Levels Of Financial Independence
Some ideas to guide, navigate and support the accumulation of wealth.
- Levels Of Financial Independence
- Motivation
- Levels
- The Wealth Ladder 6 Steps to Financial Freedom
- Net Worth
- Appendix
Last updated: Sun 30-Aug-2026 evening
Motivation
In simple terms
- It is not about how much money you make.
- It is about how much money you keep.
- As the money that you keep (i.e. your net worth, or your liquid net worth) will drive how you can use your money to make more money.
So given that there are levels of net worth that should be considered, what are they and what do they mean?
Levels
Financial independence is not a binary thing. It has levels as you increase your wealth.
| Name | Description | |
|---|---|---|
| 00 | Financial Dependency | Debt and living expenses greater than your income |
| 01 | Financial Solvency | Current on debt payments Meet financial commitments without outside help |
| 02 | Financial Stability | Built three-to-six-month emergency fund |
| 03 | Debt Freedom | Could be no debt or just no mortgage or no credit card |
| 04 | Coasting Financial Independence | Also known as - Freedom from Employer - Barista Financial Independence - Agency Could step down from a higher paying job to a lower paying job that you enjoy more Have enough invested that will grow to a level that is good enough for retirement at a pre-determined age, even if no more is added to the investment So can coast through to retirement |
| 05 | Financial Security | Cash flow from investments can provide your basic survival expenses Food, water, shelter, clothing, insurance Just survival |
| 06 | Financial Flexibility | Live off current cash flow assuming that you have a flexible spending plan to account for market fluctuations Roughly half of full financial independence |
| 07 | Financial Independence | 4% rule - https://en.wikipedia.org/wiki/Trinity_study You have saved 25x your annual expenses 100,000 * 25 = 2,500,000 2,500,000 * 4% = 100,000 |
| 08 | Financial Freedom | Can add in more life goals than previous level Add in some dreams |
| 09 | Financial Abundance | Cash flow from investment is more than you will even need 3x financial freedom number |
Reference: https://www.youtube.com/watch?v=kDSHHiFMJ_I
The Wealth Ladder 6 Steps to Financial Freedom
- by: Nick Maggiulli
As you build wealth your strategy should evolve.
| Net Worth | Associated Freedom | |
|---|---|---|
| 01 | < $10k | Paycheque to paycheque |
| 02 | $10k - $100k | Grocery Freedom |
| 03 | $100k - $1M | Restaurant Freedom |
| 04 | $1M - $10M | Travel Freedom |
| 05 | $10M - $100M | House Freedom |
| 06 | > $100M | Impact Freedom |
The 0.01% Rule
- An amount equal to 0.01% of your net worth that can be spent daily without significant thought or guilt.
The 1% Rule
- An opportunity is only worth pursing if it has the potential to increase your net worth by at least 1%.
Caveat
- There have been criticism on this concept.
- Take it with a grain of salt.
References
Net Worth
Typically net worth is:
- Assets - Liabilities
In this analysis your net worth includes the value (equity) of your home.
Consider not including your home.
- So your net worth is, in essence, your liquid assets plus investment properties, etc.
In the simple case, your home is paid and is set to the side. You have housing and do not have to worry about it going forward. If you sell it you can move into something of equal value.
If you owe money on your home the same analysis can be done. If you sell it, you can buy a new one of the same value and not worry any more about housing.
Focusing on your non-home assets gives you a more conservative view of your net worth and thus gives you a buffer.
Appendix
Version History
| Date | Notes | |
|---|---|---|
| 01 | Sun 30-Aug-2026 | Initial version factored out from top level |