Do you know what stage of financial independence you are in right now? Watch the video below to learn about the different stages and how to advance to the next level.
If you don’t have time to watch the video, I have included video notes below!
5 Stages Of Financial Independence Video Notes
Financial Independence is different for everyone. For some people, it’s quitting the 9 to 5 status quo. For someone else, it’s not having any debt.
The most important thing to remember is that financial independence is a journey, and everyone is on their own path.
No matter what path you are on, everyone’s path includes the same five stages to get to Financial Independence.
1. The Survival Stage
You are in this stage if you:
- Make enough money to cover your bill, but you are living paycheck-to-paycheck.
- If you don’t get paid, you don’t have any money.
- Negative net worth.
- Have a lot of liabilities and no assets.
- Nothing in your savings or don’t have any savings accounts at all.
- Have a tight cash flow.
- Have debt that is going down very slowly.
- You can’t save or invest.
The Survival Stage is the one stage that many people cannot get out of.
The goal is to get out of that stage as quickly as possible because it is by far the worst one to be in.
Try to create a surplus in your budget so you’ll have more cash flow during the month to put any outstanding debts you may have.
Also try to increase your income or decrease your spending.
You can increase your income by finding a side hustle, asking for a pay raise or working more hours at work at your current job.
You can decrease your expenses by becoming more aware of your spending and cutting out expensive habits that are decreasing your cash flow.
I get it, saving money can be hard if you do not have enough extra money to save in the first place. That’s why the main goal is to find ways to increase your income.
2. The Progress Stage
If you are at this stage you are further than over 78% of many Americans. Good Job!
You are in this stage if:
- You are able to save money every month.
- Pay more than minimum payments on your debt.
- Your assets are going up and your liabilities are going down. When your assets are going up, you are making progress. Your net worth is still negative, but it is improving and is almost at zero.
If you were to lose your job, this is a good stage to be in because you could live off your assets for a while.
3. The Debt-Free Stage
Time to pat yourself on the back! Your net worth has finally become positive. (Do not count your mortgage. Consumer debt is what I am talking about.)
You are in this stage if you have:
- Zero liabilities and everything is paid off.
- Some assets in savings and investment accounts.
- Cash flow is good and you are able to save money and invest even more.
4. The Growth Stage
Now that you’ve reached the Growth Stage, you have A LOT in your savings and investment accounts. You are able to keep adding to your investments, and growing without putting anything towards debt (because you have no debt).
You are in this stage if you have:
- Positive net worth and no liabilities.
- A full-sized emergency fund. (3 to 8 months’ living expenses saved.)
- Investments in stocks and real estate.
- You have passive income and you are getting richer without doing any work.
5. The Freedom Stage
In this final stage, you have enough in savings and investments that you can live off your earnings.
You have a super high net worth and a lot of money!
It’s also good to know that you do not have to wait until you reach retirement age to get to this final stage! Contrary to what many people believe, reaching the last stage of financial independence can be achieved early if you start making the right decisions when it comes to your money.
The financial independence journey is a personal journey and you will make some mistakes along the way.
However, just stay focused on the current stage you are in and try your best to use the above tips to advance to the next level.
If you are looking for support and inspiration, join the LYT family to connect with other like-minded women who are also seeking financial independence in their thirties!
You can make it happen!
