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The Path to Financial Freedom
Here are the 10 stages of Financial Freedom
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Here are the 10 stages of Financial Freedom
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1/ Financial Dependence
When debt payments + other living expenses > your own income
You need someone else (parent or a bank loan) to cover the difference
When debt payments + other living expenses > your own income
You need someone else (parent or a bank loan) to cover the difference
2/ Financial Solvency
Debt payments + other living expenses = your own income
You are current on all your debt payments and you can meet your financial commitments and other living expenses without any outside help.
Debt payments + other living expenses = your own income
You are current on all your debt payments and you can meet your financial commitments and other living expenses without any outside help.
3/ Financial Stability
After being financially solvent, you have saved enough to create an emergency fund
But how much and what should you use it for?
After being financially solvent, you have saved enough to create an emergency fund
But how much and what should you use it for?
It should be enough to cover basic living expenses for 3-6 months
Could be used for unexpected expenses (medical bill, car repair, moving costs) or a job loss
Could be used for unexpected expenses (medical bill, car repair, moving costs) or a job loss
4/ Debt Freedom
The level of debt freedom differs among people
Some believe it's when you no debt including mortage
The level of debt freedom differs among people
Some believe it's when you no debt including mortage
Some others believe it's when you have repaid all your high-interest debt (credit cards, car payments, student loans)
5/ Coasting FI
Also known as Barista Financial Independence
Able to, if you wanted, leave from a job into a new one, that may be lower-paying but more enjoyable or less stressful
Also known as Barista Financial Independence
Able to, if you wanted, leave from a job into a new one, that may be lower-paying but more enjoyable or less stressful
This is due to significant savings in the early years of your career or just the most recent years of it, which would be able to provide for the later years of your retirement after it has compounded if you don’t add any more money in.
All you need is to make enough money to get to your specified retirement age when you will be withdrawing the money from your investments.
This is usually achieved through hard work and frugal spending in your early career stage so that you coast your way into retirement.
This is usually achieved through hard work and frugal spending in your early career stage so that you coast your way into retirement.
6/ Financial Security
Investment Cash Flow > Basic Living Expenses
Basic Living expenses include accommodation, bills, food, transportation, insurance
Does NOT include eating out, vacations, gifts or entertainment
Investment Cash Flow > Basic Living Expenses
Basic Living expenses include accommodation, bills, food, transportation, insurance
Does NOT include eating out, vacations, gifts or entertainment
Gives security in case of job loss to retain a frugal lifestyle without having to worry about getting a new job or touching your emergency fund
7/ Financial Flexibility
Ability to live off investment cash flow, while having a flexible spending budget based on yearly market fluctuations and returns
Ability to live off investment cash flow, while having a flexible spending budget based on yearly market fluctuations and returns
8/ Financial Independence
It's based on the 4% rule, i.e. withdrawing 4% of your funds each year
Your investments and savings have accumulated to 25x your annual expenses
Historically, this will be enough to allow you to maintain your current lifestyle in retirement
It's based on the 4% rule, i.e. withdrawing 4% of your funds each year
Your investments and savings have accumulated to 25x your annual expenses
Historically, this will be enough to allow you to maintain your current lifestyle in retirement
9/ Financial Freedom
Your investment cash flow supports your current lifestyle and allows you to spend extra funds for bucket-list items (dream car, long vacations, moving overseas to live in another country)
Your investment cash flow supports your current lifestyle and allows you to spend extra funds for bucket-list items (dream car, long vacations, moving overseas to live in another country)
10/ Financial Abundance
Investment cash flow far exceeds your needs plus bucket list items, approximately 3x your financial freedom amount
You have the security of maintaining that lifestyle even during a bad year, or a bear market
/END/
Investment cash flow far exceeds your needs plus bucket list items, approximately 3x your financial freedom amount
You have the security of maintaining that lifestyle even during a bad year, or a bear market
/END/
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For more educational threads on financial independence and investing for beginners see below for a collection of threads
https://twitter.com/itsKostasWithK/status/1345790210441928708?s=20
For more educational threads on financial independence and investing for beginners see below for a collection of threads
https://twitter.com/itsKostasWithK/status/1345790210441928708?s=20
