Eight Levels of Financial Independence


Level 1: You have an Emergency Fund

The first level of financial independence is getting out of the hamster wheel of living paycheck to paycheck.  A major part of this is establishing an emergency fund. Ideally, you will have also paid off any credit card debt at this stage of financial freedom.

Level 2: Enough Money to Quit your Job (for a bit)

Financial Independence is all about making work an option. Saving enough money to quit your job forever is a huge undertaking. Accumulating money to be able to afford to take some time away from working is a big leap in the right direction. This does not mean you have to quit your job, but it sure is a good feeling to know you can.

Level 3: Living a Happy Life and Still Saving

 There is an immense amount of freedom and stress relief when you are in a place where you are earning enough money to save, experience the best that life has to offer, and still have money left over at the end of the month.

That extra cushion can be used to move up your financial independence date. That, of course, assumes you avoid increasing your lifestyle and spending it.  We all know people, who every time they get a raise or promotion take on new expenses, and never really get ahead financially.

Level 4: Financial Independence is about Freedom of Time

Freedom of time and financial independence go hand in hand. Together, they are about leaving the rat race to follow your passion, or spend more time with family, and not going completely broke doing it. It could come in the form of more paid time off, flex-time or perhaps working remotely on occasion. Not having to take a day off from work just so you can visit the dentist or take your kid to the doctor could be a huge benefit for some.

Level 5: Enough to Fund an Entry Level Retirement

For those of you looking to achieve financial independence at an early age, think about what your bare minimum retirement wants would look like. Could you move to a place or location with a lower cost of living? 

Would you be willing to give up going out to dinner? Work towards a nest egg that will support this bare-bones lifestyle. You probably won’t enjoy living in the woods without running water, or maybe that is your dream retirement. At the very least it might be nice to know you could afford it. Considering your bare minimum retirement, and knowing you have enough money saved to at least cover some standard of living in your early retirement, will also influence other life choices you may make along the way.

Would you lease a new luxury car if you knew it meant you would have to work a few more years? Downsizing your house might look more appealing if it meant you could retire now rather than in 10 years. If you think of dining out as extra days you will have to work, you may not order the surf and turf quite as often.

Level 6: Incomes Streams to Actually Retire Well

Assuming you are doing pretty well and are happy with your current standard of living, what would you need to maintain your standard of living in retirement? Knowing you are on track to accumulate a nest egg to support that lifestyle is a big win. Gold medals go to those who have accumulated enough assets, or passive income streams, to be in a position to retire well.

Level 7: How Much Would Your Dream Retirement Cost

If you did not spend 40, 60 or more hours per week at work, what would your dream life look like? Would it include things like traveling more and spending more time with friends and family? Traveling the world, flying first class, and staying in nice hotels do not come cheap. Think big here. What would really bring joy into your life? The sky is the limit.

How great would it feel knowing you are on track to have enough money to retire and be able to live your dream life? What is stopping you from getting there before you are 70 years old?

Level 8: More Money Than You Could Ever Spend

This is surely the most exclusive level of financial independence. Few people will really have the ability to achieve this on a typical salary.  Having more money than you expected to spend is great.

Building enough wealth so that you could not possibly spend all of it is another. This group will likely be filled with people who either won the lottery, inherited a fortune, or are founders of companies – think Jeff Bezos, Bill Gates, Larry Ellison or Warren Buffet. Even if they went on a spending spree buying planes, yachts, and automobiles; they would still have a hard time spending all of it.

Take a look at where you think you fall on the aforementioned levels of financial independence. Use it as motivation to keep moving towards your most important financial goals. 

Please let me know if you have any questions. I’m here to help! To your incredible FINANCIAL success! “RETIRE BEFORE YOU EXPIRE”

– SHATEKA Husser

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