Financial independence is more achievable and realistic when you have smaller goals or stages to pass through.
It takes years to achieve financial independence. It is a painfully slow process. With several stages, it becomes easier to quit and forget about it. This is probably why you will not see a lot of people striving to be financially independent.
On the other hand, if you are one of those people that strive to not give up so easily, you may enjoy success over the long run. These stages of financial independence will also help you develop good money habits that will last you a lifetime. Here are the 8 stages of financial independence -
Financial Dependence - This is where everyone starts. We are dependent on our family or friends. There is an inability to pay for living expenses.
Financial Solvency - In this stage, one starts building a base of savings. Through regular income, you are able to pay your bills without any help from others.
Financial Stability - You are able to save money regularly by creating an emergency fund or savings account for yourself. This is the first step towards financial independence.
Debt Freedom - At this stage, you have paid off all your debts. You are now in a position to build the life you want, taking steps towards investing your money.
Financial Security - Your income no longer dictates your lifestyle. Income from your investments is able to cover all your basic expenses.
Financial Independence - All the income generated from your expenses is able to cover your living expenses. At this point, you can stop working if you wish to.
Financial Freedom - Income and wealth generated from your investments are more than enough to cover your living expenses and plenty of other life goals.
Financial Abundance - You have more money than you will ever need over a lifetime. At this point, you have a problem with managing your money. But you have the liberty of hiring people to take care of your wealth for you.
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