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The 9 Steps to Financial Freedom

The 9 Steps to Financial Freedom

Practical and Spiritual Steps So You Can Stop Worrying
by Suze Orman 1997 338 pages
3.78
3k+ ratings
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Key Takeaways

1. Your past money experiences shape your financial future

Messages about money are passed down from generation to generation, worn and chipped like the family dishes.

Childhood memories matter. Our earliest experiences with money often form the foundation of our financial beliefs and behaviors as adults. These memories can be positive or negative, but they invariably influence how we approach money in our lives today.

Identify your money story. Take time to reflect on your earliest memories involving money. Consider:

  • What were the best presents you received as a child?
  • Did your friends have things you didn't?
  • How did your parents talk about money?
  • Did you feel ashamed or proud of your family's financial situation?

Understanding these formative experiences can help you recognize patterns in your current financial behavior and make conscious choices to change negative patterns.

2. Face your financial fears to create new truths

The more you make, the more you spend.

Confront your anxieties. Many people avoid dealing with their finances due to fear or anxiety. Common financial fears include:

  • Not having enough money
  • Losing everything
  • Being unable to support family
  • Making poor investment decisions

Create new financial truths. Once you've identified your fears, replace them with positive, empowering statements. For example:

  • "I am in control of my financial future."
  • "I have the power to make wise financial decisions."
  • "I am capable of building wealth and security."

Repeat these new truths daily to rewire your financial mindset and overcome paralyzing fears.

3. Be honest with yourself about your financial situation

Reality check: Throw away a four-dollar magazine you never got around to reading—easy. Toss in the garbage five dollars' worth of food that's gone bad; you may reprimand yourself, but you probably do it all the time. Buy a sweater on sale for thirty dollars, then notice six months later that you wore it only once; it just didn't fit right; you give it away. Now try to rip up and throw away a dollar bill.

Track your spending. Many people underestimate their monthly expenses by $1,000 to $1,500. To get an accurate picture:

  • Review bank and credit card statements for the past two years
  • Categorize all expenses (e.g., housing, food, transportation, entertainment)
  • Calculate average monthly spending for each category
  • Include irregular expenses (e.g., annual subscriptions, seasonal costs)

Face the numbers. Once you have a clear picture of your spending:

  • Compare your actual expenses to your perceived expenses
  • Identify areas where you're overspending
  • Look for opportunities to cut costs or reallocate funds
  • Create a realistic budget based on your true financial situation

4. Take responsibility for those you love financially

It is not okay when you get sick, or when you die, to leave financial chaos behind you for everyone else to clean up.

Plan for the future. Ensure you have the following in place:

  • A will or living trust
  • Durable power of attorney for healthcare
  • Adequate life insurance
  • Long-term care insurance (if appropriate)
  • An up-to-date estate plan

Consider beneficiaries. Think beyond immediate family:

  • Children from previous marriages
  • Aging parents
  • Siblings or other dependents

By taking these steps, you protect your loved ones from unnecessary financial stress and ensure your wishes are carried out.

5. Respect yourself and your money to attract wealth

Respect attracts money—Disrespect repels money.

Treat money with care. Just as you respect yourself, respect your money:

  • Keep bills organized and crisp in your wallet
  • Pay bills on time
  • Avoid unnecessary fees and penalties
  • Invest wisely and consistently

Maximize your earnings. Look for ways to make your money work harder:

  • Shop around for better interest rates on savings accounts
  • Consider high-yield savings options
  • Minimize taxes through strategic planning
  • Take advantage of employer matching in retirement accounts

By treating your money with respect, you create a positive financial energy that can attract more wealth into your life.

6. Trust yourself more than others with financial decisions

Inner Trust First, Then Outward Action.

Develop financial intuition. While it's important to seek advice, ultimately, you know your situation best:

  • Listen to your gut feelings about financial decisions
  • Consider how investments align with your values and goals
  • Don't be pressured into decisions that don't feel right

Educate yourself. Build your financial knowledge:

  • Read reputable financial books and websites
  • Attend workshops or seminars
  • Practice making small investment decisions to gain confidence

Remember, no one cares more about your money than you do. Trust your instincts and take responsibility for your financial choices.

