Financial Freedom

How To Achieve Financial Freedom In 5 Years

You can achieve financial freedom in 5 years with specific goals, careful planning and cash flowing assets. The biggest group advocating early retirement online is the FIRE movement (Financial Independence Retire Early). This strategy advocates for saving large percentages of your income (above 50%) and stock investments. While saving/investing large percentages of your income is a great strategy to propel you towards early retirement, stocks are simply too slow.

You need investments that provide regular cash flow. The key to retiring early is replacing the income of your full time job with income from your investing. Stocks rarely provide (although they can) the cash flow necessary to retire in five years or less.

The two investments with the potential to create the most cash flow are real estate and business. And don’t forget about debt. Debt can also be a great return on investment.

Let’s first look at how my wife Kate and I created enough cash flow from investing in real estate to allow her to quit her job less than 3 years after we started investing. Then we’ll talk about the principles and steps we took to make that happen.

Man on top of mountain

Case Study: Kate And Michael

Hi, I’m Michael and my wife’s name is Kate. Kate recently quit her $60,000 per year job.

Before I go into depth about my plan for anyone to achieve financial freedom in 5 years, I want to give you a recap of how we managed to replace nearly all of that $60,000 per year income.

Through our four investment properties and paying off some loans, we’ve created more than $45,000 per year of tax free cash flow. Kate’s $60,000 per year job after taxes was closer to $50,000 per year. Now she’s a full time mother and a part time Airbnb host, making almost the same salary.

Year 1: Triplex and first Airbnb

About a year before buying our first investment property, we began soaking in information by reading books and listening to podcasts. We were both interested in real estate, so we just started learning.

After about 6 months, we began looking at houses, and quickly got hooked up with a local realtor.

Kate found houses for us to check out, and I would run the numbers. We made some offers that fell through, but about nine months after we started, we had a triplex under contract.

The story of renovating it and getting it fully rented is a story for another time, but about 5 months after buying we had it fully rented. Since then the property has averaged between $400-500 positive cash flow per month. That translates to about $5,000 per year.

In the same month we bought this triplex, we also did some work in the finished basement of our primary residence and listed it on Airbnb. We didn’t expect much, but that listing exploded and has been bringing in an average monthly cash flow between $1,300 and $1,400 for the past three years (about $16,000).

We consider that $16,000 per year basically pure profit because we were already paying a mortgage and covering the expenses of the house. The only thing that changed was our utility bills have increased probably 25% and we’ve had a few repairs attributed to the Airbnb.

That’s $21,000 in one year. Not bad.

Year 2: Second Airbnb

We had actually intended to continue doing long term rentals like the triplex, but with the unexpected success of our basement Airbnb, we decided to change our direction. After saving up some more money for a down payment on a new property, we began looking for homes that we felt would make a great short term rental.

Just a couple months after the birth of our daughter, we found something that checked all our boxes. This time we only had to make one offer and we got the house.

We utilized our maternity and paternity leaves to furnish, decorate and list the new house. Picking a house specifically intended for Airbnb paid off big time.

Where our basement was bringing in about $1,350 per month in bookings, this house has been bringing in just over $2,000 per month.

Of course that is before a mortgage payment, utilities, internet, taxes, insurance and the cost of maintenance. After taking all these expenses into account, this property has been making us just over $800 per month in profit. Crazy. That’s another $9,600 per year.

After the second year we’re at $30,000 per year.

Year 3: Third Airbnb and Pay Off Some Loans

We have had so much success with our two Airbnbs that we said “let’s do it again!” Kate and I were really starting to feel like early retirement was in our future, and we began questioning the usefulness of our retirement accounts.

Kate cashed out her 401k and we put that money straight towards another property. Again, we started searching specifically for a short term rental property. After a few refused offers, we did find another home and were able to put an offer in before anyone else had.

We only have about 10 months of data on this one, but so far we’ve been averaging about $600/month in profit. Not quite as successful as the last one, but still doing great.

That adds another $7,000 per year to the total.

