Working because you want to and not because you have to is financial freedom.Tony Robbins
What is our life headed towards? Well this is not about to C-stuff that’s going around but a little bit deeper than that. Most of us are trying to work towards freedom. Freedom from working for someone, freedom from location, freedom to spend more time with your family, or freedom to live a financially comfortable. Let’s discuss financial freedom which basically allows to control the other types of freedom to an extent.
There are 6 Levels of Financial freedom –
- Financial solvency
- Financial stability
- Debt freedom
- Financial security
- Financial independence
- Financial abundance
Although these are quite self explanatory, I wanted to dig into them in some detail. Imagine them to be floors in the building. We are all trying to go to the next level. The first step would be to identify which floor you are on and figure out what you need to do to get to the next one.
If I was on the first step, the priority would be to get a sustainable source of income to achieve some stability and be able to cover month to month expenses completely. The key idea in this step would be to reduce expenses and generate income.
Once you are able to cover all your regular expenses within your income, I would get an emergency savings account set up where you save at least one months worth of expenses saved. Next, work on increasing this income towards going debt free. Pay off all debt first before purchasing another ‘want’ item. We live in a society where by the time you are in your 20s and 30s you are already in debt for your education, car, and house, if not for credit cards and afterpay. So most of us are on this floor and this is probably where people spend the longest time. Minimizing debts, or paying them off first should be priority. Increasing income would come next, either by getting promoted, or adding more income streams. (2020 – We are on this stage at the moment and working super hard with laser focus on getting out of here)
PROTIP – To get out of this floor as quickly as possible, the key would be to keep your expenses as low as possible (if you figured out what your expenses were in step 1- try stick to those expenses). People tend to increase their expenses linear with their income and end up being stuck on this step forever.
Once out of here, all the income stays and no payments to be made, time to grow investments, to ensure security. Meaning slowly your investments will start making enough income to cover your basic needs.
Climbing up to financial independence when your investment income will support you from today until your last day. There is enough for you to live a life of comfort.
Abundance, is when you and your legacy will live forever. Your income will keep coming and and with it will come a promise you a life of luxury and comfort.
Very few people get to the final floor. But there are people there. It is possible and each one of us has it inside of us to give it our best shot. And of course, money is not everything in life. But it will ensure you have the resources that will allow you to spend your life the way you want it. Share with us what your strategy to achieve financial abundance is.