7. Invest wisely for long-term financial growth

When you don't know which mutual fund to buy, and don't want to learn all this stuff about managers, you have a great option: You can buy an index fund.

Understand investment basics. Key concepts to grasp:

  • Diversification
  • Risk tolerance
  • Asset allocation
  • Dollar-cost averaging

Consider low-cost options. Index funds and ETFs often offer advantages:

  • Lower fees than actively managed funds
  • Broad market exposure
  • Simplicity and ease of management

Start early and be consistent. The power of compound interest means that even small, regular investments can grow significantly over time. Aim to:

  • Maximize contributions to retirement accounts
  • Invest automatically each month
  • Reinvest dividends and capital gains

8. Understand and manage debt effectively

Credit cards can be as addictive and destructive as hard drugs, with the same ability to create a false sense of euphoria, give you a quick fix by satisfying temporary desires.

Prioritize debt repayment. Not all debt is created equal:

  1. High-interest credit card debt
  2. Personal loans
  3. Student loans
  4. Mortgage debt

Strategies for debt reduction:

  • Snowball method: Pay off smallest debts first for psychological wins
  • Avalanche method: Focus on highest interest debts first for maximum savings
  • Consider debt consolidation or balance transfers for lower interest rates
  • Avoid taking on new debt while paying off existing balances

Remember, becoming debt-free is a crucial step towards financial freedom and building wealth.

9. Teach children financial responsibility early

Today's children will inherit a global economy, a high-tech world, an increasingly competitive universe in which they'll have to make their way.

Start early. Financial education should begin in childhood:

  • Give age-appropriate allowances
  • Teach budgeting and saving
  • Discuss family finances openly
  • Encourage entrepreneurial thinking

Use real-world experiences. Practical lessons are often most effective:

  • Involve children in grocery shopping and price comparisons
  • Help them open a bank account
  • Discuss the cost of family activities or vacations

Plan for college. Consider options like:

  • 529 college savings plans
  • Coverdell Education Savings Accounts
  • UGMA/UTMA accounts

By instilling good financial habits early, you set your children up for long-term financial success and independence.

Last updated:

FAQ

What's The 9 Steps to Financial Freedom about?

  • Holistic Approach: The book combines practical financial advice with spiritual insights, aiming to help readers achieve financial freedom while fostering a healthy relationship with money.
  • Nine-Step Framework: Suze Orman outlines a nine-step process that guides readers through understanding their financial situation, managing debt, investing wisely, and ultimately creating wealth.
  • Emotional and Financial Focus: It emphasizes that true financial freedom involves mastering fears and anxieties related to money, not just accumulating wealth.

Why should I read The 9 Steps to Financial Freedom?

  • Timeless Lessons: Despite being published in 1997, the lessons remain relevant, especially in light of recent financial crises, offering insights into the emotional aspects of money management.
  • Comprehensive Financial Education: The book provides a thorough understanding of personal finance, covering topics such as debt management, investment strategies, and estate planning.
  • Empowerment and Control: Orman’s approach encourages readers to take control of their financial destinies, helping them overcome fears and anxieties for a more secure life.

What are the key takeaways of The 9 Steps to Financial Freedom?

  • Master Your Fears: Understanding and overcoming fears about money is essential for achieving financial freedom.
  • Take Responsibility: The book stresses the importance of being responsible for your financial decisions and their impact on loved ones.
  • Respect Your Money: Treating money with respect can attract more wealth and help manage finances better.

What are the nine steps outlined in The 9 Steps to Financial Freedom?

  • Step 1: Seeing Your Past: Reflect on how past experiences with money shape current financial behaviors.
  • Step 2: Facing Your Fears: Identify and confront fears related to money to create empowering truths.
  • Step 3: Being Honest with Yourself: Assess your current financial situation, including income, expenses, and debts.

How does The 9 Steps to Financial Freedom address emotional aspects of money?

  • Emotional Connection: Orman emphasizes that emotions significantly influence financial decisions, urging readers to understand their financial behaviors.
  • Behavioral Finance: The book aligns with behavioral finance principles, exploring psychological factors affecting financial decision-making.
  • Transformative Insights: By facing fears and understanding emotional triggers, readers can transform their relationship with money.

