The journey towards financial freedom is gradual. It starts slowly until you achieve abundance. Achieving financial abundance is the ultimate goal for everyone. Unfortunately, only a few people can achieve this form of abundance. The trick is to know how to plan your finances strategically.
With proper planning, it is possible to take charge of your finances and avoid the anxiety that comes with being in debt. Whether we admit it or not, money is a cause of stress for many people, and it is always a good idea to keep your finances in order. Here are the stages of financial freedom:
Financial dependency is the stage when your bills are taken care of by someone else. This can happen in childhood because at this stage; you are not able to work to pay your bills.
It can also happen when you are an adult, but at this stage, your debt payments exceed the income. If you cannot meet all your basics and you have to take debt, then you are still at the financial dependency stage. The good news is that there is hope even for people at this stage.
This is the first step towards financial freedom. At this stage, you stop accumulating debt. You achieve solvency because you have more income than your debt.
With your financial solvency, you take charge of your debt and start working on making the payment. People in financial solvency are earning more than their bills.
A good majority of people aim to reach financial stability. Financial stability does not mean that you do not have any debt. At this stage, you can have some debt like a mortgage and student loans.
However, you should have cleared major consumer debt at this point. You should have an emergency fund that will shield you from the unfortunate event of financial problems.
At the financial agency stage, you have gotten rid of all the debt. You also have enough money in your bank account to give you the freedom to quit your job. At this stage, you do not worry about losing a job and not being able to meet your expenses.
You achieve financial security when you do not have to work anymore. Your investments can take care of your basic bills like housing, food, and insurance. Even if you never work in your life, you can continue living a decent living.
At financial independence, you can live without going to work and still take care of your basics and comforts. You can go on holiday and enjoy some luxuries without worrying about money.