NEW YORK (CNN/Money) – Everyone has a different image of financial freedom. Maybe it means having enough money to spend your days playing golf. Or maybe it's choosing to work only when you feel like it.

"Financial freedom is waking up in the morning, brewing a pot of coffee, and thinking about what you'd like to do -- whether it's volunteer work or taking voice lessons," says Ann-Marja Lander, a certified financial planner in Long Beach, Calif. "Because whatever you do will be just fine, since you have the time and the money."

Sounds good. But getting to that point takes planning and work.

Put some real-world numbers to your fantasy life. If it's retiring at 55 and traveling abroad six months a year, assess travel and living costs and any extras, including insurance.

Next, come up with what financial planners call "the magic number." That's the amount of money that can generate more in earnings and interest than your annual expenses. When you hit that number, you're set -- you can pack it in at the office and never look back.

A good rule of thumb is that your nest egg should be at least 20 times your annual expenses. That should enable you to pull 5 percent of your savings each year without tapping principal. So, if you think you'll need $100,000 a year to be happy, your magic number is $2 million. To really live the good life, on say $250,000 year, you'd need to amass $5 million.

Most people think of budgeting the same way they think of dieting: as a source of constant deprivation. That's the wrong way to look at it, said certified financial planner Phil Cook of Torrance, Calif.

Divvying up the pie • Money 101: Making a budget • The ideal budget

"A budget is about choosing the goals that are most important to you," Cook said. "If you need to save a certain amount every month to buy a home, putting that money away becomes a priority over running up your credit card or cell-phone bill."

By making your desires a priority, a budget rewards you with what you want. And it lets you plan for the long term while letting you cover your bills today. (For help formulating a budget ideal for you, click here.)

However you define financial freedom, chances are it doesn't involve paying loads of interest to wealthy third parties.

Ideally, your monthly debt and housing expenses should not exceed 36 percent of your monthly gross income. If you're over that limit, or if your financial goal requires that you save far more than such a limit would allow, getting your debt under control should be a top priority.

Cutting debt down to size • Find your perfect level of debt • Lower your credit card and refi costs • CNN/Money's Debt Reduction Planner • Money 101: Controlling debt

Taking on mortgages or student loans is productive -- both let you invest in an asset (your home or you) that can earn money in the future. What's more, the interest you pay is tax-deductible.

But tax break or no, there's no reason to pay more interest than you have to. Repayment rates on Stafford and PLUS loans for higher education dropped nearly 2 percentage points on July 1. Your payments on those loans will be reduced automatically for the next year. But you may be able to lock in today's low rates by consolidating your student loans in the next 12 months. (For more on whether consolidation makes sense for you, click here.)

If you're a homeowner, and you haven't refinanced already, you may want to take the plunge, since mortgage rates have been holding at or near historic lows. "The longer you plan to be in your home and the larger your loan balance, the more it'll make sense," said Frank Nothaft, deputy chief economist at Freddie Mac.

Nothing stands in your way more than credit card debt. You often pay punitively high interest rates for months or years, often for things you consumed long ago.

Controlling your credit cards • The real cost of paying with plastic • Credit cards: 8 dirty secrets

If you find that paying your Visa bill eats up a scary portion of your paycheck, it's time to commit to cash. You'll think twice before buying that cute pair of shoes if it means handing over $150 real dollars from your pocket.

Then call your credit card company and ask if they'll reduce your interest rate -- if you've been a good customer of long-standing, sometimes all you have to do is ask.

Finally, pay as much as you can each month until you get your balance to zero -- and then keep it there. If you've got more than one credit card, pay off your highest interest balance first. (For help reducing your credit card debt in the smartest manner, use our Debt Reduction Planner.)

As tough as it may be to rein in yourself today, the sacrifices you make will be worth it if they help you meet your goal.

Once you're on a budget and have your debt under control, it's time to start making your money work for you. And the sooner you start putting money away, the less you'll need to save monthly, because you've got time -- and compounded growth -- on your side.

Growing your nest egg • Retirement Guide 2002 • Find out your savings type • You think like a million bucks • 401(k): Stay the course

You'll need to mix volatile and steady, taxable and tax-deferred investments to keep your portfolio chugging along whether the sun shines on the stock market or not. To divide your investments in a way that suits your needs, use CNN/Money's Asset Allocator.

For long-term portfolio growth during market upswings, save some money in stock and mutual fund shares (pieces of a larger investment in a variety of company stocks). For a list of MONEY magazine's favorite 100 mutual funds, click here.

To keep your portfolio from dwindling too much during downturns, invest in bonds and bond funds -- they're typically less lucrative than stocks over the long haul, but provide reliable streams of income through thick and thin. Click here for advice on choosing the right bond fund.

According to CNN/Money's Millionaire Calculator, a 30-year-old with $10,000 in taxable accounts and $10,000 in a 401(k) could retire with $2.2 million at age 60 -- if she puts $10,000 a year into her tax-deferred accounts and another $10,000 a year into taxable investments. (That assumes an 8 percent annualized rate of return, a 30 percent federal tax bracket and a 6 percent state tax bracket.)