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Investing For Millennials: How To Really Go For Financial Freedom

Last week I accused my fellow millennials of not preparing for their financial future. But pointing fingers is easy. So this week, we’ll do something about it. In fact, I have been doing something about it for quite some time.

I started investing 25%+ of my monthly income in January 2015, and have since been growing my money at just under 7% compound annual growth rate.

But I never could’ve done it without the advice of several personal finance books, which are what I’ll draw on this week to present to you: my guide for investing for millennials. I think this is one of the most practical approaches to reach financial freedom.

Of course this isn’t just for millennials, but it does help if you have time on your side. When I look at how I’ve gotten to the point I’m at right now, it breaks down into seven steps:

Let’s walk through them.

Disclaimer: I’m not a CFP or financial advisor. This is just my system. I know it’s not perfect. Think of it as something to take you from 0 to 1, not 1 to 100.

1. Know why you’re saving and investing.

In the movie “In Time,” time is used as currency. There’s a scene where Justin Timberlake’s main character is asked what he’d do if he had more of it than he could ever spend.

His answer? “I sure as hell wouldn’t waste it.”

Money can buy a lot of things, ranging from extreme luxuries, like supercars, mansions, jets, to luxuries, like travel, entertainment, experiences, to our most basic needs, like food, clothes and shelter.

In the movie, if the clock on your arm runs out, you die. And while we can’t add hours to our lives, it is still spookily close to the real world: When you’re dead broke, making enough money to eat another day’s worth of food is what buys you the next 24 hours.

However, there’s one key difference between our world and the movie: Unlike the quest for infinite time, you can actually win the money game – but not if you’re spending it on dumb things.

For most of us, why we’re trying to save or invest our money rarely comes up day to day, and if it does, we shoot back the standard material-items-checklist from the Joneses:

  • New house
  • New car
  • New kitchen
  • New TV
  • New lawnmower

…and oh, yeah, right, the kids. They’re supposed to go to college. “You know, the usual stuff.”

But…why? Why? Why?

I want to encourage you to dig deep. To ask “why?” not once, not twice, but three times for every one of those items you think you need. Aren’t they really just symbols? Representations of those, who’ve amassed not just money, but the really scarce resources?

Because while money does buy a lot of material belongings, you can also trade it for the most intangible, scarcest resources on the planet: time and freedom.

“Look at me, I’m free, I can buy whatever I want.” That’s the statement a new BMW really makes. But wouldn’t you rather have the real thing?

Given you’re happy with a modest lifestyle, $1-$2 million at a 4% interest rate is more than enough. You wouldn’t have infinite time, but could spend however much you do have left in whatever way you want.

You could take your clock and do what Will said: Stop watching it. You have all that time. Don’t waste it.

If you can figure out why saving and investing now is important to you, it’ll be a lot easier to stop putting it off.

2. Set a financial goal.

Once you have your reason for saving and investing – and it better be strong – you can derive the appropriate goal from it. That’s how it works, not the other way around.

When you’re young and have so much of life to go, it’s hard to set your eyes on a goal that’s 50, 60, 70 years away. An investor’s best asset, however, is time and right now you have more of that than money.

In Money, Master The Game, Tony Robbins suggests these three investing goals, among others:

  1. Financial security – you can pay your rent, utilities, insurance, transport and basic food costs.
  2. Financial independence – you can cover the cost of entertainment, clothing and some luxuries too.
  3. Financial freedom – your investments pay for a significant amount of luxuries (vacations, cars, etc.) too.

I don’t know about you, but I’m swinging for the fences here. We only get one shot at this. Financial freedom it is!

As John Goodman put it in The Gambler, I want the position of f**k you.

(language warning!)

3. Spend less than you earn.

Before you do any investing whatsoever, you first need to have money left over at the end of the month.

Here are the steps from the various books to help you do that:

  • Make a list of all the fixed costs you can’t change in the short run (like rent and car insurance payments) – from The One-Page Financial Plan.
  • Look at where you’re spending money for convenience, entertainment and gratification – from The Richest Man In Babylon.
  • Now, make budgeting a game by taking on little challenges like
    1. Walking or biking to work
    2. Canceling your cable for a month to see how it feels
    3. Trying to beat your partner in who can find the most discounts for food in a week
    4. Not buying new clothes for a month – from The One-Page Financial Plan.

When looking at where you can save money, I like to think in three categories:

  1. Save money on recurring purchases, like…
    • Rent
    • Utilities
    • Insurance
    • Transport
    • Groceries
    • Food
  2. Save money on one-off purchases, that continue to cost money, like…
    • Cars
    • Houses
    • Memberships (Spotify, the golf club)
    • Large appliances (a fully automated coffee machine, lawnmower)
  3. Save money on one-off purchases, that continue to cost time, like a TV, an Xbox, a jet-ski, etc.

The first one only has a few places you can optimize, like rent, utilities and insurance, before it gets tiring to try to save 17 cents on every coffee you buy.

