Category Archives: Financial Freedom

Investing Involves Decision Making

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Investing involves decision-making. But not making those investing decisions can be a more costly move in itself.

Choosing to invest your money in the stock market is like picking your first tattoo. The stakes are high and all the available options can seem overwhelming to your senses. Thankfully, there is an an abundant amount of good financial services, resources and advice available to help you avoid making a mistake mistake and to get you started.

There is truly no time like the present to start investing. Because the sooner you start, the more time your money has to grow and the more potential you have to earn, because of the power of compound interest. This is when your money earns money on itself and grows exponentially.

But, growth isn’t always guaranteed. Investing means taking in a certain amount of risk since the market moves in cycles. Although investing comes with some risk, it doesn’t have to feel like a high-stakes gamble.

Rest assured, historically, stocks have bounced back from every downturn in history. And, then continued to climb. Investing consistently overtime can make it easier to ride out the market volatility, the ups and downs.

The first step is determining what you want your future to look like financially in retirement. Retirement is probably your most important and expensive goal, and a good place to start.

It’s important to build a portfolio based on your time horizon, how you want to invest, how comfortable you’re with risk and what you plan to use your investment earnings are for. But, you must get started.

Ready, set, go(als).

Investing could help you owe the IRS less during tax time. For example, you have until the tax filing deadline each year to open and fund an IRA, which could help you claim an extra deduction.

Harvesting losses in your brokerage account could help you reduce your capital gains taxes for the year.

If you want more control over your investment portfolio, self-directed investing is the way to go. Self-directed investing is for people at all experience levels.

However, if you prefer a hands-off approach, financial advisors or automated robo-advisors can help you capture your financial goals and tailor an investment portfolio to achieve your financial goals, complete with regular rebalancing.

But, before you jump headfirst into investing your money, it’s wise to assess your present financial status first (your cash flow and net worth) and make sure you’ve got a solid savings foundation to build on.

Finding a balance between saving your money and building wealth through investing for your future is not rocket science. It is simple to build savings and help take the fear and uncertainty out of investing.

References:

  1. https://taskandpurpose.com/from-our-partners/set-your-future-up-for-success-save-and-invest/
  2. https://www.brighthousefinancial.com/education/retirement-planning/covering-everyday-expenses-in-retirement/

Budgeting 50-30-20 Strategy and Cash Flow

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Managing your money and tracking your finances is essential in building wealth, but it doesn’t have to be complicated or painful process. It can be as simple as creating a budget. And, a budget starts with listing of your income and your expenses.

One simple strategy for tracking your personal cash flow (income and expenses) is the 50-30-20 budgeting strategy. With this budgeting strategy, you divide your income into three broad categories: necessities, wants, and savings and investments, according to those ratios.

—- 50% of your income should go toward things you need

This category includes all of your essential costs, such as rent, mortgage payments, food, utilities, health insurance, debt payments and car payments.

If your necessary expenses take up more than half of your income, you may need to cut costs or dip into your wants fund.

—- 20% of your income should go toward savings and investments

This category includes liquid savings, like an emergency fund; retirement savings, such as a 401(k) or Roth IRA; and any other investments, such as a brokerage account.

Experts typically recommend aiming to have enough cash in your emergency fund to cover between three and six months worth of living expenses. Some also suggest building up your emergency savings first, but, you don’t just want to save this money.

You want to invest it and make it work for you. That means contributing to your employer’s 401(k) plan if they offer one or saving in other retirement accounts, such as a Roth IRA or traditional IRA.

—- 30% of your income should go toward things you want

This final category includes anything that isn’t considered an essential cost, such as travel, subscriptions, dining out, shopping and fun.

This category can also include luxury upgrades: If you purchase a nicer car instead of a less expensive one, for example, that dips into your wants category.

But think about what matters to you before spending this money. As research shows, how you spend is oftentimes more important than your overall income or the amount you spend in total.

Money experts suggest you spend on experiences, such as trips or classes, rather than things. “All of the best psychological research on money and happiness tell us that spending money on experiences brings more (and more lasting) happiness than spending money on material objects,” says Ron Lieber, New York Times columnist and author.

There isn’t a one-size-fits-all approach to money management, but the 50-30-20 plan can be a good place to start if you’re new to budgeting and are wondering how to divide up your income.

