Stages of financial independence

If you live above your means and spend more than you earn, you will never be financially independent. What counts is how you handle your money: what aims you establish and how you save and spend.

If you have an average income today, it does not imply you will never be financially independent. Just keep in mind that financial independence isn’t an all-or-nothing proposition. Gradually work your way towards it, progressing from one level to the next. Remember that every step you take, no matter how tiny, brings you closer to peace and new possibilities.


You are fully reliant on others at this point. We all begin with it since we are unable to care for ourselves as children. Someone works on it for the duration of their studies, while others work on it for longer.

You are, however, in a dependent situation, not just if your parents or spouse provide for you, but also if you spend more than you make. To make ends meet, you can take out microloans or borrow from friends. You depend on someone or something to fund your expenditures in either case.

If you’re stranded because of debt, consider negotiating with your creditors for a reduced interest rate or other concessions to make life simpler.

Financial solvency

The survival phase is the initial stage. If you can pay all of your expenses and don’t need anyone’s aid, you’ve made it. You may be in debt (for example, on a credit card), but you make monthly payments and do not incur further debt. Some people reach this stage while still in school, while others never do.

Try to pay off high-interest debts first before moving on. Consider how you might improve your income or reduce your spending to help you pay off your debts more quickly.


At this point, you are meeting your financial responsibilities regularly, have paid off a portion of your debts, and have learned how to cut down on your expenditures. It’s now more crucial than ever to have a financial buffer. In the event of unanticipated needs, it will spare you from taking out further debts.

Start saving at least 5% of your monthly income, and gradually grow to 10%. Make this procedure automated, so you’re not tempted to spend your money elsewhere.

You may still have substantial debt, such as a mortgage, but you have liberated yourself from consumer loans and do not need to take out a new one at this point.


You are now in charge of your finances and do not have to live paycheck to paycheck. You’ve also set aside some funds in your reserve fund. You won’t be as reliant on your job this way. You can live happily for a time if you lose your present location or desire to leave yourself.

You will go from survival to wealth after this stage. Money will no longer be a safety net for you and your family but rather a tool with which you may create the life you choose for yourself and your family. The next step is to put the money you’ve saved into something productive.


You’ve reached the point when your investment income is sufficient to meet your basic demands (housing, utilities, food, travel expenses). You can’t, however, work and live off passive income at the same time. It will suffice for the most basic requirements, but not for a luxurious lifestyle. Continue to increase your revenue and invest money to progress.


Your return on investment will gradually increase to the point where you can maintain your present level of living for the rest of your life. You can now afford to quit your day job and not be concerned about anything. You have enough money to travel, be creative, or do whatever else you’ve always wanted to do.

This level is the ultimate objective for many individuals. Because everyone’s lifestyle and demands are different, it’s hard to verify whether you’ve reached it or not by concentrating on a certain number.


Finally, passive income reappears with fury. Not only do you have sufficient cash, but there is much more that you and your family need. Many people at this point opt to start their own company or volunteer for charity.

Now is the moment to consider not just financial management but also asset management. Determine how you will manage passive income sources, how you will share earnings from different assets, and who your loved ones will get them in the future. And remember to manage your money wisely to avoid regressing a few levels.

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