What does it even mean to have financial freedom?
Being financially free means having enough money, so you don’t have to worry about paying for the things you need.
Imagine having a bank account that’s so loaded that you can use it to buy food, pay for your house, and get the things you want without stressing about running out of money.
This is what financial freedom means.
When you’re financially free, you can choose how you spend your time instead of working to pay bills. You might still work because you enjoy your job, but don’t have to work to survive.
Being financially free helps you live a happier and less stressful life.
When you don’t have to worry about money all the time, you can focus on the things that matter to you, like spending time with family and friends or doing hobbies you love.
For me, attaining financial freedom means living freely with close friends and family around. I will be able to spend weeks watching anime (maybe One Piece at a stretch) without my conscience judging me. I will also have enough money to go to the concerts of my favourite music artists anywhere in the world.
Defining what financial freedom means to you is important.
The 7 Levels of Financial Freedom
The truth is that financial freedom comes in stages or levels.
Understanding these levels is like climbing stairs. You must reach each step before you can get to the next one. When you know how much money you need to be financially free, you can always adjust and see if you’re doing better.
Level 1: Clarity
Know exactly how much money you spend every month.
Write down what you pay for rent, food, black tax, data subscriptions, and everything else. Find out how much you currently spend monthly. Then write out your ideal monthly expenses.
This level is important because you can’t get better with money if you don’t know how you’re spending it. It’s like trying to lose weight without knowing what you eat.
In this level, figure out where you are and where you want to go.
Level 2: Self-Sufficiency
This is when you earn enough money to cover your expenses on your own.
At this level, you have saved up enough money to pay for one whole month of expenses. If you spend 20,000 Naira every month, you have 20,000 Naira saved up.
This is important because it means you can survive for one month if something bad happens, like losing your job. You won’t panic right away because you have a little cushion.
To achieve this level, you have saved your monthly expenses.
Level 3: Breathing Room
In this level, you escape living from salary to salary.
Now you have enough money saved to pay your bills for 3 to 5 months. Using the same example, you’d have 60,000 to 100,000 naira saved up.
This level gives you time to breathe and think if you lose your job or when your business is down. You don’t have to take the first job you find because you have time to look for something better.
The path is clear here – Save 3 to 5 times your monthly expenses to complete Level 3.
Level 4: Stability
This is when you have six months of living expenses saved and your debts repaid.
You have expenses saved up for the next 180 days. This means you can go half a year without working and still pay all your bills.
This level makes you feel secure. Most emergencies or job losses get fixed within six months, so you’re protected from most problems that might happen.
To achieve this level, you have saved 6 times your monthly expenses.
Level 5: Flexibility
In this level, you have two years of living expenses invested.
At this level, you have saved up twenty-four months’ worth of expenses. That’s a lot of money! It means you can live for two whole years without working.
This gives you amazing freedom. You can quit your job to start a business, go back to school, or take care of a sick family member without worrying about money.
Remember again – you need your monthly expenses saved 24 times to be financially flexible.
Level 6: Financial Independence
This is when you can live off the income generated by your investments till the day you die.
You have so much money invested that it makes enough profit to pay for your living expenses forever. You never have to work for money again if you don’t want to.
This is the dream level you must aim for. You can choose to work because you love your job, not because you need the money.
I love this level because work becomes optional at this point.
Level 7: Abundant Wealth
Here, you have more money than you’ll ever need.
Your money is too much at this level. You can buy almost anything you want and help lots of other people, too.
At this level, money isn’t something you think about anymore. Simply focus completely on doing things that make you happy and help make the world better.
I also talk about how to identify your skills and keep moving up these levels of financial freedom in Personal Wealth Maximizer. Check it out if you are truly ready to start your journey in being financially free.
Why is it Important to Know These Levels?
Knowing these levels helps you in three big ways:
First, it shows you exactly where you are right now with your money. You might discover you’re already at Level 2 and didn’t even know it!
Second, it gives you clear goals to work toward. Instead of just saying “I want to save money,” you can say “I want to get to Level 3 by saving up four months of expenses.”
Third, it helps you stay motivated. When you see yourself moving from Level 1 to Level 2, you feel proud and want to keep going.
Again, at what Point will you be financially free?
To be financially free, recognise these 7 Levels and complete them one at a time.
- Clarity (know your monthly expenses)
- Self-sufficiency (Save 1x monthly expenses)
- Breathing Room (Save 3 to 5x monthly expenses)
- Stability (Save 6x monthly expenses)
- Flexibility (Save 24x monthly expenses)
- Financial Independence (Make enough money to pay for your living expenses forever)
- Abundant Wealth (Have more money than you’ll ever need)
Ultimately, the amount you need comes down to the life you want to live, where you want to live it, what you value, and what brings you joy.
I hope this helps.
Godspeed and Cheers.
Zamai.