References:

  1. https://www.cnbc.com/2021/06/25/best-free-budgeting-tools-2021-how-to-make-your-own-spreadsheet.html
  2. https://www.cnbc.com/2021/05/11/how-to-follow-the-50-30-20-budgeting-strategy.html
  3. https://www.cnbc.com/2019/07/22/use-the-50-30-20-formula-to-figure-out-how-much-you-should-save.html

Financial Freedom

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“It’s the ability to live and maintain the lifestyle which you desire without having to work or rely on anyone for money.” T Harv Eker

Financial Peace guru Dave Ramsey proclaims that “Financial freedom means that you get to make life decisions without being overly stressed about the financial impact because you are prepared. You control your finances instead of being controlled by them.”

It’s about having complete control over your finances which is the fruit of hard work, sacrifice and time. And, as a result, all of that effort and planning was well worth it!

Nevertheless, reaching financial freedom may be challenging but not impossible. It also may seem complicated, but in just a straightforward calculation, you can easily estimate of how much money you’ll need to be financially free.

What is financial freedom? Financial freedom is the ability to live the remainder of your life without outside help, working if you choose, but doing so only if you desire. It’s the ability to have the things you want and need, despite any occurrence other than the most catastrophic of outside circumstance.

To calculate your Financial Freedom Number, the total amount of money required to give you a sufficient income to cover your living expenses for the rest of your life

Step 1: Calculate Your Spending

Know how much you are spending each year. If you’ve done a financial analysis (net worth and cash flow), created a budget, and monitored your cash flow, then you’re ahead.

Take your monthly budget and multiply that amount by 12. Make sure you include periodic expenses such as annual premiums and dues or quarterly bills. Also include continued monthly contributions into accounts like your emergency fund, vacation clubs, car maintenance, etc.

Add all these together to get your Yearly Spending Total.

Keep in mind the lower the spending total, the lower the amount of money you’ll need to become financially independent. Learn how to lower your monthly household expenses and determine the difference between needs and wants.

Step 2: Choose Your Safe Withdrawal Rate

The safe withdrawal rate (also referred to as SWR) is a conservative method that retirees use to determine how much money can be withdrawn from accounts each year without running out of money for the rest of their lives.

The safe withdrawal rate method instructs financially independent people to take out a small percentage between 3-4% of their investment portfolios to mitigate worst-case scenarios. This withdrawal percentage is from the Trinity Study.

The Trinity Study found the 4% rule applies through all market ups and downs. By making sure you do not withdraw more than 4% of your initial investments each year, your assets should last for the rest of your life.

Step 3: Calculate Your Financial Independence (FI) Number

Your FI number is your Yearly Spending Total divided by your Safe Withdrawal Rate.

To find the amount of money you’ll need to be financially independent, take your Yearly Spending Total and divide it by your SWR.

For example:

  • Yearly Spending: $40,000
  • Safe Withdrawal Rate: 4%

Financial Independence Number = Yearly Spending / SWR

  • $40,000 / 0.04 = $1,000,000

Who becomes financially free? According to most financial advisors, compulsive savers and discipline investors tend to become financially free since:

  • They live on and spend less they earn.
  • They organize their time, energy and money efficiently in ways conducive to building wealth.
  • They have a strong belief that gaining financial freedom and independence is far more important than displaying high social status and financial symbols.
  • Their parents did not keep on helping them financially.
  • They have a keen insight to recognize financial and wealth building opportunities.

Net worth is the most important number in personal finance and represents your financial scorecard. Your net worth includes your investments, but it also includes other assets that might not generate income for you. Net Worth can be defined to mean:

  • Income (earned or passive)
  • Savings
  • Investing to grow and to put your money to work for you)
  • Simple and more frugal lifestyle

Financial freedom means different things to different people, and different people need vastly different amounts of wealth to feel financially free.

Maybe financial freedom means being debt-free, or having more time to spend with your family, or being able to quit corporate America, or having $5,000 a month in passive income, or making enough money to work from your laptop anywhere in the world, or having enough money so you never have to work another day in your life.

Ultimately, the amount you need comes down to the life you want to live, where you want to live it, what you value, and what brings you joy. Joy is defined as a feeling of great pleasure and happiness caused by something exceptionally good, satisfying, or delightful—aka “The Good Life.”

