🧭 Financial Freedom Compass — What Steps You Should Take

“Can I just copy your portfolio?”

Yes, you can, but is it wise? NO.

My portfolio is for me and my specific situation. It is not a one-size-fits-all investing strategy.

There’s a lot of talk about what to do in investing and how to do it. The main thing is to follow a few certain steps before even starting to worry about how to pick stocks, or whether you should follow Walsh Investment Strategy or not.

One of the biggest mistakes people make is prioritizing investing before laying the groundwork that leads to financial freedom. That’s why I wrote this article.

Only pick stocks with what you’re comfortable losing.

This is especially true if you’ve never invested before, or if you’ve never experienced heavy investing losses.

It’s easy to think “How hard can it be?” until you see your entire portfolio down 50%, or half of your net worth! For those of us who aren’t buying yachts and second vacation homes, that loss means siginificantly more than just less fun. It means moving in with your parents, limited education options for kids, and selling your home.

Here’s all the steps you should take before picking stocks and potentially following Walsh Investment Strategy.

  1. Start early!

  2. Spend less than you make.

  3. Get 3,000 in savings.

  4. Get rid of high-interest debt.

  5. Increase emergency fund to 6-12 months of expenses.

  6. Maximize employer match.

  7. Maximize Health Savings Account (HSA).

  8. Maximize Roth IRA.

  9. Invest in regular brokerage account.

  10. Invest well.

If you’re thinking “that’s a lot of steps. What if I’m only 20?” then you’re thinking correctly. Yes, it’s a lot of steps, and they do take a lot of time, but the important thing is you can start at any point in life.

However, the earlier you start, the better. Some of these steps can take years. All of these steps are worth it.

“Then why would I sign up for Walsh Investment Strategy?”

That’s a great question. You can check out all the answers here. One of the biggest reasons is that I’m not incentivized to make money off of you. The perfect example? Almost all advisors and financial professionals will tell you that you need their services.

The truth is, you probably don’t need their services, especially when they charge an exorbitant amount of money for sub-par service.

I do not take this approach. Instead, my goal here is to maximize returns for as many people as possible for as little as possible. I know that by generating wealth for many, I will succeed. Your success is my success whether you become a member or not.

Now let’s dive in to the right steps you should take before picking stocks:

1. Start Early!

I have two examples below. One is about a 20 year old who invests 10,000 dollars for 40 years, and the other is about a 40 year old who also invests 10,000 dollars for 20 years, but ads an additional 300 dollars per month on top of that.

Let’s look at the 20 year old:

The below example shows what starting out with 10,000 dollars over the course of 40 years.

Let’s pretend it’s a 20 year old who invested 10k and holds onto it until they’re 60.

It grew to over $200,000 without contributing anything along the way. That’s a 20x increase and over 200,000 in interest.

Now let’s see what happens if we wait until we are 40 to start investing.

It’ll be the same 10,000 to start, but half the time. We’ll also add in an aditional 300 dollars per month.

We have to contribute $300 every month to end up at the same amount than if we started 20 years ago. That’s $72,000 that we have to contribute extra.

After all that extra contribution, we end up roughly at the same $200,000, but we only had $135,000 in interest.

So if we start at 40, that’s turning $82,000 into $200,000 with a lot of extra contributions.

That’s 2.6x vs our 20yo who made a 20x return. Staggering.

So START EARLY!

If you can’t start early, that’s fine. Start now, and make sure the young ones around you start early. (Have kids? Teach them about investing and compounding returns!)

2. Spend less than you make.

This is a requirement for all other steps. If you cannot do this, you will not be successful, and it will not matter how good you are at investing or making money.

A few tips to spend less:

  • Drive used cars instead of new cars

  • Eat out once per week or less

  • Track spending (most bank apps have a categorization feature now. Spend 10 minutes per week categorizing expenses and reviewing the past week. You’ll surprise yourself!)

  • Keep your “why” close. Have a picture or journal of the reasons why you’re paying attention to your financial wellness. (If you’re like me, those reasons are family, freedom, and generosity.)

3. Get 3,000 in savings

This is your starting emergency fund. It’ll help keep you from having to use credit cards, which keep poor people poor. Now, if your car breaks down, or if something needs to be replaced, you’ll have money in the bank for it.

4. Get rid of high-interest debt

This is your credit cards and personal loans. This does not mean pay off your house! Chances are, your house (if you’re lucky enough to have your own), is less than 6% interest. Credit cards have a much higher interest rate. Pay those off!

Being debt-free is not for everyone, but I can attest to the sheer joy I have when people complain about their credit card payments beeing hundreds or even thousands per month, while I have zero monthly debt payments.

“But what about leveraging debt to improve lifestyle?”

That’s called paying extra to get poor faster. If you want to improve your finances, don’t do it.

“What about leveraging debt to buy assets?”

