Stages of Financial Freedom
A few days ago I explained what it means to be financially free and that financial freedom is progressive (i.e. it becomes more and more).
In this post I will talk about the ideal stages that I’d like to see people go through on their journey from 0% financial freedom to 100% financial freedom. I will give some meaning to the stages by using a running example.
The stages are not set in stone; everyone’s journey is different. This is a rough outline. It is a subjective view of what I’d like to see in my own life and in the lives of people I mentor, coach and influence in their own journeys to financial freedom.
That said, if you are just starting on your journey, this will give you a good idea of the feeling of freedom you can expect to experience at each stage.
Stage 1: Trapped
You have a mortgage, a car loan, a personal loan and three credit cards. You’re living an average life, you’re driving an average car, you’re doing all the average things other people in your income bracket are doing.
On the outside you seem OK. It’s on the inside, left with your own thoughts, where it’s a different story. You’re unhappy with your life, bored with your job and you’ve given up on most of the dreams you had when you were young.
You cannot quit your job. You cannot make the changes you really need in your life. You cannot pursue your dreams. Why?
You need that next pay-cheque.
Perhaps you’re not only unhappy with your life, you are also worried that if anything unexpected should happen (e.g. car breaks down, medical emergency, geyser packs up), that you won’t be able to pay the bills.
You’re trapped.
If this is how you are feeling at the moment, here are two little facts to bring you comfort:
1. You are not alone, and 2. It is not too late.
In fact, the feeling you have right now is the feeling that convinces most people to make the drastic changes that are necessary to get started on their journey to financial freedom.
Stage 2: Breathing Easily
It’s been one year and ten months since you decided to start your journey to financial freedom. You’ve just paid off your last loan. You breathe in slowly and knowing that you don’t owe anyone anything, you just… feel… free.
You’ve made a lot of sacrifices. You drastically lowered your living standard. You gave up a couple of holidays. While your peers were buying new cars, you were trading in your car on an older model. You haven’t eaten at a restaurant in over three months, the last time being to celebrate your anniversary.
However, even though two years ago you would never have imagined it, making these sacrifices weren’t all that bad. They were actually rewarding, somehow.
You have rediscovered appreciation for little things. That last time you took your wife out to celebrate your anniversary, both of you had a great time, you appreciated each other’s company and you really enjoyed your meal.
More than anything, you’re dumbfounded that you managed to get to where you are now in such a small amount of time. It was amazing how things started gathering momentum after you paid off your first loan.
Stage 3: Dreaming Again
Four months ago on this day you paid off your last loan. You’ve just reached your next goal: saving up enough money for you and your family to survive for six months without earning an income.
You haven’t really made any changes to your lifestyle since paying off your last loan. You didn’t really feel the need to buy a better car, or to allow yourself more luxuries. However, some things inside your heart did start to change.
You’re dreaming again.
Things you always wanted to do or try, that you’d given up on because they seemed impossible, suddenly don’t seem so impossible anymore.
Stage 4: Taking Risks
It has been three years since you began on your journey to financial freedom. It’s been six months since you quit your job to start your own company.
The last six months went by very quickly. They were filled with a lot of hard work, a lot of unexpected problems, a lot of stress and a huge learning curve.
However, you were well prepared. You saved up enough money to support your family for two years without having to earn an income. You did your research, you drew up a business plan and only then did you take the magic leap.
Now, six months down the line, your efforts are paying off. You’ve made it through that crucial take-off stage, you’ve landed your first contracts and you’ll be turning a good profit within the next few months.
You’ve also noticed a change in yourself. You’re living for your heart again and your dreams are growing bigger. You’re excited about the future.
Stage 5: Giving Back
Roughly ten years ago you made the decision to become financially free. Today you reached your goal and you are 100% financially free.
As of now, you can maintain your living standard and take care of yourself and your family financially, for the rest of your life, even if you never actively earn an income again.
A lot happened in the last ten years. You’ve had a lot of success, you’ve made a lot of mistakes and you’ve learnt a great deal. More than anything, you can’t believe that you are where you are today, considering where you were just ten years ago.
Your mindset also changed a lot over the years. You’ve reached many of your own goals and ambitions, but you’ve also developed many new ones. Many of your new goals are focussed externally: to help other people, to make a difference, to give back some of the good with which God blessed you.
You and your wife are planning to travel to Africa and you’ll be leaving in six months. Together you’ve decided to give two years of your life as volunteers with an aid organization, to help distribute food and medical supplies to some of the poorest people on Earth.
Summary of Stages
In this post I tried to give a subjective example of the stages someone might experience on their journey to financial freedom.