It is worth clearly articulating what the different levels of financial freedom mean. Grant Sabatier’s book, Financial Freedom: A Proven Path to All the Money You’ll Ever Need, the levels of financial freedom are:

Seven Levels of Financial Freedom

  1. Clarity, when you figure out where you are financially (net worth and cash flow) and where you want to go
  2. Self-sufficiency, when you earn enough money to cover your expenses
  3. Breathing room, when you escape living paycheck to paycheck
  4. Stability, when you have six months of living expenses saved and bad debt, like credit card debt, repaid
  5. Flexibility, when you have at least two years of living expenses invested
  6. Financial independence, when you can live off the income generated by your investments and work becomes optional
  7. Abundant wealth, when you have more money than you’ll ever need

The difference between income and wealth: Wealth is accumulated assets, cash, stocks, bonds, real estate investments, and they have passive income. Simply, they don’t have to work if they don’t want to.

Accumulating wealth and becoming wealthy requires knowing what you want, discipline, taking responsibility and have a plan.

Hundreds of thousands of Americans have great incomes, but you wouldn’t call them wealthy because of debt and lack of accumulated assets, instead:

  • They owe for their homes
  • They owe for their cars and boats.
  • They have little savings and investments
  • They have few “paid for” assets
  • They have negative net worth

Essentially, if you make a great income and spend it all, you will not become wealthy. Often, high income earners’ true net worth is far less than they think it is.

Here are several factors and steps to improve your financial life:

  • Establishing financial goals
  • Paying yourself first and automate the process
  • Creating and sticking to a budget. Know where you money goes.
  • Paying down and/or eliminating credit card and other bad debt. Debt which is taking from your future to pay for your past.
  • Saving for the future and investing for the long term consistently
  • Investing the maximum in your employer’s 401(k)
  • Living on and spending less than you earn
  • Simplify – separating your needs from your wants. You don’t need to keep buying stuff.

Financial freedom can look something like this:

  • Freedom to choose a career you love without worrying about money
  • Freedom to take a luxury vacation every year without it straining your budget
  • Freedom to pay cash for a new boat
  • Freedom to respond to the needs of others with outrageous generosity
  • Freedom to retire a whole decade early

When you have financial freedom, you have options.

“Your worth consists in what you are and not in what you have. What you are will show in what you do.” Thomas Edison

References:

  1. https://www.phroogal.com/calculate-financial-independence-number/
  2. https://www.ramseysolutions.com/retirement/what-is-financial-freedom
  3. https://thefinanciallyindependentmillennial.com/steps-to-financial-freedom/

Wealth and Financial Freedom Mindset

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A major factor regarding effectively managing your money and achieving financial freedom is maintaining a positive and confident mindset. Maintaining a positive growth mindset takes effort and knowledge. Here are some ways to start thinking about financial matters and building wealth:

Focus On What You Want – And Take It! So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”. Play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

Confront closely-held beliefs. Spend some time dissecting and understanding the previously-held beliefs you have about money. You learn a lot about money from your family at a young age—either that money is good or money is evil, for example.

Some people may grow up believing that money is a scarce resource, while others understand money as a tool. There are many numbers of qualities that get assigned to money that are not objectively true.

If you have major fear or shame regarding money, you may want to consider working through these emotions with a financial therapist. Your feelings are valid—but that doesn’t mean you have to live with them.

Integrate affirmations into your daily routine. You may find affirmations to be a grounding part of your day. For example, affirmations such as “I am worthy of wealth,” “I am capable of managing my money,” and “There is money out there to be made by me” could act as helpful reminders that you are in charge of your money and not the other way around.

To develop a positive mindset and to become a person who is “good with money”, it is essential to understand that achieving financial freedom and accumulating wealth is a journey. So, consider taking it step by step. Start by building familiarity with your financial situation, and look for small ways to improve it and make it better every day.

Don’t Spend Your Money – Invest It. The reason you need to save your money is to grow it by investing it for the long term. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with building wealth. You’ll want to quit your regular job at some point.

Bottomline is to stop working for your money and invest, which puts your money to work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

References:

  1. https://www.lifehack.org/articles/money/develop-millionaire-mindset-6-easy-steps.html
  2. https://www.sofi.com/learn/content/am-i-bad-with-money/

Wealth Blueprint

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If building wealth and financial freedom are your destination, the journey always starts with your financial mindset, attitude and habits. Jeff Hayden

T. Harv Eker, author of “Secrets of the Millionaire Mind”, is convinced that anyone can be build wealth and become financially free. But, he opines that what holds most people back from accumulating wealth is an internal mental script or “money blueprint” that tells them that they can’t or shouldn’t.

