the stages of financial independence: Which one are you in?

The Stages of Financial Independence: What Stage Are You Currently In?

• Stage 0 – Dependence

Dependence stage is the stage that you cannot support yourself on your own. If you rely on credit card or your partner’s income to support you; you currently at the dependence stage

• Stage 1 – Solvency

Solvency is the ability to meet your financial commitments on your own. You know you’ve reached this stage when you have disposable income after having paid all of your financial obligations.

• Stage 2 – Stability

You’ve built some emergency savings funds; you’re managing your debt and you can keep your living expenses low.

• Stage 3 – Security

At this stage, you can start thinking about building the life you have always dreamed of.

You’ve eliminated your debt and you have enough savings to cover a period of unemployment.

You are now relying on your investments to cover your basic needs. This depends on how much your already saved up and invested.

• Stage 4 – Independence

This is the goal that most strive for. At this stage, working is a choice and not a requirement.

Not only are your basic needs covered at this point from investment income, you can allow yourself to splurge a little as well. You could ultimately stop working if you chose to. A financially independent person can retire at any age without worrying about how to cover their costs of living. Remember retirement isn’t an age but a financial independence figure that will cover your basic needs.

• Stage 5 – Freedom

You are free to live the life you choose and take risks. Money isn’t a controlling factor anymore.

At this stage, you have a surplus after having covered your lifestyle needs. This is the ultimate freedom; you can begin to think of leaving a legacy. You’re in a great position to share, give back, help out friends and family, or set up long-lasting generational wealth.

What stage of financial independence are you currently at?

How can we help you reach this stage?

Why are you working toward financial independence in the first place?