Mastering Your Money: A Step-by-Step Guide to Achieving Financial Freedom four

**Welcome back to our series on financial freedom!**

For those of you joining us for the first time, I'd like to inform you that this article is quite lengthy, so let's dive right into the main topic. I have to admit that since starting this financial freedom series, episode 4 is the one I’ve been most eager to share with you. The contents of this episode have had a significant impact on my entire financial journey. Consequently, I have spent a considerable amount of time preparing for it.

In previous episodes, we covered the initial steps on the path to financial freedom, from dealing with debt to becoming self-sufficient. In this episode, we will delve deeper into phase 2, a foundational phase for the entire journey. I call this phase "Monitoring and Action."

The first milestone in this phase corresponds to step 4 out of a total of 12 steps in our journey. This is the most crucial step—so much so that even if you only complete this step and skip the others, I believe it will significantly influence your mindset and actions moving forward.

The good news is that this step isn’t difficult; it just requires patience. On average, it takes about a month, though ideally, it would be a few months. The first step is very simple: start recording all your expenses. Use a note-taking app on your phone, create a dedicated folder for this purpose, and every time you spend money, jot it down immediately, including the item, date, and amount spent. Record everything, no matter how small.

The next step is to set up a spreadsheet in Excel or Google Sheets. Your spreadsheet should include columns for the item, date, amount, and category of the expense. You can categorize expenses into three groups: essential (like rent and transportation), wasteful (like dining out and unnecessary shopping), and "nice-to-have" (like courses and gym memberships).

Each day, or ideally at the end of the day, enter these expenses into your spreadsheet. If you’re not familiar with using spreadsheets on your phone, you can note them down first and then enter them later. The key is to be thorough and not miss anything.

After some time collecting and categorizing your expenses, you’ll have a clear picture of your monthly costs. For instance, your essential expenses might total 20 million VND, wasteful expenses 5 million VND, and "nice-to-have" expenses 4 million VND. This will help you understand how much you need to maintain your lifestyle, referred to as your minimum and standard spending levels.

Next, create a spreadsheet for your post-tax income, recording all your income sources. If your income exceeds your expenses, you’ll have a monthly surplus. If it doesn’t, you need to start a debt elimination plan.

To eliminate debt, cut out all "nice-to-have" and wasteful expenses, spending only at the minimum level. Open an emergency savings account at a different bank, set up automatic monthly transfers to this account for debt repayment.

Focus on paying off high-interest debts first, such as credit card debt or payday loans, then move on to no-interest debts. Once you have a clear repayment plan, your debt pressure will decrease significantly, making life more comfortable.

When you are debt-free, continue living at the minimum spending level and start building other savings accounts, such as long-term savings and investment accounts. Each month, prioritize accumulating in these accounts: emergency savings first, long-term savings second, and investments last.

This journey will have its challenges, but patience is key. Even if you’re only halfway through, adhering to these steps will significantly improve your financial situation.

Wishing you success on your path to financial freedom. See you in the next articles!