Over the next months we began targeting some loans that we hadn’t paid off yet. After paying off a car loan and some student loans, we managed to knock off $800 per month in loan payments.

This is just as good as profit from an investment, so we get to count another $9,600 per year towards our investment income.

After three years of buying property, turning our primary residence into an investment and paying off loans, we’ve created an additional $47,000 per year in nearly tax free income.

Year 4 and 5: What’s ahead

Of course we want to replace the income of my full time job over the next few years, but in order to do that we also need to replace the benefits my employer provides (namely health insurance). This is an extra hurdle that we didn’t have to think about when Kate quit her job. We just moved her onto my insurance.

So how do we get to full financial freedom, where we don’t need employers anymore?

We have a few plans in the making.

First is this blog. A well planned blog can easily bring in several thousand dollars per month.

Second is something I’ve been wanting to try for a while. I want to buy a website with the money made from this blog. You should be able to get 30-40% cash on cash return on the purchase of a website. That’s on par with what we’ve gotten for our Airbnbs, but websites are easier to scale. It’s much more feasible to double profits on a website that double profits for an investment property.

Third is to buy another investment property, possibly out of town. We’ve had great success with our short term rentals, but we have a glaring risk of local ordinances. We know we could do well with another short term rental in our city, but there’s been a lot of new legislation around how they can be operated.

We want to invest in another city to lower the risk of local legislation completely wiping out our business.

How To Repeat Our Success

Here’s the thing, the success that Kate and I have had is not unique. There are so many people who have created as much or more income than we have. There are many roads to financial freedom.

I’m going to do my best to show a generalized exercise anyone can go through to repeat what we’ve already done. And keep in mind real estate is just one way of many. If you want another resource, check out my financial plan with planner.

Alright, let’s do this.

1. Create Your End Target

I’ve written about this several times. I believe you have to start with the end in mind. If you live in Los Angeles and you need to make $150,000 per year to create your financial freedom, you’ll probably need a different approach than someone living in the Midwest who only needs to make $40,000 per year.

How much cash flow will you need?

The first question you need to ask yourself is how much cash flow you need. Cash flow is the force that puts money in your bank account each month. It’s like a paycheck, except your investments pay you rather than your employer.

When your home increases in value from $140,000 to $150,000, you got richer, but that kind of wealth doesn’t really help you pay your bills. So you need cash flow.

I typically like to think of cash flow by month. Many expenses occur on a monthly basis, utilities and loan payments, and most people create budgets on a monthly basis. So I like to think about my cash flow in the same way.

What’s your cash flow number?

I would start with your expenses. How much do you spend on food? gas? internet? Honestly, just go back through your bank statements and see how much money leaves your account every month. You need to make more than that number.

Not only do you need the money to cover your expenses, but you need money left over to invest.

Emergency fund

I recommend keeping an emergency fund at the ready. When surprise expenses attack, you want to be ready.

So write down a number for this as well.

Generally, I think 3 months of expenses is a sufficiently large emergency fund. However, it’s important to actually think about it. What are your expenses and what are some big expenses that you are at risk for? HVAC units, roofs and plumbing are risks for all homeowners, but maybe you have some unique risks.

Analyze debt

One of my requirements for financial freedom is to eliminate bad debt. I define bad debt as any debt that makes me poorer. Loans on investments properties are usually good debt (as long as you’re making money). Loans on cars are bad debt because the car loses value over time.

Ask yourself what your debt picture needs to look like to be financially free.

What does your life look like?

I ascribe to the hypothesis that visualizing your future self helps you become that version of yourself. So ask yourself what financial freedom looks like for you.

Are you just chilling at home every day, or are you out in your community trying to help people? Do you own real estate or stocks or businesses? Are your investments passive, or more active? Are you traveling? Where do you live?

This step is a license to daydream. Spend time visualizing yourself as a financially free individual and write down as many details as you can. You’ll need to start connecting the dots on how to get from where you are now to that future.

