Wednesday, March 2, 2011

The Four Stages of Financial Independence

Stage 1: Monthly Passive Income = Monthly Expenses

Stage 2: Monthly Passive Income = 2X Monthly Expenses

Stage 3: Monthly Passive Income = 3.33X Monthly Expenses

Stage 4: $100,000 in Monthly Passive Income

Again, using the example of an individual with $3,000 a month in expenses, the following chart shows the monthly cash flow necessary to attain the various stages.

Monthly Expenses

Monthly Cash Flow

Stage 1

$ 3,000

$ 3,000

Stage 2

$ 3,000

$ 6,000

Stage 3

$ 3,000

$ 10,000

Stage 4

$ 3,000

$ 100,000

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