Financial goals are the aspirations that every person should have when it comes to growing their wealth. These goals may include saving for retirement, building an emergency fund, paying off debt, investing in assets such as stocks or real estate, and creating a budget to manage expenses. Establishing clear financial objectives provides direction and purpose, helping individuals make informed decisions to secure their financial future and achieve long-term stability. By setting measurable and achievable financial goals, individuals can effectively track their progress and make necessary adjustments to ensure their financial success. Inspired by Adam Khoo’s book, “Secrets of Self-Made Millionaires”, here’s our take on how to achieve financial freedom. Listed below are 4 levels or you can think of it as stages to reach financial goals and building your wealth
Level 1: Financial Stability
How most people know they have achieved financial freedom when they feel confident in their financial situation and spending. If you are financially stable, you do not have to worry about paying your bills because you know you will have the money. Financial stability also means you are debt-free and have money saved for your future goals. In this condition, you also have enough money saved to cover emergencies.
You are also financially stable when your existing liquid assets are six times your monthly expenses. Should anything happen to you, you can cover your or your family’s expenses because you have life and hospitalisation insurance. It is essential to have financial stability as it ensures that you don’t fall victim to money-related stress and mental disorders.
Achieving financial stability provides a sense of security and peace of mind, reducing the anxiety and strain often associated with financial uncertainty. It allows individuals to focus on their personal and professional growth, without being weighed down by constant worries about financial obligations. Moreover, financial stability fosters a positive mindset and overall well-being, enabling individuals to make proactive decisions about their financial future, take calculated risks, and pursue opportunities that align with their long-term objectives. This stability also serves as a foundation for building towards higher financial aspirations and long-term wealth management.
Level 2: Financial Security
Financial security is achieved when you have enough investments or assets to generate passive income enough to cover your basic expenses, this aspect covers the second level to achieving a sense of freedom in your wealth. Financial stability means you are free of debt and can comfortably pay off monthly expenses with plenty left for savings. However, when you are financially secure, you have enough money to cover your expenses, emergencies, and retirement without the fear of running out.
While anyone could achieve it, very few manage to actually do it, because financial security is a challenging journey. Besides making a thorough plan, you must also be diligent until you achieve financial security. When you no longer have to worry about money, you can feel at peace knowing that your financial situation can cover your needs.
Level 3: Financial Freedom
Financial freedom is when you have enough positive cash flow assets to generate passive income to sustain your current lifestyle. Everybody is making a fuss about reaching financial freedom. They’re not exactly wrong since financial freedom will help you take ownership of your finances and, more essentially, your life. Financial freedom is about living within your means and ensuring that money is spent on things you need like food, shelter, vacations, or relaxation.
This is not about being rich or having a tonne of money. Instead, it focuses on having enough money to cover your expenses. When you have enough residual income to cover your living expenses, you can spend your precious time doing what you love rather than doing things to earn money.
Level 4: Financial Abundance
If you reach this level, you have accumulated enough positive cash-flow assets to generate enough passive income to sustain your desired lifestyle. As the name suggests, it is about having everything you need and then some. You can live a life of ease and abundance without having to worry about money.
This also means that you can live your life in a way that feels authentic to you because you can afford to do what you love. This is the highest stage of wealth that enables you to enjoy life’s simple pleasures without being burdened by financial stress or worry.
Our take? No one has it all, and your journey is unique to you. Take it one goal at a time. You can start with setting financial goals for your future because you will tend to spend more than you should when you are not working towards anything specific. So, try to fix your short-term, mid-term, and long-term financial goals early in life to become financially secure with these 4 stages of building wealth.
