The 7 Levels Of Wealth (What Stage Are You In?)

guess what you can measure and describe something called Financial Independence which means having enough money to live without a job but there's more according to Grant saboteer there are not just one or two levels Beyond Independence but a total of seven levels of wealth knowing where you stand in this wealth scale is crucial because it helps you take steps towards becoming financially free so what are the seven levels of wealth starting with the first level which is dependence if you're in this stage it means you rely on someone else to take care of you people

in this category are usually kids teenagers or even recent college graduates who don't have a full-time job or enough savings to support themselves surprisingly a report by savings.com found that about half of parents still financially support their grown-up children so if your parents are still helping you out you're technically considered dependent even someone like your friend Chad who seems to have all the money and opportunities in the world might still be in this category Chad might have wealthy parents and lots of chances in front of them but as long as he's getting financial support from

his parents he's still considered dependent all jokes aside this phase usually continues until you start making your own money and taking care of your own bills the second stage is called survival in this stage you're basically trying to make ends meet and pay your bills without getting into debt surprisingly 61 percent of Americans report living paycheck to paycheck which means there are likely in this survival stage you could find yourself in this stage even if you've just started your career and are earning a decent income maybe you haven't had enough time to save money or

build a financial safety net however it's also a stage where you could get stuck for example I have a friend who's 27 years old and makes sixty three thousand dollars a year in the expensive Bay Area she struggles to save money because of the High Cost of Living a new car payment and not tracking her expenses she also has two pets which add to her monthly expenses she manages to save a bit each month but one big unexpected expense could wipe out her savings in her case I've suggested that she switched jobs to increase her

income and create a bigger gap between what she earns and what she spends when you're in the survival stage most of your paycheck goes toward covering your expenses to move forward you need to focus on controlling your spending because that's something you can directly manage a helpful exercise is to review your credit card and bank statements from the past three months to see where your money is going this awareness can help you make better Financial choices being in the survival stage isn't the worst place to be and many Americans are in this stage but if

you're diligent and work on improving your financial skills and knowledge you can move on to the next level the third stage is financial stability in this stage you're better prepared for unexpected expenses and you're probably making enough money to enjoy a decent quality of life you might even go on a vacation once or twice a year although they might not be extravagant trips financially you can plan for the next six months but thinking beyond that might be a bit challenging at the stability level you likely have three key characteristics you have an emergency fund of

at least three to six months worth of living expenses saved up this is important in case you lose your job or face unexpected Financial setbacks you're not living paycheck to paycheck anymore you can easily cover your bills and have some money left over you've started thinking about saving for retirement or other big expenses like a down payment on a house reaching level 3 is crucial because it reduces the stress about money however your financial Journey isn't complete yet you still need to take the right steps to ensure your financial Independence in the future especially if

you have student loans or other debts when it comes to liquid cash money you can access easily let's consider an example if your yearly expenses are around forty thousand dollars which includes everything from rent and transportation to food and entertainment then your monthly spending is about three thousand three hundred thirty three dollars in this case a financially stable person should ideally have an emergency fund of ten thousand dollars to twenty thousand dollars equivalent to three to six months of living expenses five thousand dollars to ten thousand dollars in their checking account for everyday spending perhaps

five thousand dollars in a high yield savings account or some money invested so in total you might need to have somewhere between twenty thousand dollars to forty thousand dollars in liquid cash to be financially stable depending on your situation more importantly you're likely earning an annual salary between sixty five thousand dollars to ninety thousand dollars allowing you to cover your expenses and save between eight to twenty percent per year it's worth noting that progressing from one level to the next might take a while you could spend several years in each stage before moving on however

as you build your financial knowledge and increase your savings and Investments you can gradually move up the ladder now let's talk about the next level which is Financial Security it's a bit different from Financial Independence which we'll discuss later in this video Financial Security means you can easily pay your bills without any worry you're at a point where you don't stress about the cost of your bills anymore instead you're more focused on growing your wealth within your Investment Portfolio you're getting to a stage where even significant setbacks like losing your job for 6 to 12

