General

stages of financial independence

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This is the stage when a person is dependent. All people are dependent from the moment they are born because a child is unable to provide for himself or herself. But the sad fact is that many people when they become adults, cannot get out of this stage.Signs that a person is in the stage of financial dependency are a severe lack of money, loans that cannot be paid, etc.In such a situation, a person needs to change their mindset, become more responsible, and try to improve their situation.It is because of a faulty way of thinking that the person cannot improve the situation, believing that a bad economy, lack of connections, or other reasons prevent him from doing so.A person moves to this stage when they have mastered the ability to spend as much as they earn, although they may still have credit left over.To hold on to this stage, it is necessary to master the skill of saving money. It is better to start with a minimum percentage of your monthly salary, but these funds should be untouchable. It is necessary to understand that from this stage it is very easy to go back to the financial pit.At this stage, a person already has a financial safety cushion – an accumulated amount that will help maintain stability and independence in case of unforeseen situations.

There are almost no debts and credits left at this stage. Income is a certain amount higher than expenses, and after closing the mandatory monthly expenses, there is still money left over. And this money needs to start investing in something. financial stabilityFinancial stability is when the income is twice the expenses. At this stage, a person should have at least two sources of income. In case you want to change jobs, the accumulated funds will help you to live quietly for some time. At this stage, it is necessary to start investing to get a passive income.At this stage, passive income allows one to provide for current expenses and payments such as food, utilities, and other expenses.This means that the person has come to financial independence. Passive income is enough to cover basic needs and requirements. But one still needs to work to maintain a comfortable standard of living.For many, reaching this stage is enough. But for further movement, you need to continue to increase income and invest money.This is the stage where passive income fully provides not only for basic needs and wants, but also for all other expenses such as unexpected purchases, vacations, entertainment, travel, and more. Money becomes much more than the person and his family need.At this stage, a person stops thinking of money as a means of survival; very few people reach this stage.These five stages are a financial ladder, and no one is immune from falling off any of its rungs. To avoid it, one has to take certain actions and make some effort.

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