What is the importance of having a will and trust according to The 9 Steps to Financial Freedom?

  • Protecting Loved Ones: A will and trust ensure that loved ones are taken care of after your death, avoiding financial chaos.
  • Avoiding Probate Fees: Trusts help heirs avoid costly probate fees, preserving more of the inheritance.
  • Control Over Assets: A trust allows you to specify asset management and distribution, providing peace of mind.

What are some practical financial strategies mentioned in The 9 Steps to Financial Freedom?

  • Debt Management: Strategies for managing and reducing debt, emphasizing living within your means and prioritizing high-interest debts.
  • Investment Basics: Covers fundamental investment principles, including diversification and understanding risk.
  • Retirement Planning: Stresses the need to start saving for retirement early, discussing various retirement accounts and their benefits.

How does The 9 Steps to Financial Freedom define true wealth?

  • Beyond Financial Assets: True wealth is not just money but also peace of mind and emotional well-being.
  • Emotional Freedom: Includes freedom from financial worries and the ability to live life on your own terms.
  • Legacy and Impact: Encourages thinking about the legacy you want to leave, making a positive impact on others.

What is the dollar cost averaging method mentioned in The 9 Steps to Financial Freedom?

  • Investment Strategy: Involves dividing the total amount to be invested across periodic purchases of a target asset, reducing volatility impact.
  • Consistent Contributions: By investing a fixed amount regularly, investors can buy more shares when prices are low and fewer when prices are high.
  • Long-Term Growth: Mitigates the risk of investing a large amount at the wrong time, promoting a disciplined approach to investing.

How does The 9 Steps to Financial Freedom address debt management?

  • Understanding Debt: Emphasizes recognizing the types of debt and their impact on financial freedom.
  • Strategies for Repayment: Provides practical strategies for paying off debt, such as prioritizing high-interest debts.
  • Emotional Impact of Debt: Discusses the psychological burden of debt and encourages facing financial realities to regain control.

What are the differences between a Roth IRA and a Traditional IRA as explained in the book?

  • Tax Treatment: Traditional IRA contributions may be tax-deductible, but withdrawals are taxed; Roth IRA contributions are after-tax, allowing tax-free withdrawals.
  • Withdrawal Rules: Traditional IRAs require minimum distributions starting at age 72, while Roth IRAs do not during the account holder's lifetime.
  • Ideal Situations: Roth IRAs are recommended for younger individuals in lower tax brackets, while Traditional IRAs may benefit those seeking immediate tax deductions.

How can I maximize my retirement savings according to The 9 Steps to Financial Freedom?

  • Start Early: Emphasizes the importance of beginning to save for retirement early to take advantage of compounding interest.
  • Contribute to Employer Plans: Encourages contributing to employer-sponsored retirement plans, especially to receive any employer match.
  • Diversify Investments: Advises diversifying retirement investments across various asset classes to balance risk and growth potential.

Review Summary

3.78 out of 5
Average of 3k+ ratings from Goodreads and Amazon.

The 9 Steps to Financial Freedom receives mixed reviews. Many readers find it helpful for understanding personal finances and changing their relationship with money. Praised aspects include its holistic approach, practical advice on estate planning, and emphasis on generosity. Some criticize its dated information and focus on American financial systems. Readers appreciate Orman's blend of technical knowledge and emotional insights, though some find her spiritual approach off-putting. The book is generally seen as more suitable for those with some financial stability rather than those in severe debt.

Your rating:

About the Author

Suze Orman is an American financial advisor, author, and television personality known for her straightforward approach to personal finance. Born Susan Lynn Orman, she has written numerous books on financial planning and hosted her own TV show. Orman's advice often combines practical financial strategies with spiritual and psychological insights, emphasizing the importance of understanding one's relationship with money. Her work targets women in particular, aiming to empower them financially. Despite some criticism of her methods, Orman has become a prominent figure in the field of personal finance, known for her catchphrases and no-nonsense attitude. Her success has made her a sought-after speaker and media personality.

Other books by Suze Orman

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