2. Determine How You’ll Make The Money

OK enough daydreaming. While I do wholeheartedly believe that visualizing your success works, I also know that the results are created in the real world. It’s time for you to figure out how you can reach your cash flow, emergency fund and debt goals.

List out every way you can create cash flow

I like to start with a list. A list of every way you can create cash flow. Here’s a list of 50 ways to get the ideas flowing.

If you have no interest in real estate at all, then don’t write it down. If you pretty much already know how you want to do this, then just write down your methodologies.

I recommend spending some time on this. Anyone can come up with 2 or 3 ideas, but you will probably need 10. Financial freedom in 5 years requires some creativity, so don’t stop after writing down “pay off debt” and “buy stocks.”

Do some research and try to think outside the box.

Start making the numbers add up

Before we start, we need to make sure the ideas we wrote down can reasonably get us to our cash flow goal. How do we do this?

An easy place to start is debt.

If you have debt that needs to be paid off in order to reach financial freedom, then write it down. There are two things of interest with debt. First is the monthly payment. When you pay off a loan, the lack of monthly payment will be like added cash flow. The second is the principal balance on the loan. This is how much it will take to eliminate that monthly payment.

Dave Ramsey talks about the debt snowball. You pay off one loan and then start using the cash flow gained from paying it off to pay off the next loan. He recommends starting with the loans with the smallest principal balance. Generally, I like this approach, but we’re trying to achieve freedom in only 5 years. We’ll likely have to be more mathematically oriented to work within that time frame.

To make the five year time frame possible you have to prioritize cash on cash return above all else. That means paying off a $500 per month loan payment with a $8,000 principal balance should come before a $150 per month loan payment with a $5,000 principal balance.

Cash on cash return should influence every investment decision you make, not just the loans. If you can make $600 per month from an investment that costs you $8,000 then you should do that before paying off your $500 per month loan with a principal balance of $8,000.

You need to end up at your cash flow goal in five years, so start adding up the numbers.

An example

Let me show you how I’d go about doing this with an example. Let’s say I found that $30,000 per year would be enough for me to quit my job, feel financially free and live the life I want (Of course, that won’t cut it for everyone). $30,000 per year equates to $2,500 per month.

I want to create that cash flow through blogs/websites and paying off my school and car loans.

I can reasonably expect a 30% cash on cash return from the purchase of a website. This means if I should be able to recoup 30% of the up front cost of purchasing a website within one year.

My two loans stand as follows:

  • School loan is $615 per month with a principal balance of $36,000
  • Car loan is $190 per month with a principal balance of $2,500

The cash on cash return of paying off the school loan is 20.5% (615 x 12 ÷ 36,000).

The cash on cash return of paying off the car loan is 91% (190 x 12 ÷ 2,500).

The return of paying off the car loan is insanely high! I will prioritize that first. Then the blog investments will be my next step. Though keep in mind that as you continue making minimum payments on the school loan, the cash on cash return of paying it off will improve. When the principal balance reaches $24,600 the cash on cash return of paying off the loan reaches 30% (615 x 12 ÷ 24,600).

And last we need to ensure that our investments will actually reach the $2,500 per month we need to be financially free. The two loans add up to $805 per month, so my website investing will need to create an additional $1,700 per month.

At a 30% cash on cash return I’ll need to invest about $70,000 in websites/blogs in order to reach my $30,000 per year cash flow number.

3. See The Path And Map Out Your First Year

Hopefully now you’ve proven to yourself that the cash flowing assets (or debt) you plan to invest in over the next 5 years can get you to your financial freedom number.

Now it’s time to plan out your first year.

Pay yourself first

In the example above, I said it made the most sense to pay off my car loan first (91% cash on cash return!). So that’s going to be part of my year one plan.

You’ll need to find how much per month you can put towards your investments. Your income minus expenses is one way to do it, but often we can speed up our trajectory through the concept of “paying yourself first”.

The idea is that if you set aside your investment money before considering how you’ll pay the bills, you’ll have to get creative to make ends meet.