Using debt to buy equipment for a business, real estate, or anything else is a gamble. Nobody knows the future, and debt can still rear its ugly head at the worst times. Remember the pandemic? Many small businesses struggled unnecessarily because they used too much debt to finance their operations. When customers stopped buying, they still had to make payments on that debt.

Most of the time, when starting out on a financial journey, it’s wisest to stay away from debt. This even goes for small businesses.

Note

If you’re paying 15% or more in interest on credit card debt and making 15% investing, then you’re behind due to inflation.

In investing, 10% annual return is great, but credit card interest is often higher than that. This is why we pay off high-interest debt as fast as possible.

If our journey to financial freedom was a marathon, high-interest debt is like bleeding. Stay away from it!

5. Increase emergency fund to 6-12 months of expenses.

So now we are saving money, don’t have any high-interest debt, and have 3,000 in savings. This is a GREAT start. Now it’s time to check off one last item before the fun begins: save for an actual emergency.

The common rule here is to save for more months if your job is unstable or if you’re the sole income for your household.

Example: You’re a mom with 3 kids and a stay-at-home dad. You work at a startup that has approximately 36 months of runway left to make a profit before you’re out of a job. You’re confident that this startup will be the next Amazon.

Should you save 3, 6, or 12 months of expenses? The answer is probably closer to 12. If anything happens to that startup, or to YOU, then you’ll be very glad you have 12 months of expenses saved up.

Losing a job and having a large savings account is the difference between getting a better job in 6 months or a significantly worse job right away.

Next example: You and your significant other work at WalMart and Lowes and have been there for 10 years. You have no kids and live in an apartment.

Should you save 3, 6, or 12 months expenses? The answer is probably somewhere from 3-6 months. The main point is this: it’s all preference around risk. You can have a savings account as large or as small as you’d like. Just remember that not being prepared financially takes things from “bad” to “worse” really fast.

So get that savings up!

 

The 3 sections are on maximizing handouts and minimizing taxes. On their own, each of these options are powerful. Combined, they create a path to financial freedom in a much more feasible way. Without these tools, financial freedom will be much farther off for the vast majority.

 

6. Maximize employer match.

Congratulations! You’ve climbed out of debt and saved a signifiacnt chunk of money for emergencies. Now let’s start compounding your money so that you can do all sorts of amazing things.

If you work for a more established company, they probably offer some sort of retirement. If you’re lucky, they have an empoyer retirement match program where they put in the same amount of money that you do.

That’s quite literally free money.

Maximize their contribution and your future self will thank you.

7. Maximize Health Savings Account (HSA).

A health savings account is better than most medical insurance plans over the long term. It also offers some tax advantages over traditional medical insurance plans.

This is where talking to an advisor is a good idea to see if a HSA is right for you.

8. Maximize Roth IRA.

Roth IRAs are a great tool that allow you to contribute after-tax money that can grow tax-free and withdrawn in retirement tax-free. I don’t know about you, but I try to minimize taxes as much as possible.

If you’d rather pay more taxes, feel free to skip this step.

9. Invest with a broker.

So now we’ve taken full advantage of the tools available to use that allow us to 1) live with a safety net, and 2) minimize unnecessary taxes.

Now it’s time to invest as much as we’d like in a regular brokerage account.

This is where Walsh Investment Strategy comes in.

I still recommend only picking stocks with as much money as you’re willing to lose.

For different people this looks differently. A good way to find this out is to imagine buying something for 1,000 dollars, and then immediately losing it without replacement. How would you feel? What about 10,000? 100,000?

If you’re like me, the thought of losing $1,000 is a travesty. Therefore if I started today, I would start with $100.

By the way, once your net worth gets up to a reasonable amount, and you’re on track to retire well, you can invest a percentage of your liquid net worth, but first write yourself a contract that you will not go outside of the agreed percentage.

If your net worth is 100,000 and you agree to pick stocks with 1%, then great. $1,000 to see how you do. But once that $1,000 is gone, stop. Hire a financial advisor, or stick with index ETFs.

Note: Some of the greatest investors of all time, Warren Buffett and Charlie Munger, recommend investing in an index fund. Warren is particularly fond of the S&P 500 index. (The S&P 500 is a collection of the largest companies in the US. Most common S&P 500 index ETFs are SPY and VOO.)

10. Invest WELL.

This is the final step. This is where the fun really begins.

This is where you get to pick stocks. Start with a very small amount, even $100, as brokerages are now letting users buy fractional shares. I suggest giving yourself 1 year with a small amount to see if picking stocks is right for you.

Now you can follow Walsh Investment Strategy, or any other crazy thing on the internet.

Some things to watch out for:

  • Staying awake worrying about your stocks

  • Emotional buying or selling

  • Obsession (is it detracting from time with family, down time, or work?)

  • Self-deception: are you lying to yourself about how you’re doing?

This entire website and my service is about investing well. It cannot be summed up in one article or book, as it encompasses every facet of being human.

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Disclaimer: The information provided on this website is for general informational purposes only and should not be considered investment advice. Please read our full disclaimer for more information. You can access it by clicking HERE.

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