Three Levels of Financial Independence

And Then There’s The Riches … Now You Have It, Now What?

Really, there are three, technical levels of financial well-being along the spectrum to financial independence. Each one builds upon the other.

1. Defense and Security

First and foremost, moving closer to financial independence provides you with monetary security. If your boss comes in tomorrow and fires you, can you still afford to pay for the basic necessities; food, clothing and shelter? How long can you last before running out of money? In this book, my prescription will bring you to this stage first. Food, clothing and shelter will be taken care of. I define this stage as the ability to cover your monthly expenses via passive or portfolio cash flow. If for example, you have $3,000 a month in expenses and $3,000 in passive cash flow, then you have reached stage one. At the very least, if career or financial disaster strikes, you will be able to cover the necessities. Then and only then will you progress to stage two.

2. Having a Chair When the Music Stops

Back to my previous example, if your boss cans your ass tomorrow, it will be absolutely critical to be able to procure food, clothing and shelter. Once the essentials are covered though, you can travel further along the financial independence paradigm and build a nice chair to sit in once the music stops, or in other words, when the job ends. By nice chair I mean a source of income that provides you with excess income to buy luxuries over and above the essentials and in part, allows you indulge in a passion that you truly enjoy instead of a job unless of course you truly enjoy your job. I would define this stage as having twice the amount of monthly expenses flowing into your income column from passive and portfolio investments. If you have $3,000 a month in expenses then once you have $6,000 a month in passive cash flow, you have reached stage two.

Now, some people in the world actually enjoy the job they have right now and even if they reached this stage, they would continue to do what they do simply because they enjoy doing it and would become bored if they stopped. That is fine. Continue to work your job if you enjoy it. The point is to have options, financial independence and work that you are passionate about. Stage two is all about building a nice place to sit once the music stops and making sure you enjoy sitting there.

3. Attaining Control, Ultimate Freedom and Riches

Stage three is the ultimate goal of the financial independence paradigm. Now that the necessities are taken care of and you have a good chair to sit in after the music stops, you should now work to increase your wealth even more, give more away, spend more time with family (unless you are completely annoyed by them at this point), spend more time in service and charitable contributions, spend more time at movie theaters and ballgames, indulge in dormant hobbies such as music and art, go back to school, buy a bunch of toys and again, give more time and money away. I would define this point as generating at the least $10,000 a month in passive income and really, there is a stage four of $100,000 a month. Of course, this prescription is relative to your monthly expenses i.e., if you have $10,000 a month in expenses then truly $10,000 will be stage two for you. It can take years to get here but you hold in your hand the map to do it.

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The above excerpt is from my upcoming third book My Happy Assets - Taking the Last

Steps to Financial Independence.

If you like what you read, check out my first book, My Happy Assetsathttp://www.myhappyassets.com/only

$3.99 and the complete second book, Small Business Coffee Hour, Three Essential Ingredients for a Successful

Businessathttp://www.smallbizcoffee.com/, only $3.99. Or both are available at lulu.com. Happy Reading!

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