In his bestselling book, Eker teaches people to identify their internal money blueprint and revise them. However, many critics rightfully argue that his focus on personal psychology as the sole driver of success ignores very real economic and systemic factors such as inequality, sexism and racism which can be possible determinants of one’s income bracket and net worth.

“If your subconscious “financial blueprint” is not set for success, nothing you learn, nothing you know and nothing you do will make much of a difference.” T Harv Eker

Yet, Eker argues that you have a personal wealth blueprint already ingrained in your subconscious mind that will determine your financial life and overall success. What he means is that you can know everything about saving for the future, investing to grow your money, and accumulating wealth, but if your subconscious wealth blueprint isn’t preset to a high level of life and financial success, you will never amass a large amount of wealth or achieve financial freedom.

What people have to realize is that we are all subconsciously taught and conditioned in how to deal with money and wealth, according to Eker. Unfortunately, many of us were taught by family members and acquaintances who didn’t own a lot of assets and did not have a lot of money, so their way of thinking about wealth became your natural and automatic way to think. And since you are a creature of habit, your internal thoughts and beliefs about wealth and money will determine your external results of net worth and cash flow.

“If you want to change your results, you have to start by changing your thoughts.” T. Harv Eker

Your wealth blueprint single-handedly, according to Eker, determines your financial life, because your thoughts lead to feelings, which lead to actions, which lead to your results. Thought is the ‘Mother of all Results’. It’s about a process of manifestation, that your thoughts lead to your feelings, which lead to your actions, which lead to your results.

Thoughts → Feelings → Actions → Results

The reason you think the way you do about money is conditioning. You were taught how to think about money. You weren’t born with money thoughts and beliefs. You learned them. You were conditioned around money, success, and wealth by:

  • Verbal programming – what you’ve heard,
  • Modeling – what you’ve seen,
  • And specific incidences and experiences you’ve had.

No personal wealth mental blueprint is true or false or right or wrong, says Eker. It’s just how you’ve been programmed. Some people are savers. Others are spenders.

There are several important question to ask yourself: What is your current wealth and success blueprint, and what results is it subconsciously moving you toward? Are you set for working hard for your money or are you set to have your money work hard for you? Are you programmed for saving money or for spending money? Are you programmed for managing your money well or mismanaging it?

Bottomline, your wealth blueprint, meaning your thoughts and beliefs, will determine ultimately your financial life and net worth – and can even determine your personal life, according to Eker.

“The vast majority of people simply do not have the internal capacity to create and hold on to large amounts of money and the increased challenges that go with more money and success. That, my friends, is the primary reason they don’t have much money.” T. Harv Eker

References:

  1. https://www.selfgrowth.com/articles/what_is_your_money_blueprint.html
  2. https://www.knowledgeformen.com/podcast-t-harv-eker/
  3. https://www.tonyrobbins.com/mind-meaning/a-new-blueprint-for-happiness
  4. https://www.businesstimes.com.sg/lifestyle/weekend-interview/t-harv-eker

Calculating Net Worth

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Calculating net worth involves adding up all your assets and subtracting all your liabilities.  The resulting sum is your net worth.

The value of your primary residence is not included in your net worth calculation.  In addition, any mortgage or other loan on the residence does not count as a liability up to the fair market value of the residence.  If the loan is for more than the fair market value of the residence (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.

Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount does not exceed the value of the residence) will count as a liability as well.  The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.

The following table sets forth examples of calculations under the net worth test for being an accredited investor:

Accredited Investor table

References:

 

Planning for Financial Freedom

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Planning for financial freedom is the key to getting there. 

Your financial plan has to consider both the future and the present. For the present, you need enough cash available to cover your current expenses. Your long-term financial plan should prepare you for retirement, your kids’ college education or a big dream purchase. Putting money every month toward your current budget and your long-term goals is the goals.

For most investors, the biggest challenge has been staying the course and focusing on long-term goals in the face of market fluctuations. And, it’s important for investors to avoid getting discouraged since saving and investing are a long-term journey.

Working toward your goals:

  • Create a plan. Figure out how much you’ll need and set a target date to have that amount saved up, so you can create a savings plan with a specific monthly goal.
  • Automate your savings and investing. Include your monthly savings and investing goals in your budget to hold yourself accountable today for the future you want tomorrow.
  • Manage or eliminate your debt. Keeping your debt-to-income ratio low can help you get a better interest rate on both the home you have today and the home of your dreams. Furthermore, eliminating your debt gives you increased flexibility with your income to Dave and invest.

