- There are 6 stages to Financial Freedom
- Dependence
- Starts from childhood, extends into adulthood
- As soon as our income surpasses our expenditure, we move to the next stage
- Solvency
- Being able to cover your financial obligations independently
- The real beginning of your financial journey
- Stability
- Its achieved when you have
- Built an emergency fund
- Paid off high interest debt
- Been consistently living within your means
- During this stage, you’re not just managing your expenses, you are preparing yourself for the unexpected
- During this stage, you are also laying the groundwork for a secure financial future
- Debt is still okay at this stage, but having a buffer (an emergency fund) will provide you with a peace of mind
- You should not be spiralling into debt during a financial crisis
- Continuing to stay disciplined and make wise financial decisions at this stage will enable to build a solid financial foundation and move closer to Financial Freedom
- Security
- This is the stage where your stability transitions to confidence and peace of mind.
- You should have eliminated high interest debt or have enough assets to cover it in this stage.
- You’re not just prepared for unexpected expenses, you’re ready for anything life throws at you - unemployment or any other financial setback
- Surviving to thriving
- Independence
- Achieved when investment and/or passive income can cover your needs
- You’ve reached a level of financial self-sufficiency where you can CHOOSE to retire without worrying about how to sustain your lifestyle
- Freedom
- Having more than enough resources to cover your needs and desires
- Take calculated risks or pursue your passion