The 8 Stages of Financial Independence
The wealth building journey has 8 stages. Note, these are not Net Worth thresholds.
📄️ Stage 0 - Complete Financial Dependence
Active Cash Flow < Lifestyle Cost
📄️ Stage 1 - Financial Solvency
Active Cash Flow > Lifestyle Cost
📄️ Stage 2 - Financial Stability
Active Cash Flow > Lifestyle Cost; + Savings
📄️ Stage 3 - Debt Freedom
Active Cash Flow > Lifestyle Cost; + No Unacceptable Debts
📄️ Stage 4 - Financial Security
Passive Cash Flow > Survival Expenses
📄️ Stage 5 - Financial Independence
Passive Cash Flow > Lifestyle Expenses
📄️ Stage 6 - Financial Freedom
Passive Cash Flow > Life Goals
📄️ Stage 7 - Financial Abundance
“I couldn’t spend it even if I tried”
First stage is zero
The reason that the list starts from 0 instead of 1, is because the FI community has deep roots in the software engineering and computer science communities, and they start lists at 0.
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