The normal financial path that's prescribed by our society is to get out of school, get a job, and then start making money and keep making as much money as you can until you retire. That works for some people, but it also leaves a lot of people unsatisfied and feeling trapped within the rat race. I've followed a different path, some parts deliberately and others by accident, and I think it could serve as a reasonable guide for anyone who doesn't want to have a job for life.
First Phase: Some Independent Income
The first phase is just to start making any independent income. The two best times to do this are when you are in school, and thus have few responsibilities but plenty of free time, or when you have a job that you're trying to escape.
Don't try to hit it out of the park, just try to make some money. If you can do it in a way that is perpetual, that's a lot better than something that takes up your time, but either one is good.
The reason this phase is important is because it begins to strengthen the muscle of providing for yourself and it proves to yourself that you can do it. Even if you just make $500 a month and never go past this phase, that's still enough to fund your Roth IRA.
I got to this phase by writing books. I did it by accident, but once I knew that I had some "free" income every month, I got motivated and wrote more books. Today I don't even think about my books or writing new ones but I still make an amount of money from them that matters to me.
Second Phase: Bare Bones Self Sufficiency
Try to expand the way you're making money independently and simultaneously shrink down your living costs. If you can use money from your savings or job to buy a cheap permanent living situation, definitely do that.
The point of this phase is to create a low-stress launch pad to help you do something bigger. You want your lifestyle to be spartan enough that you are motivated to do more, but stress-free enough that you can focus on building something.
I did this by buying a $12,000 RV around 2007. It wasn't the most luxurious accomodation, but I never had a rent or mortgage payment again. I embraced it for what it was and enjoyed it a lot. At the same time I went from one book to 3-4 books, so my income generally covered my expenses and then some. There were some months where I sold a lot of books and greatly exceeded my costs, but there were also some months where I had to dip into savings a bit.
I felt a great sense of freedom in this phase because I knew that I could live like that forever. It wasn't my end goal, but it was a hell of a safety net. From that point on I felt like it was impossible for me to fail.
You could also buy an inexpensive house, split one with someone, or live with family members.
Third Phase: Start Saving / Building
Once you have a place to live and can cover your expenses either passively or through using a minority of your time, it's time to start aiming higher. Build your skills, your income, and your savings. Keep your expenses low and avoid the temptation to upgrade your lifestyle too much. If you can hold off just a few years your savings will begin to accumulate.
I wrote more books, started Sett (which made very little money), started CruiseSheet, and expanded some of my books to be audiobooks.
When your expenses are next to nothing and you are frugal, even a small amount of savings can begin to add up quickly, especially if you invest it well.
What people don't generally realize is that most people around them are spending almost all of their money on their expenses. If you're making $2000 a month while spending $1000, which I was doing for a while, you might be saving more than someone who makes $6k a month. Pride yourself on your savings rate, not on your income.
You can also build skills that will pay off later. I would not have a successful coaching / event practice if it wasn't for the tremendous amount of work I did on myself during that time. CruiseSheet wouldn't exist if I hadn't learned to program through building Sett.
Fourth Phase: Lock in Utility
Once you've increased the delta between your income and your expenses and have built up savings, look for ways to turn your savings into permanent utility. For less than $80,000 spent over 6 years I bought my own two bedroom condo in Las Vegas, an island with friends, a flat in Budapest with friends, and an apartment in Hawaii with friends.
I calculated that over the time I lived in my RV I saved $144,000 versus paying rent. I was saving money that whole time, so in return for living in an RV for ~4 years (dividing the time by half, assuming I made some return on my investments), I got a free condo, an island, and two vacation houses.
My income is a lot higher now than it was back then, but if that changed either voluntarily or involuntarily, I would still have an amazing life which I could support for about $1000 a month.
Fifth Phase: ???
I'm not really sure what the fifth phase is. I'm running out of useful ways to convert savings to utility, so I'm just saving up money now and trying to optimize its tax treatment by maxing out retirement accounts. If there are no other phases, I'm happy with that. I've built an amazing life, a career I love, and have built it to be so robust that I can't imagine anything that could topple it. Money I have invested in safe and reliable investments provide enough interest to support my lifestyle virtually indefinitely.
My one suspicion as that phase five might be to take moonshots. If I could build a company to sell for millions, for example, that could definitely be a level up.
This is the actual path I followed, and I actually thought of it as these phases along the way. No phase was ever reliant on high income. The primariy disciplines required were living below my means and relying on myself. Anyone can do that.
Photo is a cool bridge in Lilikoulani park in Hilo
Due to CruiseSheet growing and my new coaching project, my income has gone up quite a bit compared to previous years. This has been a strange transition for me, as I'm used to being the guy who doesn't really make much money, but does clever things to maximize it. Now I have a more normal income.
So far I haven't really changed, but I suspect that if things keep going well I will be less relatable to people who don't make too much money when I talk about money. For that reason, I'd like to freeze this moment in time and explain how I think about and use money. I suspect that my habits will mostly stay the same, but you never really know.
People think about net worth and income, and while those numbers are useful, they're just a small part of the picture. Focusing on them will cause you to make mistakes.
The two factors I always think about are runway and quality of life. If those numbers are high, then nothing else matters. They are a complete picture.
Edit: I gave up on financial goals in late 2011 after some huge financial and artistic wins... money shouldn't be taken too seriously. For the record, they were all basically on track, some were being massively exceeded, others were a bit behind schedule, but were all happening.
I set my next 10 years of financial goals on June 28th. That was exactly a month ago.
1 year - Critical Thinking [my first book] out. Blog income trickling. Some info products. Some freelancing. Something else, some X-Factor thing bringing in cash. Net monthly income positive. Health insurance. $50,000 in the bank. Expenses = income per month minimum.
3 years - 3 to 5 books out, many products out, blog income robust, some working on big exciting deals. $10,000 per month total, $5000 passive at least. First property owned. $300,000 in the bank.
5 years - 7-10 books out, many many products out, many passive income internet properties, working on big exciting things, $50,000 per month total, $40,000 passive at least. $1,000,000 in the bank.