everything we spend money on. Now 2% to 3% doesn’t sound like a lot, but if
you consider a year’s worth of spending, that does add up to a nice check that we get
and it’s money back in our pockets. And the one thing we do is pay that bill
in full every month regardless. We don’t overspend and if we have a big purchase,
then we need to take that money… …out of savings and pay the bill down so we’re not
blowing money on that interest payment. I think the important thing
about budgeting is… …keeping that in mind whenever you’re out
and you’re spending money, don’t forget that you have a budget
and you have a goal. The goal is to pay off all your debt
and start putting money aside… …so that you can gain financial freedom and
be able to live the life that you want. So now that you’ve got
your budget, we can sort of transition into the next step,
which is all about paying off your debt. – What?
– Joe’s out of coffee. We might have to stop and
make him another pot. [both laugh]
You should have a pretty good idea of how much money
you can save and put towards paying off your debt. That’s what the third step
is all about. The best way we found to pay down
your debt is to look at that list… …and order everything by which one
has the highest percentage. I’m assuming that a lot of your credit cards
are going to be 18-20%. That’s stuff you’re paying every month.
That money is just vanishing into thin air. Take that payment, let’s say it $100 a month. Add
the $400 you saved because of your budget. You’re now paying
$500 a month. And as you make more money or you’re able to
save more, put that towards your credit card. Start getting that
paid down. Once that’s paid down, take that $500
and apply it to the next thing. You’ll be surprised at how quickly
you can pay this stuff off. That even includes
your mortgage. Once you have this big ball of money rolling down
and knocking down all of your debt, you can start applying it to
your mortgage as well. You’ll be paying down tons of
principal month after month. One example of paying off debt
is a student loan that I had. I actually attended law school for a semester.
I decided it wasn’t for me. That semester, I ended up with almost
$11,000 of student loan debt. I got a job, luckily, after I left law school
and it paid I think $34,000 a year. So I was making $34,000 a year,
I had an $11,000 student loan. My entire focus was to pay off that student loan
and I was able to do it within six months. It’s doable because that was
my entire goal. And I was still able to
live a good life. Granted, I was living at home, but I knew
my goal was to pay off that debt. So I held off on getting
an apartment… …and then the minute I paid it off, I was able to
get an apartment for myself. – It’s all about priorities.
– And you also had a car payment at the time. You were paying down your car
and everything else. All of this advice is coming from actual experience.
Before I met Kait, I had credit card debt. When we met, she was actually considering
not dating me because of the debt I had. I had school loans, I had car payments,
I had an apartment. All this money was
going out. Together, we really figured out how to pay
these things off as quickly as we could. I think we both had a sort of
different mindset. I grew up with “you don’t spend money that
you don’t have”. That’s how I grew up. And never did I ever imagine that I would take out
a loan, or that I would have credit card debt. Now, going to law school,
I saw as an investment… …so I took out the student loan with the intention
of paying it off once I graduated. And I came from a mindset of “hey,
I want that new big screen TV,” “so I’ll put it on my credit card
and pay it off as I can.” Now for us, credit card debt
is almost a 4-letter word. There are people that if you have a
credit card and you can’t help… …but break it out every time
and start spending money… …and you’re not able to track that
and pay it of every month, you’re the type of person that needs to
get rid of any kind of credit card. For us, the credit cards we have,
those bills are paid in full… …every single month
without exception. Once you’re done paying off all of your debt
it’s time to save money. And that’s the
next step. To really put all the money that you’re putting
towards your debt into your savings. That can mean a variety of things:
looking for possible investments… …to have passive income, to putting it in a CD,
or just in a savings account. But really, doing
some research and figuring out how you want to allocate
that money into your savings… …and really investing
in yourself. It’s easy to say once you’re done
paying off all your debt… …to have this extra money left over and
start spending it on stuff again. But really focus on putting that money into your savings
will help you stay ahead of the game. One example is when we got done with debt
and we were planning this trip, for those five years or so, we had a house
and we were paying the mortgage down… …but we didn’t take all that money and
start applying it into our mortgage. We started applying it
to our savings… …because our plan was to work for
ourselves and get on the road. We felt in order to do this we needed
as much money saved as possible. And we wanted to have at least
a year’s emergency fund. We start planning for that, and when you start
saving, come up with a plan as to… …what you want to do with that money.
Is it save it for retirement? Or is it save it for some adventure
you want to take in five years? Really come up with “what am I doing this for?”
and “what am I putting it towards?” To be clear, saving money isn’t about stashing it
away in a mattress for when you’re 65, which is totally fine, but it’s putting it
towards what you want. To be able to live the life
that you want. One thing you’ll need to do is to continue to
reevaluate your budget as you go. Always take a look at what
you’re doing and say: “does this budget still make sense
for me and my family?” A lot of times you’ll look at it
and say “you know what?” “I think we can be putting more money towards our
mortgage” or “more money towards our savings”. Or, “we’ve gotten back into some bad habits and
somehow our credit card bills have gone back up”. So it’s good to circle back, look at what
you’re doing and just reevaluate. The other thing is also reevaluating your budget
for what you want your future life to be. For us, when we were working full-time, we had
a house, a mortgage, car payments, etc. We had one budget, but we needed to reevaluate
that budget for life on the road… …because everything was
totally different. When we were doing our
planning for our savings, we looked at this monthly budget we planned
to have on the road, and saved for that. That became our plan
going forward. Throughout the five years that
we were planning for this life, we always made sure we had
a fun budget. It wasn’t extravagant, but I think it’s important
to not lose sight of that. Have fun because that’s what this is all about.
It’s really enjoying your life. Just don’t enjoy it to
the point where… …you wake up one day, you open up a credit card bill
and realize you owe $50,000. Enjoy responsibly.
Your homework assignment for this week is to start
making that list of your total financial picture. All the money you have coming in,
all the money you have going out. Really figuring that out, because next week
we’re going to get into the planning phase. This kind of takes what we’ve talked about:
figuring out the life you want to live. And now, you can figure out how lon
it’s going to take you to get there. Thank you guys for watching.
We’ll see you next week! Bye!