The second one deals with unnecessary liabilities, where a cheaper option might get you the same result (like a monthly pass for the subway instead of a car).

The third one is seriously underrated: whatever takes your time also costs you money, because you could spend it trying to make more and get to your goal faster. This doesn’t mean you have to kill all your hobbies, but be aware of time-suckers that you pay for, as it’s a double loss.

So, what to do with the first few bucks you manage to save?

4. Create an emergency fund.

Simple: Keep them for absolute emergencies. This is a lesson from The Total Money Makeover by Dave Ramsey. The very first $1,000 you save should go directly into an emergency fund. You never know.

Then, take care of any money you owe.

5. Eliminate your debt.

Ideally, you will be able to skip this step (because you have no debt). However, if you can’t, then pay down your debts, starting with the smallest, moving from

  1. Your outstanding $25 phone bill to
  2. The $100 you owe a friend to
  3. The $1,500 TV you purchased on credit to
  4. Your remaining payments to make that $35,000 car your own.

You get the idea. This step also comes from The Total Money Makeover. Pay down everything that’s below $100,000, so no houses or massive student loans, as you’ll have to tackle those separately later on. Before that, turn to your emergency fund again.

6. Save for a rainy day.

Last one from Dave Ramsey. Having $1,000 in cash for emergencies is nice, but they go really fast. One broken leg, a minor car accident or a careless mistake at a party and poof, that money’s gone.

What you really want is to have a solid, 3-6 month cash buffer you could live on, whatever happens. Dave Ramsey estimates this should usually be around ~$10,000-$15,000, depending on where you live.


The result of these steps (3-6) is you’ll free yourself from any financial burden that mentally weighs you down and feel safe enough to take the necessary risks to grow your money, because you have a net to catch you when something goes wrong.

And now, the fun begins.

7. Grow your money.

At this point, your liabilities are covered with money to spare, which means you can start building assets, which will put more money into your pocket each month, instead of taking some out.

Here are the 8 steps I personally started with and that have worked well for me:

  1. Start with investing 10% of your income. However little you have, 1/10th of it won’t hurt you – from The Richest Man In Babylon.
  2. Take this money away before you spend on anything else, and treat it as if it’s gone forever – from Rich Dad Poor Dad.
  3. The best way to do this is to set up an automated payment to your investment account that sends the money right where it needs to go – from I Will Teach You To Be Rich.
  4. Take a value investing approach in which you minimize losses, focus on safe and steady returns and pick stocks for the long term – from The Intelligent Investor.
  5. Since evaluating companies is not that easy, your best bet is to invest in safe, low-cost index funds, which model the stock market and thus, its average annual 8% growth rate – from The Little Book of Common Sense Investing.
  6. Start with the cheapest fund that’s available to you (Vanguard has a great selection) and then diversify across various index funds – from The Little Book of Common Sense Investing.
  7. Stick to a fixed budget you will invest every month or quarter, no matter the current stock/fund prices, which will allow you to average your costs – from The Intelligent Investor.
  8. Add the 2% and 6% safety rules, so you’ll never risk more than 2% of your portfolio on a single trade and never more than 6% of it in any given month – from The New Trading For A Living.

This approach will make the stock portion of your portfolio somewhat antifragile, meaning it’ll only get stronger from shocks and market crashes, because you can buy the same, valuable stocks and index funds at discounted prices when they happen and reap even bigger rewards long-term – from Antifragile. To make your entire portfolio antifragile, much more diversification is needed, though.

Note: I’ve summarized all these personal finance books and more here.

I hope this will turn out as practical as I want it to be. I want this to give you security, independence and freedom.

Maybe one day, you and I will both be in the position of f**k you.

I think this is the most practical way to get there. Is it? You tell me.

Niklas Goeke

I am a German student on his way to becoming an entrepreneur!

  • Zuzana Grady

    I love it, great post Niklas!! Let’s get into the position of F*** You. Eliminating unnecessary purchases is really so much easier, if you honestly ask yourself – are you going to use it, do you really need it? Will it help you achieve your goals? Excellent! I hope many people get to read it … keep on writing, love it!

  • Daniel

    Great article. Not living in the US, however, I always get stuck in finding similar options where I live…. and it seems that 99% of all financial advice in English out there is focused on US financial world….. I see that you live in Germany (like me), but do you invest in the US? If not, how did you adapt from US-based advice to Germany investing?

    • Daniel, great question, I struggle with this myself sometimes. I do invest in the US, but what’s accessible there is mostly just stocks via NYSE etc. I’d love to get into automation and am annoyed that things like Wealthfront aren’t available here. I found a few European startups who model US innovations in investing here: https://www.quora.com/Are-there-any-European-alternatives-to-investment-platforms-like-Betterment-Wealthfront-etc

      Hope those can be a start! Also, my broker is DEGIRO, a Dutch platform (only 100% secured up to 20k, but it’s great to begin with due to low fees and lets you invest in US markets).

      • Daniel

        Thanks Niklas, I’ll look into those! 🙂