Another key to that financial freedom is building an emergency fund that can more than cover your expenses for 3–6 months if you needed it for life’s unexpected surprises like unforeseen major car repairs and medical bills that can derail your personal finances if you haven’t built up a buffer to cover them. 

Essentially, you should:

  • Build an emergency fund. Create and track your emergency fund in a separate account that you can access easily in case you need it.
  • Make a budget. Create a budget that includes a monthly savings goal, and track your savings contributions to build that emergency fund quickly.
  • Track your expenses. Watch your spending to make sure you’re staying within your budget, and check in on that budget regularly to find new places to save.
  • Track your debt. Create a comprehensive list of all your loans and credit card accounts so you can see everything together. Free yourself from debt by paying your minimums and attacking one debt at a time with extra monthly payments.
  • Include all your loan information. Keep track of the interest rate and monthly payment for each loan to help you create a solid debt-reduction plan.
  • Plan and schedule your extra payments. Pay extra on the loan with the highest interest rate until that one is paid off, then roll those payments into the next loan to pay that off even faster. 

A financial free retirement is one in which you can do the things you enjoy in life without worrying about money. For long-term goals like retirement, it is imperative to stay on track with your saving and investing no matter what comes your way.

Planning for a financially free retirement includes:

  • Track your net worth and cash flow. Tracking your net worth and cash flow can help you stay focused on your long-term objectives, reducing stress by giving you the information you need along with concrete goals to strive for. “Net worth is what’s yours, really yours. First, add up the value of everything you own, then subtract the total amount of any debts that you have. What’s left is your net worth”, explains Investment adviser Robert LeFevre Jr., a certified public accountant and certified financial planner
  • Consider your options. As you face decisions along the way, experiment with various scenarios to see how those decisions could affect your retirement.
  • Make managing and tracking your finances a habit. By reviewing regularly your long-term financial plan, you’ll have the information you need to keep on track with your financial goals—no guessing needed.

Financial freedom means that you get to make life decisions without being overly stressed about the financial impact because you are prepared. You control your finances instead of being controlled by them.

References:

  1. https://www.quicken.com/blog/claim-financial-freedom

Planning and Achieving Financial Freedom

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Financial freedom can be an elusive—and hard-to-define—goal.

Financial freedom is often said to be in the eye of the beholder. To some it may mean freedom of debt and being able to fund your lifestyle with your cash flow; to others it may mean early retirement on a Caribbean island. Whatever your financial goals or definition of financial freedom, there are ways and things you can learn to help you get your financial house in order.

Once you’ve decided that financial freedom is one of your top goals, you can start taking steps to achieve it. Thus, the first step toward achieving financial freedom is to define exactly what it means for you. You can’t generally achieve something that you haven’t defined. So, once you’ve defined what financial freedom means to you, you can start taking steps toward your goals.

“What then is freedom? The power to live as one wishes.” Marcus Tullius Cicero

Just because you have money does not mean you have financial freedom. There have been numerous people, especially professional athletes and entertainers, who have earned millions of dollars and subsequently lost it all through reckless spending and debilitating debt. Thus, even if you have a lot of money, if you don’t know how to manage and make your money work for you, it will more than likely disappear.

Financial freedom typically means having enough savings, financial assets, and cash on hand to afford the kind of life you desire for yourself and your families. It means growing savings and investments to a level that enables you to retire or pursue the career you want without being driven to earn a wage or salary each year. Financial freedom means your money and assets are working hard for you rather than the other way around…you’re working hard for your money.

In other words, financial freedom is about much more than just having money. It’s the freedom to be who you really are and do what you really want in life. It’s about following your passion, making choices that aren’t influenced by your bank account, net worth or cash flow, and living life on your terms.

Track your expenses

It’s difficult to know how to save money if you don’t have a good idea of where your money is going. Carefully track your spending habits for a typical month. Doing this will help you to become more conscious of your discretionary expenditures. It will also reinforce what expenses are essential and remind you to plan for unexpected expenditures, like medical emergencies and car repairs. Therefore, it is vital to understand and to know where your money is going.

Make a budget

Once you’ve taken inventory of your expenses, next step is to create a budget. While budgeting can sound like a cumbersome task, you may want to start by using a budgeting calculator to get a feel for how you are currently spending your money and how you’d like to change your spending.