Here’s what to do. You’ll want a total investment number. How much money do I have to invest to reach my financial freedom number? In my example I needed $70,000 to invest towards blogs/websites, $2,500 to pay off my car loan and $36,000 to pay off my school loan. So my total investment number is the sum of those, $108,500.

I can use this number to find the amount I need to pay myself each month.

  • $108,500 ÷ 5 years = $21,700 to pay myself each year
  • $21,700 ÷ 12 months = $1,808 to pay myself each month

You can work backwards to figure out how much you have to pay yourself each month.

Keep in mind that you don’t have to pay yourself the same amount each month for the full five years. You can start at say $1,000 per month, then increase by $190 after paying off your car loan, then increase again after your first investment.

Note: I didn’t add an emergency fund into this example. You will probably want to include your emergency fund.

First year investments

After deciding how much you be investing each month, you’ll have to decide what to invest in.

Loans are easy because you can literally make extra payments every month. Your extra payments will go directly toward the principal balance of the loan and increase the speed with which the loan is paid off.

Stocks can also be relatively easy. You can purchase many stocks for under $100, though there are plenty that you may have to save up for.

Real estate and business generally require some patience. The least amount of money up front I’ve needed for a real estate purchase was $18,000. That takes some time to accumulate.

Again, prioritize your investments with the highest cash on cash return. If your highest cash on cash return is something you’ll have to save up for, like real estate, then start saving. But don’t let that keep you from preparing for your investment.

Plan to research and network. Read books, listen to podcasts. Visit with bankers, lawyers and accountants. make sure that you’re fully prepared when the time comes to make your first purchase.

Optional: Set Daily Habits

Daily habits are something I’ve recently implemented. I say they’re optional because Kate and I reached our $47,000 per year without them. However, I’ve found my daily habits invaluable for my endeavors which have no immediate reward, namely blogging.

I use the emotional tool of a streak to help keep my actions toward success consistent. I first came across this technique when I read about Jerry Seinfeld’s “don’t break the chain” method. He talks about how doing something every day (in his case writing comedy) and keeping a running count of each day, you’ll create this desire to not break the streak.

I’m on a 119 day streak (as of today) of writing for this blog. After writing every day for 119 consecutive days I can tell you, I’ve gotten to a point where virtually nothing will keep me from writing. I’ve had some 2am late nights to bed, I’ve gone on vacation, and I’ve had friends and family visit, and I still find time to write every day.

I have other daily habits with similar streaks going, and I feel that they are keeping me moving closer to my goals each and every day.

4. Check Up On Progress Every Year

You can of course check on your progress as often as you want. The reason I recommend checking on progress is because you should be able to pivot and change your plan as you learn and experience more.

When I wrote about Kate’s and my path, I mentioned that we decided to start doing short term rentals instead of long term rentals because they were making so much money. You’ll almost certainly have similar experiences.

You’ll need to adjust your plan based on your experience.

Honestly, I’m not even sure it’s practical to truly have a 5 year plan. I don’t think it’s helpful to plan more than one year at a time. You’ll find yourself straying from your plan if you look too far ahead.

The important thing is to prove to yourself that you can reach your goal in 5 years or less. Once you do that you really only need to plan your next step and continue to monitor your progress over time.

What to look out for

There are some things to be aware of on your path to financial freedom, some things that could indicate you’re moving off the target.

Your investments are underperforming

Maybe your investments are making you money, but it’s not nearly as much as you had planned on. Or maybe you straight up lost money when you bought a business, website or property.

If this happens, it doesn’t mean your plan was flawed. Don’t let the loss of money keep you from investing. That’s like saying if you get food poisoning you shouldn’t eat any more. You HAVE to invest to reach financial freedom. Don’t give up if your investments aren’t performing yet.

You’re making more AND spending more

There’s a natural inclination to begin spending more when you have more money. That’s natural and it’s even OK to do that, but make sure you’re keeping pace with your 5 year plan.

Don’t lose focus and let your expenses prevent your from reaching the freedom you’re working towards.

