Want to have financial freedom?

Want to have financial freedom? I’ll boil it down to a few modest steps:

1) Live on less than you make; save the excess. First, squirrel away some emergency money. Once you have three months’ worth of living expenses, you are ahead of 50% of Americans. http://money.cnn.com/2013/06/24/pf/emergency-savings/

2) With your retirement savings (where you put your savings after the emergency fund): put it in your company’s 401k up to the match. It’s free money from your employer—take it. If you can afford to put in more (and you want to be putting in 10-15% of your earnings), put it in a Roth IRA.

How much should you have in your retirement accounts? By age group:

20s: Get out of debt—pay off the car loan, student loans, credit cards, etc. Start into your retirement savings, but it is the early years—so just getting started and comfortably living on less than you make is a major accomplishment.

30s: You should have your annual salary’s worth saved in retirement accounts. Now’s when you drip some money into the kids’ education funds if you're so inclined. However, make sure your retirement is getting 15% of your salary before you pay for the kids’ college—they can get scholarships, grants, and loans, but those are not available for your retirement.

40s: Your retirement assets should be worth three times your annual salary. For those late to the game, these can be catch-up years.

50s: You’d love to see five times your salary in your retirement accounts. I know, you’re paying for kids’ college tuition and perhaps helping your aging folks. However, these are the high-income years, and you’ll want to be putting significant funds toward your retirement—especially if you aren’t close to where you should be.

60s: If you started saving early, you could consider retiring in the early part of your sixties; if not, it will be the latter part of the decade. Postpone getting Social Security payments—the longer you wait, the more you will get each month. Because most of us are living longer, you want to have your Social Security payments disbursing you a larger sum for a long time.

3) Money is in the retirement accounts, now how should it be invested? Go with the academic research, not with what Wall Street is hyping. Buy a widely diversified portfolio of global index funds.

It’s probably worth getting some help here but only do it from a fee-only financial advisor.

Most folks in the financial world are salespeople, not incentivized to look out for your best interest. In fact, by an employment contract, they are supposed to look out for the company’s best interest. Rather, you want to spend the time to find a fee-only advisor who has signed up for doing what’s right for you first (in the industry, it’s called taking on a fiduciary role, by the way). Moreover, get it in writing that they will be a fiduciary 100% of the time—salespeople can say anything, I’m sorry to report.

4) Stay the course. You’ll hear hundreds of products and ideas pitched. Perhaps you’ll feel that others have figured out a short-cut solution—they haven’t. However, haven’t hedge funds made more than the everyday index funds? Nope. http://www.investopedia.com/articles/investing/030916/buffetts-bet-hedge-funds-year-eight-brka-brkb.asp How about those life insurance products—ways to reduce taxes in retirement? You’d be cutting off your nose to spite your face; not worth it…not even close. Invest in your brother-in-law’s new business? Don’t do it.

Yes, some will get rich making these alternative investments. Someone hits the jackpot at the slot machines too. The odds are not in your favor, so don’t fret about all those great products you’ll hear Wall Street, the insurance companies, and others heave on you. Stay the course. Your 75-year-old self will thank you.

Jered Skousen is a fee-only Investment Adviser with Harvard Avenue. He operates as one of a minority of folks in the financial industry—a 100% fiduciary.