The stages I described were:
- Stage 1: Trapped
Trapped by debt and totally dependent on your next pay-check. - Stage 2: Breathing Easily
Free from debt. - Stage 3: Dreaming Again
Enough saved up to survive a few months without an income. - Stage 4: Taking Risks
Enough saved up to make real changes in your life, e.g. quit your job. - Stage 5: Giving Back
You’re 100% financially free, you’ve taken care of yourself and your family and now you’re free to do whatever you want. Why not use your freedom to give back?
I hope this article will encourage and motivate people to work towards financial freedom. If you don’t know where to start, you can read this article:
How to become Financially Free.
May you be inspired to start your journey to financial freedom and to bless other people, as you are blessed, along the way.
July 22nd, 2008 at 04:05 pm
awesome post! it was seriously like reading a generic version of my life for the the first two stages, and a generic version of my plans for the next three.
1. we were trapped, but it wasn’t too late. we made the serious effort just like you said. our circumstances helped change our minds. we sacrificed.
2. breathing easy. while we have a few months to go, we can already feel it. we have definitely learned how to appreciate the little things and have no intention to jump back into all the crazy consumerism.
3. that’s our next goal. i just wrote it out this past weekend to see about how long it would take us, and imagine that, it’s just about 4 months!
4. taking risks? starting my own business has always been something that intrigued and yet mortified me at the same time. i had a bad experience trying to start one–where a lot of this debt came from. but then i see how i wasn’t prepared. i still needed my paycheck, and risks are even riskier-almost deadly-when you already have debt.
5.Giving back. this is the part i look forward to the most. while we already try to give and live a life of service, i can’t wait to actually enter a stage of life where things are designed for us to do some huge things.
July 22nd, 2008 at 04:35 pm
[...] Francois writes a blog called Liberta. He is one that is walking ahead of me in this journey of financial freedom, teaching and encouraging many to join him. He found my blog a month or two ago, and since then has been an huge resource for encouragement. Currently he is writing a series on financial freedom. I loved this post he wrote today. [...]
July 22nd, 2008 at 04:24 pm
I found you from Nate’s Positive Post Tuesday! We’ve been on the journey for nearly 1 year.
It’s going well, but we truly aren’t able to put the effort in like Nate has. Hubs is a salesman and has to be available in the evenings for customers. So he hasn’ been able to take a second job.
I am applying for a cheer coach position in the Fall. I can take our 3 kids & it’s a few hundred a month. That should really help!
It’s amazing that once I started going through it…so many others were too. A support system through the web…who’d of thought?
July 22nd, 2008 at 09:52 pm
Francois,
Wow. AWESOME post! Starting my own business is not on my agenda, although I plan on doing consulting work for extra income somewhere down the line, I like the idea of stages for financial freedom. Right now with 4 kids, college and retirement to save for, our dreams focus more on stages as empty nesters….our dreams have come true with 4 beautiful children…we are a very close family, which makes life worth living…financial freedom will be the icing on the cake!
July 22nd, 2008 at 10:47 pm
@Nate: Wow thanks for the positive Tuesday post!!!
@Mandy: Thanks for dropping by. And thanks for the borderline age-restricted funny posts on your site.
I’ve subscribed and will be following.
@Sharon: I think taking joy in and spending time with your family is more rewarding and important than any Earthly achievement will ever be – so I commend you on that.
Also, starting a business is not for everyone. My example is just one example of what someone may do when he enters the 4th stage.
What I mean by “Taking Risks” is that it is a time when you can afford to take the risk of making real changes to your life.
I’m there now. Apart from starting my own company, one of the things I’ve been able to do is to move down to the coast. I always wanted to live at the sea. Another thing I’m able to do is to live with less stress, and spend a lot more time taking care of my health through exercise, and just being outdoors.
The 4th stage is a time for real life changes that you couldn’t risk to make before.
July 31st, 2008 at 10:47 am
I wish I had discovered your site sooner. I’m studying my final year in university and will be working next year. I’ve watched my family suffering financially for years, which is ungodly (in my view) since we’re Christian and we should be living abundantly. I’m glad i’ve found you before I start working. I’ll be sure to keep you updated on my experiences next year.
May 30th, 2009 at 04:39 pm
[...] a look at the defined stages of financial freedom, I’m making good progress towards the top of the pyramid, hopefully the pyramid doesn’t [...]
September 29th, 2009 at 08:46 am
I stuck in stage 1.5 now………@_@”
but anyways, reading your entry brings me fun & laughters, thx =>