8 Levels of Financial Freedom

8 Levels of Financial Freedom

When you read articles about financial freedom, you may hear people drone on and on about how they are spending practically nothing so they can retire at a younger age, like 30.

Conversely, they may have already achieved financial freedom and are bragging about how frugal they were so they could retire well before the typical retirement age.



Here are the 8 levels of financial freedom that you should work towards achieving.

Level 1: Not Living Paycheck to Paycheck

The first level of financial freedom is building up an emergency fund. Ideally, this will include paying off any credit card debt as well.


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

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

For extra credit you may want to save up for a sabbatical or extended vacation. I dream of spending a month, or two, in a foreign country each year. By no means will I be quitting my job, but it would take some planning in order to be away from my financial firm for that long.

In the shorter term, that extra money could also serve as your emergency fund. I mentioned that just in case some of you wanted some extra motivation to get to this level.

Level 3: Enough to be Financially Happy and Still Save

This is a bit more about enjoying your life and having the money to do it. There is an immense sense of relief when you are earning enough to save, doing the things you enjoy and still having extra at the end of the month.

That extra cushion can be used to move up your financial freedom date. That of course assumes you avoid increasing your lifestyle and spending it.

Level 4: Freedom of Time

What many people desire is more flexibility with their schedules. 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 for a Basic Retirement



Would you lease a new luxury car if you new 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.

Level 6: Enough to Actually Retire Well


Level 7: Enough for Dream Retirement

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 does not come cheap. Think big here. What would really bring joy into your life.

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



Source: Forbes
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