30 thoughts on “Gaining Financial Freedom – Ep. 2 | Live Life on Your Own Terms Series

  • Excellent advice! We use a few tools for managing money. We are working on getting out of debt. But much rather have the debt we have now versus the debt of a mortgage. Can be debt free in 3-4 years instead of a lifetime.

  • Oh by the way, the second question as to "Why" Many people in my neighborhood don't understand why you would want to see America, Urban life they may be is the only life they know. I think this beckons a much deeper social question. Much Peace !!!

  • Another incredible video ! We real believe you guys are smart and a very…(cute couple). Your wisdom on financial matters and budgeting is great ! I would like to add also culture differences. We have been preparing for RV life for 5 years. We are the scenario who waited for our youngest to graduate. Many people have asked us "How do you do it… And why are you doing it" The first is a financial question and the second is a idealist question. There are few in my neighborhood who believes they are capable of affording the RV life. That's retired or not. Sure, we still get the "We have kids or grand kids" So we can't just leave excuse. That fact is many people in my neighborhood do not think the RV life is an option for them. Margaret and I believe by showing RV life ether part or full-time living is possible for everyone. We will give your link to your series so people can understand and benefit from the knowing of the ABC's of financial freedom. Great job Joe and Katie !!! Peace

  • HOMEWORK!?!?!? I didn't know I had DADBLAME,RessumfrassumHomework!! Ok, Column One, Love to Spend Money,,,Column Two, Hate to Make Money,,and Column Three,,,,why is there more than two columns?? LMBO! Ha HA,,,Love you guys! C-Ya!,,,,Peace!

  • We have started our own 5 year plan to start full time RVing. Looking forward to following your travels as we prepare to travel when our kiddo gets older.

  • Hopefully your saving for your old age. Every one thinks that they can work forever, but most run out of ability to do so because of declining health. Your off to a good start by not having significant debt and living on less than you make. Sock away the rest for long term investments. You won't be sorry.

  • Unusual topic but, well thought out and, as ever very informative. It was a bit like going to a funeral, along the lines of not really looking forward to going because of the negative parts of it. On the other hand when you realised the positive parts, like that you caught up with people that you'd lost touch with you feel a whole lot better. You realised that it was something that needed to be done and in the process also, that you had to question your family and your own mortality to appreciate life more. So what did I realise? Well 1. (Good part) I'm credit card debt-free, the bank took my card off me because I wasn't spending on it! (Bad part) My wife controls the purse strings and I think she's using the logic of having a credit card for each of us and maybe some of her invisible friends that only talk to her in her head, whilst in the shopping centre!

  • 2. (Good part) My wife took the news really well and said "changes will be made". (Bad part) I'm expected to defy the €uromillions lottery odds (116,000,000-1) get a second job and sort it out quickly! Thanks Joe n Kait! Lol.

  • Nice job – you guys are far too young to be dishing out such sage advice 🙂 You are both so fortunate to have found each other, and have found a way to live your dreams together; thanks for sharing your wisdom!

  • Great advice guys. I'm 47 now and I have a plan to be totally debt free in 4 years. I'm paying on student loans (I went back to school after being laid off a few yrs ago), a car, and mortgage and will pay them off in that order. After that I'll start adding more to my savings and start saving up to purchase my class b van. I don't want to RV full-time, as I like owning a house, but after I retire I'd like to RV during the warmest 6 months or the year, and chill at home during the colder months. I just hope the stock market is kind to my savings over the next decade, so I can retire early. Either way, after 4 years from now I will never be in debt again.

  • How do you cover health insurance, especially with challenges with your back? Thanks in advance! Love your videos!

  • Awesome 1st episode! I can't wait to finish the series. You two are super inspiring and hopefully I'll meet you when I'm on the road in 2018. It is scary and exciting. Almost every box is checked but I'm still figuring out exactly my nomadic income. Luckily I have a comfortable buffer. The wheels are turning! Oh, and I need a name for my Class B, etc. because everyone has one, right? haha

  • Sounds to me you both are/have followed Dave Ramsey Life to Financial Freedom. We have a Car payment plus an RV payment and I must admit it sucks! It is not much fun. I am thinking I should sell a vehicle, but which one? Pay off debt.

  • Of all the videos where I mention how WTR are extremely pragmatic thinkers, this is the video that explains EXACTLY WHAT I MEAN! Absolutely BRILLIANT PLANNING! 👍

  • just came across your channel I have been following a lot of different rvers . Great channel guys Can't wait to watch your vids.

  • Correct me if I am wrong. But I don't understand how filling gas inside an rv every day will be financially sensible.

  • I want this SO MUCH! I couldn't have found this series at a better time. I'm planning to do the homework and make it happen! Thanks so very much for the inspiration, you guys are fantastic. 🙂

  • Sounds like you guys read one of my favorite books, “Money or your Life”, awesome book for examining your financial situation and planning the crossover point to financial independence.

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