6 Phases Of Personal Financial Freedom

The tough thing about money is that it is not rational, logical, or follows rules like many of us would like it to. This is because the way many of us relate to money is so much more behavioral and emotional than it is cut and dry, black and white.

Our behaviors around money shape how we feel about it, and how much we have at the end of the day. Personal financial freedom is the result of psychological success as much as anything.

Let’s get one thing straight, to begin with though…I Love Money. I do, I just love it.

I love the freedom it gives me when I have a lot of it, I love the persistent challenge it presents to me, my spouse, my children’s future, and my wellbeing, and I love that it is this constant companion that keeps me honest in my day-to-day life.

But to be even more honest, I’m not inherently great with money. I like living a good life. Would definitely be in the FatFIRE group and could never live on $40,000/year. That’s why this site is not just a personal finance blog but rather a more holistic site that’s aimed at us living a well-rounded life, on our own terms.

The thing is, it almost always comes back to money. Whether you have money or not just dictates so many of the decisions that you want to make in life:

  • Can I go on vacation?
  • Can I afford to eat organic food?
  • Can I live where I really want to?
  • Can I give my children the future they deserve?
  • Can I treat my spouse to a special surprise, just because I want to

If you’ve ever had money concerns (and I’m guessing you’re here because you have or do right now) then you know the answer to these could very well be a resounding NO. And that’s just scary.

Especially if you’re like me and are a middle aged, middle class, not exceptionally special individual.

The path to personal financial freedom has 6 phases that all of us will (hopefully) go through. If you’re here then you’re in luck and are on the right path. This journey will not be easy but you’ll come out the other side a better person, a better partner, a better parent, and a better role model for your community.

So let’s get cracking.

Phase 1: Denial

This is where everyone starts because of course you don’t have a money problem. You’re a regular middle-class, white-collar worker. How could you actually have credit card debt, no retirement savings, or no actual plan for your financial future?

If you truly want to achieve personal financial freedom then you have to first admit that if you’re reading this article then you’re not well on your way to having everything you want, you’ve got to change a few things. Admitting that you’re not where you want to be in your financial life is the first step in changing it.

Phase 2: Dependence

Congrats, you’ve realized that you need a plan and have come up with one. Now the hard part starts.

You know you need a budget and have been honest with yourself about what your financial life looks like. Now it’s time to figure out to earn more money, cut your spending and get this ship to float.

If you haven’t already, download the Mint app and enter in all of your financial information. Come up with a budget that you can stick with and just see what the numbers look like. Once you’ve done that for a month you can begin whittling away at the shortcomings.

Phase 3: Solvency

I don’t love the word solvency because it’s just a bit too fancy for me, but it is the right term. You are treading water.

You can pay your bills each month, and you might even be saving a bit (just to take that annual vacation), but you’re certainly not building real wealth yet.

You’re probably one large medical bill or unexpected layoff at work away from being back in the “poor house” feeling. This is arguably the most dangerous part of your personal financial freedom journey because you’re almost to the tipping point where all the hard work you’ve put in will start to compound for you.

Phase 4: Stability

You’re keeping more money than you spend each month and are now starting to make proactive decisions about how to grow real wealth over time.

This is often scary for those of us who have never had money because now we have something to lose. Just like you did in the Denial phase it’s time to get serious about your goals and develop some real guardrails around your money.

You’ve likely made a lot of decisions on your own up until this point, but this is where having a team of professionals to help you make the smartest possible financial decisions will do wonders for your wealth accumulation over time.

Phase 5: Growth

At this point, you shouldn’t worry about money anymore, but you should still think about it. A Lot.

Becuase at this stage, your basic needs are met by your investment income and you’re in the building wealth phase of your journey as a profession.

You’ve likely quit your day job by now because your time and mental energy is best spent focusing on how to grow your wealth.

Now is the time to start thinking much longer term, and bigger picture with your wealth and what it can do for you, your family, your community, and the world around us. Take a minute to enjoy this stage because it’s rarified air.

Phase 6: Independence (aka Antidependence)

Your wealth snowball is growing now and it’s time to really think about your (and your family’s future). Some other financial types might call this independence, but of course, we have a better word. Antidependent.

Because independence just means you’re not dependent, but Antidependence means that you’re so much more. You start to make impactful decisions about your lifestyle, community, and the world around us that can be transformational. But you only do this because that nagging pressure of money is behind you and you’ve taken charge of your financial future throughout these 6 phases.

Congrats! Just reading this article means you’re well on your way to passing through the 1st phase of your financial journey. There are loads of resources linked above in each of the phases, and I encourage you to pick up on the journey wherever you are in this process.

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