One popular budgeting method is the 50/30/20 rule. The 50/30/20 rule is a way to divide your post-tax income based on your needs, wants and savings. The rule states that people should spend 50% of their income on their needs. This includes health insurance, housing, transportation, and groceries. Then, the guideline states that people should spend 30% of their income on wants or non-necessities such as entertainment, travel, and more. Finally, the last 20% of a person’s income should be saved or invested. This might include retirement savings and building a stock portfolio.

Once you have created a budget, don’t put it in a drawer and forget about it. Instead, make it a working and living document that you check and refer to often. Spend a half-hour per month reviewing how your actual expenses match your budget and make adjustments as necessary.

Automate your savings

Automating your savings and investing is one of the easiest steps you can take to ensure that you are on the path to financial freedom. You can set automated contributions to your employer-sponsored investments, including your 401(k) contributions and employee stock options.

When your savings and investing are automated, your money will continue to grow without you having to think about it. This will help you to reach your financial goals easily and quickly.

Have some percentage (10% to 20%) of your paycheck automatically deposited into a separate account—whether it’s a savings account, a 401(k) or an IRA. Money that isn’t easily accessible is not easily spent.

Unfortunately, many Americans are not saving enough to maintain their current standard of living during their retirement years. It was found that about 21% of Americans have nothing saved for retirement, according to the Northwestern Mutual’s 2018 Planning & Progress Study.

Start investing early

Follow the adage, the best time to start investing was twenty years ago; the second best time is today. You should start investing in a tax deferred account, preferably with your employer matching a portion or all of your contribution.

Planning for retirement is a marathon and not a sprint. Even if you are starting small, the most important thing is to get started. Therefore, it will likely take decades to reach your goal. Therefore, it is important to remember why you want to achieve financial freedom. Keeping your purpose, goals and the bigger picture in mind will help you navigate the day-to-day financial decisions.

Once you become financially free, you have more choices of how to live your life and spend your days.

When you decide that you want to start working toward financial freedom, it is important to remember that you will not become financially free overnight. However, according to certified financial planner David Rae, in a 2018 article in Forbes magazine, there are eight hierarchies of financial freedom that you can work towards:

  1. Level 1: Not Living Paycheck to Paycheck – The first level of financial freedom is building up an emergency fund and paying off any credit card debt. Unfortunately, living paycheck to paycheck is the reality of millions of Americans. According to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2017, some 40% of households could not cover a $400 unexpected expense.
  2. Level 2: Enough Money to take a sabbatical from your work – Accumulating enough money to be able to take a break away from work can be rewarding. This does not mean you have to quit your job, but it sure is a good feeling to know you can.
  3. Level 3: Enough to be Financially Happy and still Save – it’s about enjoying your life and having the money to do it. There can be peace when you are earning enough to save, doing the things you enjoy and still having extra at the end of the month.
  4. Level 4: Freedom of Time – Many people desire more flexibility with their schedules. Freedom of time and financial independence go hand in hand. Together, they are about following your passion, or spending more time with family, and not going completely broke doing it.
  5. Level 5: Enough for a Basic Retirement – Think about what your bare minimum retirement would look like. By knowing your bare minimum retirement, and knowing that you have enough money saved to at least cover some standard of living in your retirement, will also influence other life choices you may make along the way.
  6. Level 6: Enough to Actually Retire Well – Knowing you are on track to accumulate a nest egg to support that lifestyle is a big win. Well done to those who have accumulated enough assets, or passive income streams, to be in a position to retire well.
  7. Level 7: Enough for Dream Retirement – It would feel great knowing that 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.
  8. Level 8: More Money Than You Could Ever Spend – 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.

Bottomline is that if you want to be financially free, if you want to be able to live the lifestyle of your choosing while responsibly managing your finances, you need to become a different person than you are today and let go of the financial mindset that has created your current financial predicament and has held you back in the past.

Attaining financial freedom, which means having enough savings, investments and cash flow to live as you desire, both now and in your later years, requires a continuous process of growth, learning and emotional strength. In other words, whatever has held you back and provided you comfort in the past or kept you less than who you really are will have to be replaced. You will have to become comfortable for awhile being uncomfortable. And in return, the financially empowered, purposeful, and successful you will emerge — like a butterfly shedding its cocoon.

References:

  1. https://www.richdad.com/what-is-financial-freedom
  2. https://smartasset.com/financial-advisor/financial-freedom
  3. https://www.forbes.com/sites/davidrae/2019/04/09/levels-of-financial-freedom