Grant Sabatier, author of ‘Financial Freedom,’ says there are seven levels of wealth: what stage are you in in 2024?

By admin On Sep 19, 2024 0

A shaky economy, job uncertainty and rising everyday costs have Americans yearning for financial independence that makes money worries a distant memory.

That might be why so many people turn to author and personal finance expert Grant Sabatier. Seven-level breakdown To financial freedom.

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Sabatier’s list is gaining attention because it lays out the different levels of wealth people reach on their path to prosperity. Understanding where you are on the ladder can guide your next steps toward the ultimate rung: total financial freedom.

So where are you on the ladder and how can you keep moving up?

Level 1: Clarity

The journey begins with understanding your financial situation: your income, debts and savings.

Today’s high food prices and everyday costs make basic living expenses a challenge. But it can be empowering to understand where you stand financially and how much you need to make ends meet. Here’s how to make a plan.

How to scale: Start by tracking the inflows and outflows of each dollar. Budgeting Apps Tools like Mint or YNAB can help you get organized and clarify your debt-to-income ratio so you understand what you owe.

Level 2: Self-sufficiency

At this stage, you are no longer dependent on anyone for financial support and are able to cover basic expenses. Reaching this stage means you are paying your rent or mortgage, utilities, and other essentials without accumulating debt.

However, living paycheck to paycheck is still considered part of this step. Recent MagnifyMoney Study He found that half of Americans are dealing with that reality.

How to scale: It’s important to build an emergency fund with the equivalent of three to six months of basic expenses — a safety net to protect against loss of income or unexpected expenses. It’s also important to minimize lifestyle inflation and keep expenses low as income increases.

Level 3: Breathing Space

At this level, you no longer have to live paycheck to paycheck. The extra money allows you to spend discretionarily. You no longer stress about paying your monthly bills. Knowing that your financial situation is in order, you have enough to afford to eat out, go on vacation, and do other non-essential things.

How to scale: Focus on Erase high-interest debt and increase your savings rate. Prioritizing where your money goes ensures that you continue to build wealth while enjoying the results.

Read more: Rich, young Americans are fleeing the turbulent stock market. These are the alternative assets they are relying on instead

Level 4: Stability

At this point, you’ve built a solid foundation. Everyday expenses and unforeseen emergencies don’t worry you. This level is about security and knowing that an unexpected bill won’t send you spiraling into debt.

How to scale: Maintain regular contributions to your savings and investments. Make sure you have the right insurance policies (health, life, disability) to protect your assets and income.

Level 5: Flexibility

You can now take more risks or consider life changes (such as a career change or entrepreneurship) without fear. Flexibility allows you to follow your passions, knowing that your money can handle it.

How to scale: Continue to create diverse revenue streams and make strategic investments. Real estateStocks and side businesses are common ways to create financial flexibility.

Level 6: Financial independence

Now your investments generate enough income to cover your daily expenses. Suddenly, working is optional.

This level is commonly associated with the FIRE movement (financial independence, early retirement)where investments provide enough income to cover daily costs and allow you to stop working while enjoying greater control over your time.

How to scale: Maximize contributions to tax-advantaged accounts, such as 401(k)s and individual retirement accounts (IRAs), and invest in dividend-paying stocks or rental properties to generate passive income. With the ups and downs of the stock market, a well-diversified portfolio is essential to maintaining your financial independence.

Level 7: Abundant Wealth

Is this the goal? Sabatier says the final level finds you with more money than you need, allowing you to live the life of your dreams and give generously. Whether that means traveling, pursuing passion projects or doing philanthropic work, abundant wealth allows you to pursue what matters most to you.

How to scale: Focus on preserving your wealth through diversified investments and estate planning. Giving back to the community, whether through charitable donations or creating a legacy for your family, can also become a priority.