How Understanding Financial Freedom Levels Can Accelerate Your Financial Journey

Welcome to today's episode of the wealthy after 40 podcast. We are going to be discussing the levels of financial freedom. Having a better understanding of this will help you progress. Further more easily on your financial journey. If this topic is of interest to you, please join me for my free workshop in March. Called the financial freedom blueprint where we were where we will be mapping your money. creating a budget, understanding how that blends and ties in with all of these levels of financial freedom. You can find the link to register down in the show notes or on my website, and I would love to have you join me. Back to today's episode. So today's episode, I'm so excited to talk about these different levels. I think that we hear the word financial freedom and we just think we're never going to get there. But understanding that financial freedom is stepping stones to finding financial abundance. So we will talk about these. I did not develop these. These were defined by Grant. Subbottier. I'm probably butchering his last name, um, but it is spelled S A B A T I E R. He wrote a book, and I've read this book. It is probably my number one recommend. If you've heard me on other podcasts, this is the one I give, and it is titled Financial Freedom, A Proven Path to All the Money You Will Ever Need. So yeah, if you're a reader, or even an audio book. He has it in audio as well. I loved this book. It was such, um, such a great learning moment for me, but I found it, I think he wrote it later too, so maybe I couldn't have found it sooner. I wished I would have had it earlier on my financial journey. So if you're somebody that is feeling stuck or Not understanding all of these, and even after today's go dive into his book. So without further ado, let's dive into each of these levels. Um, and again, I give you a title, what they mean and the. Some action steps to help you move to the next level. So, Grant has you starting out where if you listened to January's episodes, he has you starting the same place. He has you starting with clarity. How much money do you have? How much do you owe? And what are your goals? His statement, you can't get to where you want to go without knowing where you're starting from. Clarity is so important, um, and knowing how to get there and creating that vision as I talked about in those episodes. So understanding, like, what it is we want. And I really believe this level will accompany you at every other level. If something happens in life, you have a major life event, something changes, death, divorce, you know, things like that, job loss, you're going to want to come back to clarity. I think clarity will help you reign in, help you understand the effect that is happening, and then wherever, whatever level you are in, you will be able to, you know, make a better decision. You'd be able to get yourself out of that financial problem, maybe not real quick, but you will be able to make wise decisions. So understanding your current You know, financial situation, um, and what you want, um, really starts propelling you and getting you moving forward. So level two, he calls self sufficiency. Now we see this most in, um, teenagers as they're growing older, you know, moving on from mom and dad. So to be self sufficient means that you have enough of a earnings to cover your expenses without any outside help, right? So like I said, typically we see this in teenagers as they're starting out. Contributions come from mom and dad. That's great, but at some point we need to learn to be self sufficient and to be able to provide for all of our expenses. So that's level two. Um, at this level, Uh, grant notes that you may be living paycheck to paycheck or taking on loans to make ends meet. So you're really just sitting in this level of not making progression, living paycheck to paycheck. And so really exploring that, what that means. Um, sometimes it can mean you need to increase your skills, increase your education, right? Look for promotions, Especially if you're at the very beginning of your, um, career journey, you're new to working, you're new to this. And I remember being first married, first working wages were not that great. Right. And so just trying to make it, trying to get by, trying to provide the next things, definitely, um, a learning level, a growing level, and, you know, being able to provide for ourselves. But hopefully, at some point, we move to Level 3. Level 3 is called Breathing Room. So people at Level 3 have money left over after living expenses. So it is having, you know, 50, a hundred dollars. It can start out that small, but with this quote, breathing room with this quote, leftover money, we need to refer back to clarity. What is our vision and what is our goals? And using this quote money, how can we support ourselves in moving forward? How can we continue to grow and reach our goals? And so making that determination in level 3 is what will aid us in building the bridge to level 4, which I will get into in just a minute. But, um, the thing you need to watch in level 3 is that you don't, uh, defer to lifestyle creep. Right. We, and what that means is that with every single raise we get, we continue to spend it all. You've heard that saying, man, I got a raise and I don't know where the money went. It is allowing this lifestyle creep to come in. Rob from you, meaning that you just don't know where it's going. So again, level three, use your clarity, use level one to support you. Um, and so it's at this point, the grant takes us back to level two and says escaping level two means giving yourself some financial leeway, right? So that is the breathing room. It doesn't always necessarily mean making a bigger salary. Great. Now I know what I said a minute ago, but I want to read a statistic from Grant that he says 31 percent of working Americans making over 100, 000, so six figures, live paycheck to paycheck. And that was according to the Magnify Money Survey. So it is not always about making more money. Especially if you're, but it can be if you're low earning, right? So looking at that again, I don't know how clarity does not support us in this and help us get moving and progressing and moving forward. So again, level three, breathing room, you have quote money left over. What are you going to do with it? Use your clarity here. Avoid lifestyle creep and continue to build that, quote, extra breathing room. It is with that, that you will then create stability, which is level four. Um, so he describes level four as, um, those who have reached it have paid down high interest rate debt. So such as your credit card debt, and they have stashed away six months worth of living expenses in an emergency fund. So really in the stability. What you have created at this point, and I am going to define next week in next week's episode about how to build this, what are the building blocks for stability, and kind of breaking down this quote emergency fund into an easier grasping, um, working knowledge. I. struggled with this, having this living expenses in an emergency fund because it didn't serve what I thought it should. And so we will dive into that next week. Come and yeah, listen to that. So in this level, you're ready for, you know, financial surprises. You're ready for financial emergencies. You're ready to take on even a job loss. So recognizing that when you're in that stability, you have assets, right? You have this money to help, help support this new event that has happened. So recognizing that, you know, it's just, it's such a good relief to be in this level to where you're stable, where if