I read an article that discussed various steps to financial freedom and how people have to progress from one level to another level and finally reach their financial freedom. In this article, I'm going to cover 7 steps in which we can reach financial freedom and we can also do a self-evaluation to understand where we are currently at to reach financial freedom.
Level 1 - Financial knowledge
This is the level where we get a basic financial understanding and clarity on our income and expenses. We pay more attention to our financials and have control over the inflow and outflow. Understanding the debts and savings we have and the flow of our income. This is also the stage when you start making your financial planning.
Level 2 - Covering basic needs
This is the stage where you are self-sufficient and have reached stability on the basic needs. You can cover your basic needs and this is also where you don't have any debts. Whatever you are making, you can cover your expenses without any challenge. Basic utility payments can be made without creating any debts.
Level 3 - Little extra money
In this level, you get some extra breathing space where you can take care of the basic needs and the monthly bill and you can also plan a few non-essentials or a vacation or an additional expense on top of what you are covering for the basic needs. In this level there is no stress on cash flow for basic needs and bill payments.
Level 4 - Good stability
This is the level at which you have already started building a strong foundation with your income sources and cash flow. This is also the level at which you have great stability so that you don't have to worry about any unexpected expenses or any emergency money needs. You are confident that you can arrange for such expenses. You are far from debt and it is not required to fall into a debt trap for any financial need.
Level 5 - Risks and life changes
Based on the financial stability you have, this is the level where you have emergency funds, you have decent savings and you are ready to make any career changes or life changes. This is the stage where you are confident about your financial status and are also ready to risks. This is also when you do more risk-based investments to strengthen your finances.
Level 6 - Financial Freedom
This is the level where you have created enough sources to generate passive income for you to be fully financially free. You don't have to worry about money anymore and working on a job also becomes an optional thing because the passive income covers your basic needs. People don't quit even at this stage and there is one more level where the actual financial freedom happens.
Level 7 - Financial fulfillment with abundant wealth
This is the final stage in this financial journey where you have reached the finish line with abundant wealth accumulated from your earnings and passive income. This can also let you live your dream life and you become able to do almost anything. Whatever matters to you the most, you can do that thing.
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