months won't derail your financial goals in the bigger picture importantly Financial Security doesn't solely come from having a high income surprisingly some people with six-figure incomes still live paycheck to paycheck so having a higher income doesn't automatically put you in this stage Financial Security is more about having a relatively High income compared to your expenses in other words you're likely living well below your means if you're younger say under 25 or 30 you're probably not financially secure because you have many variables in your life that aren't settled yet you don't know if you'll have kids

or where you'll permanently settle down making it challenging to predict your annual expenses Financial Security is often achieved later in life around ages 35 40 45 and Beyond when you've established your financial Foundation know your annual expenses and are saving for significant goals like your children's college education another goal at this stage is to try to pay off your mortgage if you haven't already and increase your savings rate the national average savings rate for individuals is around 4.5 percent but you're aiming to increase it to 15 to 20 percent if you haven't already done so

even if you're financially secure you're likely still budget conscious for the most part however you can occasionally indulge in luxury items without harming your financial stability now let's talk about the fifth level which is financial Independence this is often a significant goal for many people because it means your Investments fully cover your lifestyle expenses you might have heard about communities like fire financial Independence retire early and their main passion is being able to live off their Investments their specific definition of financial Independence is being able to withdraw four percent of their total portfolio value every

year to sustain their lifestyle indefinitely to achieve this you typically aim to build a net worth that's at least 25 times your annual expenses for example if your yearly expenses are forty thousand dollars you'd aim for a portfolio of one million dollar which would allow you to live off forty thousand dollars annually the hope is that your investment returns can replace the income you're withdrawing technically at this stage you could consider yourself retired and work becomes optional however many people who reach this point still choose to work but they do so on their own terms

some continue working because they want to fund a more luxurious lifestyle While others find work that they're passionate about and truly enjoy Financial Independence also typically means that you've paid off most if not all of your debts including your mortgage you've also saved enough for your children's future needs so every financial obligation you can think of is covered at this stage you're primarily concerned with your own living expenses which are being covered by your investment income that's when you can consider yourself financially independent now let's talk about the final level which is Financial Freedom this

is technically the second to last level but it's the last level for 99.9 of people out there Financial Freedom means you have the freedom to do whatever you want whenever you want at this point you're living life to the fullest and your Investments are more than enough to cover your lifestyle some people even call this Fu money as in look what I found in my pocket a year's salary it means you can live your preferred lifestyle without ever worrying about running out of money in Practical terms this means you can take luxurious vacations around the

world afford the luxuries you desire and pursue virtually anything you want you might not be at the private jet level of wealth but that's not even a necessity at this point you wake up feeling comfortable without a care in the world regarding Financial Obligations at this level your focus shifts to how you can spend your time to bring the most happiness and fulfillment hopefully you've been working towards this throughout your life but it's at this point when the financial burden are completely removed and it's just about deciding how you want to spend your time now

the last level is a level that very very few people will ever achieve and it's known as Financial abundance this is like the next level of wealth and honestly I debated whether to include it in this video because not many people reach this level achieving Financial abundance typically takes an extremely long time or if you're very young it might require a significant windfall like selling a company or going public IPO at this point you've gone Way Beyond Financial Freedom if you're financially abundant you're likely thinking about how to leave a lasting Legacy or impact on

the world money is no longer a concern you have more money than you could ever need your children are well taken care of and maybe even your grandchildren your focus shifts to maximizing the time you have left on this Earth you can attend most events because you can simply buy your way in you might have multiple houses a private jet and you probably engage in generous philanthropy if you want to go to space you might even start your own space company because there are no Financial barriers in your way of course you don't have to

be as famous as Elon Musk or Richard Branson but the idea is that if you're financially abundant you have an abundance of money and you can use it to pursue just about anything you desire which level of wealth are you currently in let me know down in the comments I would love to hear from you I'll see you guys in the next video