some medical. Emergency happens where if a home repair happens, you know, something like that, you wreck your car or it needs a car repair that you're stable, right? You can cover that. You don't have to turn to your credit cards anymore. All right, so moving into level five, which he calls flexibility. So he says at this point, people have at least two years worth of living expenses saved. I'm going to add this into next week's episode as well to, you know, kind of explain how this will work together and to find some more quote buckets. I think we've kind of progressed to something different these days that will help many individuals who have struggled with, you know, just having. a pile of money for two years worth? Like, does that even entice you? Because what he's saying is, this is going to buy you some time to take a year off from your job if you wanted to. Okay, but what if you don't want to? What does it mean then? We will dive into that next week as well. But I also see it as being flexible for, um, something that was really unexpected, right? Something that was really major, or if you're wanting to maybe take a lower paying job, you've saved up some money, you're on your final years, you're able to kind of step back because you've been able to save some money to support that. To me, I also see it as, see that as flexibility. So you're definitely going to want to define what that means to you and how that best would support you. Um, it really just means that you can be flexible with large emergencies. You're not put in a situation where you're not sure what to do. You're going to have to scramble. It sets you off. Like any emergency, any quote disaster is not fun, but being able to cover the costs of what is needed to get yourself removed from that emergency and moving forward is just so huge. Now we move on to level six, financial independence. I think this is the term that gets synonymously used with financial freedom, and I can solely see why people who have achieved this level can live solely off the income generated from their investments. So, You either have an investment portfolio that generates enough interest for you to use and cover expenses, or you have rental properties that the cash flow from the rent also covers your living expenses. You can also have a hybrid of these two. But really getting to this point, you need to be able to shift a high percentage of your income to investment, right, into savings. The thing with this level is that achieving financial independence, if you want to do it early, right, like the fire, uh, financial independence retire early movement, if you're familiar with that. Really you're going to have to shift and invest a high percentage of your income in the correct investments. Definitely consult a financial advisor if you are wanting to be on this journey, but just know to do it early and quickly will require you to invest a high percentage of your income and require you to shift your modest lifestyle maybe to a lower cost of living. Definitely can happen. You have to be willing to pursue those changes in thinking if that is truly what you desire. Working towards my financial independence, which I want to clarify, there's not only investment portfolios and cash flows. You may be one of the fortunate few that has pension. Use that pension. That will be the same supporting. I had to do an X number of years to get mine. So there's still an investment amount. But being able to, uh, you know, to step into this level for myself, I had to reduce my expenses by 40%, something I planned on and I prepared for well in advance. So even as you're pursuing this and moving forward, work with that financial advisor, be really, bold with him on what it is that you want, and see what it is that you need to have, you know, you need to do. Shift that thinking, see if that's something you can do, um, and really explore that with him. All right, the final level that Grant has defined is abundant wealth. So financially independent folks who live off their portfolio income, so the things we talked about in level six. That will never run out, they will never expend or even get close to expending their financial wealth, have now moved into abundant wealth. I want to really state that abundant wealth can be a different monetary number, different for everyone. for listening. Now, I remember when my mom realized her abundant wealth and they were not millionaires, so just know it can be achieved. She turned to me and she said, I cannot spend my money fast enough. Her lifestyle, she was still enjoying and living, but yet she had this money that kept accruing and kept growing. Now, again, reminding you abundant wealth is different for everybody. People who are wealthy are building wealth for generations down the road. So that is beyond and thinking you want to get there. You have to work your way through these levels. You need to know how to, um, take those baby steps. You've heard me, you know, say before, like you might see somebody with 50 or 50. Excuse me, 50, 000 in cash savings. And you're like, yeah, I need to have that too. But you got to take baby steps. You've got to take baby steps. That's where I believe these levels are very. You know, helpful to us and shouldn't, hopefully they're not a downing, like, Oh my gosh, I will never get there, but really check in with your mind. And, um, what I want you to do with today's information from today's episode. And if you need to go back and listen to it, please do. But I want you to identify at which level you are. So, um, clarity, do that one. If you haven't done that, if you didn't do that in January, where we talked about it, then recognize, are you self sufficient? Are you covering all your expenses? Even if you are living paycheck to paycheck right now, are you covering your expenses? Then next through, you know, level three is breathing room. How can you create having some money left over? And once you do have money left over, to get to level four, how are you building? How are you building for your vision and your goals? And That will create stability. And like I said, we will dive into that next week and talk about how to actually build that. Um, as you continue to grow those building blocks, as you continue to do that, you will become more flexible and be able to handle more easily, not lovingly, but more easily some major financial decisions that will come your way. And sooner you will, then later you will realize that you have reached financial independence and you can enjoy to Trade your time for money if you want, and getting there is very rewarding and it is a lifetime pursuit. The lifetime is up to you on how long you want to, and then being able to grow that. But I think what's also important is if you are a parent, to teach your children about these levels as well. How can they become self sufficient? How can they begin to start growing their building blocks? So remember, go back, identify which level you are, determine your next steps to help you move to the next level. Work on that. Don't lose sight of that. Um, really embrace the mindset of abundance, meaning you can do it. Even if your abundant mindset is only getting you to the next level, continue moving forward. Continue to persevere now that you have these steps. And again, if you're interested in how budgeting can slide in with these levels to support your journey more easily, join me in my workshop in March called the Financial Freedom Blueprint Uh, link is down in the show notes or on my website to get registered and we can create that blueprint for you. Thank you so much for being here today and we will dive into financial stability next week.