If you find yourself talking about moving into a bigger house or buying a new car, you may be succumbing to this temptation.

Fear starts creeping in

I’ve noticed this one myself. Our success has started making me feel like it’s only a matter of time before we blunder and lose everything. We’ve begun opting for lower risk investments like paying down debt.

It’s important to be aware of your risks and seek to minimize those risks, but don’t let that prevent you from going after high yielding investments.

You’re losing focus

The most common problem is that focus is lost on the goal. You just lose interest and quit taking the actions necessary to reach your goal.

My technique to maintain focus is daily affirmations. I speak out loud the goals I have for myself and how I will go about reaching them.

5. Quit Your Job

At some point along the path to financial freedom, you’ll probably plan to quit your job. There are some special details involved with quitting your job.

Don’t neglect your emergency fund

It’s true that you could be fired from your day job at any time, but for my own peace of mind I’ve committed to building an emergency fund with three months’ expenses before quitting my job.

It’s never a bad idea to keep an emergency fund, and I think it becomes slightly more important when you no longer have a full time job.

You lose your benefits

When you quit your job you lose more than just a salary. You lose any other benefits that job provided you. In the U.S. where I live, the biggest of those benefits is health insurance.

It costs between $1,000 and $2,000 per month to privately insure a family in the states. So this number is included when I’m factoring in what it takes for me to quit my job.

You may also have some other things provided by an employer:

  • Other insurances like life, vision or even pet insurance
  • Access to retirement accounts like a 401k or 403b
  • Vacation and sick time and holidays
  • Gym memberships
  • Babysitting

Just make sure you think about what these things cost and how you can either replace them or live without them.

Don’t stop investing

You’ve been paying yourself first in order to invest and create additional income all this time. Don’t stop now!

You should be investing for the rest of your life. Yes, investing is a way to create additional income and help you reach financial and time freedom, but it’s also a tool to help mitigate the risks of your existing investments.

There’s a chance that quitting your job and reaching your cash flow goal happen at basically the same time. But there’s also a chance that you’re quitting your job before reaching your goal.

Keep going!

6. Reach Your Goal

So what happens when you actually hit your cash flow goal? Is it time to just kick your feet up and sit in front of the TV for the rest of your life?

Of course not. Once you’ve reached your goal, your primary financial goal should be to stay on top.

Mitigate risk

If you’re making more than your need, that doesn’t mean you should neglect your investing. Someone who invests in real estate is going to have risks of losing that income, and when that’s your living income you’ll want to do whatever you can to either prevent that loss or keep the loss of that income from hurting too much.

That’s why so much investing advice hammers at the idea of diversification. It’s the principal that when one or more investments lose money, you don’t lose money on your entire portfolio.

There are a lot of ways to diversify and a lot of ways to mitigate risk. Stock investors can look to collect stock across multiple companies and sectors of business, but they can also look to other investments.

Real estate investors can start buying property out of town and out of state to diversify markets.

Business owners can buy more businesses in the same niche and buy in new markets.

There’s no way to eliminate risk, but you should stay vigilante in being aware of the risks of your investment portfolio and always be seeking to minimize that risk.

Enjoy yourself and give

Once your financially free you can pretty much do what you want with your money. I strongly advocate that you continue to invest, but at this point you’ve earned the right to travel the world, buy some nice things for yourself and give back.


Financial freedom CAN be achieved in 5 years. The most important steps in doing it are to first create your goal with a specific number and timeline. Then you plan out your first year by putting your money towards the investments that have the highest cash on cash return. Then you learn and adjust.

The speed with which you can create income from investing is dependent on how much money you put towards investing and the cash on cash return of those investments.

And don’t forget to reference my financial freedom plan and planner.

Happy investing.


I'm living the path to financial success and sharing everything I learn in this blog. I believe in the power of cash flowing investments, due diligence and time. This is my journey so far.

I learned everything I know from books, podcasts, conversations with friends and family and of course through real world experience as a cash flow investor. And I'm always pushing to learn more.

To see my investing timeline, check out our about page

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