This is an article that talks about the 6 financial levels – debts, break even, Financial Security, Financial Comfortable, Financial Freedom and Rich. Each level has its own meaning and some important financial decisions that you must make to achieve it. So just read through the article and find out which level you are in. After that make your decision and move your financial level forward.
We all had born differently. We have different background, experience, ability and etc. This theory also applies in personal finance too.
We have different mindset, experience and ideas to manage our money and this make us have a totally different personal finance status. Maybe you have more money than others. Maybe she is weak in money management and having a financial disaster. Or maybe he is good in investing and builds a lot of passive income until he never work for others and etc.
Before you make any financial decision or set any goal, you must know your current financial level. This is because each level has its own priority tasks to be accomplished and also requirement to move on to the next level. By knowing where you are now, you can compile a better financial plan for your future. This is why I wrote this article to tell you what are the 6 financial levels.
Let us discuss what the 6 financial levels are:
Level 1: You are in Debt
This is a dangerous, yet famous financial level that most people fell in. If you are in this level, your personal finance is in trouble. You are having negative balance in your monthly financial statement. If we are using the metaphor of school system, you are failing in the money test with negative marks. You are in risk and you are in the hot water.
Recommended Goal: Pay off your debt as fast as possible.
Please pay attention on: Your spending habits and money management skill. There must be something wrong with the way you handle your money. So pay attention on it.
What you can do right now: Take out all your latest bill statements, sit down and read through them. Keep asking yourself, what kind of expenses listed there that you can avoid and not necessary for your living. Currently what you must do is understand your spending habits and change accordingly. You must concentrate on getting out of debts. Nothing is more important than that in this stage.
Level 2: Break Even
You are considered the lucky one if you are in this level of personal finance. In this level, you don’t own any big debt but you don’t achieve any financial success too. I said that you are lucky because you have the basic money management that keeps you out of debt though you still need to improve on this and gain more wealth.
Recommended Goal: Prepare yourself to move on to the financial security level where you have the true security for your finance
Please pay attention on: Your Money management skill. There must be some room to be improved so you can achieve something instead of break even in your personal finance.
What you can do right now: Again take out all your latest bill statements, sit down and read through them. After that start a budget and concentrate on saving and save up a 6 months emergency fund as fast as possible. You must concentrate on making yourself in a secure position no matter what happen in life.
Level 3: Financial Security
Congratulation if you are in this level now. In this level, you are living financially secure. You have your saving, emergency fund, a good money management habits or a steady income that will prevent you from falling into any financial disaster if there are something happen in life. However, you cannot stop here because this is not enough for your future. You must learn how to release your potential and gain a better financial level – financial comfortable.
Recommended Goal: Learn whatever you can about starting a business and investing. If possible, you can start a part time business in this stage.
Please pay attention on: Again, your money management. No matter what happen, please protect your emergency fund and don’t take risk on this money. This will put you in the financial security level. Besides that, you must also start to pay attention on investing and business education.
What you can do right now: Now change your budget and add a column called education. Now you must allow a certain amount of money to pay for the important education materials such as books, attend seminars or pay for a mentor to guide you. When you think you are ready, you can start investing or start a business that will help you to upgrade to the next level – financial comfortable.
Level 4: Financial Comfortable
Financial comfortable - a life that many people dream about. You are out of debt and in a position of financial security, so you don’t have any financial worries. Besides that, financial comfortable also means that you have excessive cash where you can buy something valuable, better quality or even own more than others. This is a stage that all of us must hit, at least, in our life. In addition, this is the foundation of financial freedom where you have excessive cash to buy more assets.
Recommended Goal: Try your best to keep yourself in this stage or move on to achieve financial freedom
Please pay attention on: You desire to buy. Yes, now you have more money, but you still need to delay your gratification if you want to move on to financial freedom. You must invest your money before you spend it. Invest it now and spend it later, this is the best formula to be rich. Besides that you must concentrate on passive income which will let you retire earlier and choose not to work anymore.
What you can do right now: Now you are ready to invest and buy more assets. So go out and shop! Not go for shopping but shop for assets, just like what those rich people do every day. Use your knowledge that you invest in the previous stage to buy more assets and convert your income to passive income.
Level 5: Financial Freedom
Well Done and Congratulation if you are financial free now. This is a life that most people dream about. In this stage, your passive income is more than your expenses and you can really stop working and do whatever you want to everyday.
Recommended Goal: Take a long holiday!
Please pay attention on: In fact, you don’t really have to pay attention on anything. You are financial free and this has proven that you are good in money management, investment and business.
What you can do right now: Take some rest and get ready to make a second big decision for your life. You are financial free and you have plenty of time than others, so you really can do more than others. One of the question that you must consider is, do you want to move on and become rich?
Level 6: Rich
You are cool if you are in this stage right now. For me, in order to become rich, you must have a strong desire and reason so that you will work harder and move from financial freedom to rich. Without this, you will never hit the level of rich. I don’t have much to say for this stage. Being rich means you are expert and professional on money. So you can decide what you want to do and invent your ways to gain the wealth.
I have listed down 6 financial levels in this article. Yes, it is easier to type the level out compare to achieve it in practical. Well, this is what we usually call life and money is directly related to our life. So know your current financial level, understand what you want and take action. This is what we can do right now.
Good Luck!
Related posts:
- 5 Basic Requirements For Your Financial Security Purpose One of the reason people is unhappy in their living...
- How to Set a Financial Goal and Take Control of your Money Previously I shared with you how you can do a...
- Financial Freedom - Set the level of financial freedom that you want to hit Financial Freedom, when first time I heard it, I really...
- 5 Financial Goals that You can Set For Your Life Year 2008 is around the corner and we are now...
- How to Make a Plan to Achieve Financial Freedom, Part 4 Read previous articles of this series Part 1 : Run...
- Prepare for the LUCK of Being Financial Free Do you believe in luck? I knew there are people...
[...] to Financial Freedom highlights the Six Financial Levels. Yep, we’re still at level [...]
I started out with student loan debt and earn minimum wage. Did I mishandle my money?
[...] Security ……… knowing where we are is the first step to getting where we want to go. Harrison Loke of Journey to Financial Freedom, has written on Levels of Financial [...]