7 Rungs to Ladder of Financial Freedom
Being financially secure comes with various promises, and a long term security. This has undoubtedly always been a common aspiration for the majority of people, but recently it has gained as a means of expression. Most of us crave a life free of the daily grind of working for money since it is so ingrained in us.
There are many distinct levels of financial independence, and it's important to know what they entail. Here are 7 rungs to ladder of financial freedom.
Self-sufficiency, the ability to care for one's own needs, is an essential component of any form of independence. As a means of ensuring your own survival, you'll need a steady source of income that will allow you to purchase necessities like food and transportation. You may have to lower your expectations a bit if you're expecting too much.
3. Breathing Room:
This level is achieved when you stop surviving paycheck to paycheck. There is no room to breathe, especially in the event of an emergency, if you have saved six months' worth of living expenses. Only 39 percent of respondents to Bankrate's 2018 financial security index study were able to come up with $1,000 in an emergency.
When you've paid for six months' worth of living costs and don't owe anyone money, having stability offers you a little more room to move. Also, you're able to take minor risks since you have emergency money as a safety net. If you're making more money than you're spending, you're in a position to decide what to do with the extra.
It's not uncommon for folks to get stuck in this phase and never come out the other side. Whenever they have extra money, they spend it on enhancing their lifestyle.
A year's worth of expenditures will safeguard you against unexpected costs, but a year's worth of expenses will allow you to live your life how you choose. Once you've achieved this degree of financial success, it's a good idea to review your priorities and reward yourself.
6. Financial Independence:
It's no longer necessary for a person to work to live off their investment income. We all want to get to this point in our lives. When your investment income covers your basic needs and most of your personal extravagances, you've achieved full financial freedom. Your annual budget includes a "safety net" that may be used in the event of an emergency.
You've achieved "enough," and you'll never have to work again.
7. Abundant Wealth:
Your investment portfolio is now generating more income than you require to live comfortably. Unfortunately, over time, the gap between what you have and what you need will widen.
This is the stage when you have the most control. All of your life decisions should be based on your level of satisfaction, not on the amount of money you save. When you're well-off, you're in an excellent position to give back to your community, aid your loved ones, and leave a lasting legacy.
It will take time to rise through the ranks of financial independence. However, the financial burden should decrease as you rise through the ranks, and your options—where you work, where you live, and what you drive—will expand. Let us all be financially free!