Most people don't get into a car and just start driving. They usually have a clear idea about where they want to go before they even leave the house. The road to financial freedom is just that - a road. Before you take that road, it is important to know where you are and where you want to go.

If you ask most people who want to be financially free what it means to be financially free, they rarely describe it in a measurable way. The usual responses are along the lines of "I don't have to work if I don't want to" or "I don't have to worry about money". With such vague destinations, it is no wonder why most people are not financially free.

In Lesson 1, we learned that the only way to keep score is by calculating your net worth (click here if you want a review). By now, you should all know your current net worth (if not, click here for the net worth calculator). Just like planning a trip, once you know your starting point the next step is to determine your destination.

So where do you want to go?

Think about the lifestyle you want to lead and what the average monthly expense will be when you retire. Also you'll need to decide when you want to retire and how long you plan on living. Of course, the longer you continue working, the less you'll need to save per month.

If you want a quick rough calculation of your target net worth, ING has a Find Your Number Calculator that is quick and easy to use (note: I don't use ING and I am not endorsing ING and any of its products and services).

Once you have your desired number, you can use the retirement calculator at the bottom of this article to see what you need to save per year depending on your current net worth (current savings), your target net worth (desired retirement savings) and the time you want to retire (years until retirement).

Now that you have an idea of where you want to go, we need to begin planning for your trip to financial freedom.

In the next lesson, we're going to take a slight detour and discuss good and bad debt and the best way to get out of bad debt. This way you can unload any unnecessary baggage that you have before we begin our journey. This will be a must read for anyone with a negative net worth.

If you are part of the lucky group that is debt-free, you can continue your journey by going straight to lesson 4.

The post Be Financially Free – Lesson 2 – Do You Know YOUR Number? appeared first on Embrace Possibility.

For those who do agree or would like to become financially free anyway, read on.

Most people are not financially free for one simple reason:

They don't know how to keep score.

People tend to equate financial success with big homes, fast cars and luxurious lifestyles. It is this "consumption thinking" that holds people back from attaining their financial freedom. In Thomas Stanley's two books, The Millionaire Next Door and The Millionaire Mind, most of the millionaires profiled don't drive expensive cars nor lead extravagant lifestyles. They tend to value frugality.

There is only one way to keep score and it is ... (drum roll please)

...keeping track of your net worth.

Net Worth = Total Assets - Total Liabilities

Assets are things of value such as cash, investments (e.g. stocks and bonds) and the value of your home. Liabilities are the obligations that you owe such as credit card debt, student and bank loans and mortgage.

If you already know what your net worth, then all you need to do is make sure it stays positive and keeps going up. The faster it goes up, the better you're doing. In a future post, I will talk about how to decide what your target net worth is.

For those of you who don't know your net worth, get your financial information ready because you should calculate it right now. Stop whatever else you're doing because this is the most important number you'll need to know if you want to be financially free. It won't take too long and all you need to do is plug your numbers into the calculator below:

The post Be Financially Free – Lesson 1 – What is your Net Worth? appeared first on Embrace Possibility.