I previously introduced this information in one of my introductory posts outlining my goals, but it’s such a central tenet to my blog that I figured it was time to give it its own post.
I explained that Unchained55 was about my journey to achieving Financial Freedom by the age of 55, and that because “Financial Freedom” may mean very different things depending on who you’re talking to, I defined five of the major stages.
The 5 Stages of Personal Financial Independence
- Financial Instability: The stage at which your present income is not enough to cover all of your expenses to live comfortably and you are incurring debt just to cover living expenses. Obviously, the definition of a “comfortable” lifestyle will vary greatly from person to person.
- Financial Stability: The stage at which your present income is high enough to cover all of your expenses while living comfortably without having to incur any debt.
- Financial Security: The stage at which your present income is high enough to cover all of your expenses while living comfortably today as well as building a comfortable future (i.e. Retirement savings are on track.)
- Financial Freedom: The stage at which you no longer are in any debt and no longer have to work to be able to cover all your expenses because you have accumulated enough wealth to sustain a comfortable lifestyle for the rest of your life. Typically achieved at retirement age.
- Financial Wealth: The stage at which you have accumulated enough wealth to sustain a lifestyle of luxury indefinitely.
I started this blog in a position of Financial Instability, and so Goal #2 for 2015 was to achieve a position of Financial Stability by October 31. I’m super happy to say that as of our Financial Health Check #3, we achieved this goal 50 days ahead of schedule!
Goal #1 was to pay off our HELOC balance, after which we will only have a few other small debts to pay (e.g. TFSA over payment penalties, HBP repayments, etc.) before we can start saving towards our retirement, meaning we’ll be in Stage #3 – Financial Security!
My ultimate goal is to achieve Financial Freedom by the age of 55, so we’ll (hopefully) be in a position of Financial Stability for many years as we prep and plan to graduate to Stage 4. If you’re curious as to why I’m not striving towards Financial Wealth, check it out here.