When I was young, I liked to read story books before going to bed at night.
Now that I have two little girls, I found myself re-visiting this old love and reading stories to my little girls before they go to sleep at night. One of my favorite classics is “Alice in Wonderland”. Do you remember this scene?
“Would you tell me, please, which way I ought to go from here?” asked Alice.
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where.“ said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
Isn’t this so true? If you don’t know where you want to go, then anywhere will do!
Many people go through life without ever knowing what they truly want and why they want it, and therefore they just ’let life happen to them’.
Don’t let that be you. If we don’t know what we want, how can we get what we want? If we don’t have a dream, how can we have a dream come true?
When I was working hard in my corporate life years ago, although I was making a good income, I was time broke and stressed out. I knew something was missing. I didn’t want to live my life like a robot. And I knew I wasn’t fulfilling my life’s purpose. I wanted to do more, to have more, to experience more, to be more, and just to ’live’ more.
Similarly, when it comes to your financial goals, you must know also where you want to go. In this blog post, I will share with you how I define the 4 Levels of Wealth and how you could achieve them.
LEVEL 1: FINANCIAL STABILITY
The first level of wealth is known as “Financial Stability”. This is the most basic level of wealth that everyone should first attain.
To achieve “Financial Stability”:
1) You should have accumulated enough liquid assets to cover your current expenses for a minimum of 6 months.
2) You should have basic insurance to protect you and your family’s lifestyle should you become temporarily or permanently disabled, unable to work or if you pass away suddenly.
Insurance coverage is beyond the scope of this blog post but I would strongly encourage you to talk to your trusted insurance professionals to find out more about what insurance coverage best suits you.
When you have attained this first level, you will have the peace of mind that should anything unexpected happens such as job retrenchment, business failure, pay cut, death or disability, you and your family’s lifestyle will be protected for at least the next few months so you have time to get back on your feet financially.
If you have achieved this 1st level, congratulations! Now, let’s move onto the 2nd level which will give you much more freedom and excitement in life.
LEVEL 2: FINANCIAL SECURITY
You have achieved “Financial Security” when your monthly residual passive incomes cover your MOST BASIC monthly total expenses. You can establish residual passive incomes by building and acquiring businesses and investments. Check out my blog posts ’The Proven Formula to Generating More Income’ and ’The Power of Leveraging’ for more ideas.
In other words, when you reach this level, you can stop working and maintain a very BASIC lifestyle.
It also means that if you continue working, all your active income can now be channeled towards your investments or re-invest into your businesses and this will further compound your assets and increase your cash flow.
So, what are your most BASIC expenses? Think of all the necessities you will need to live a very simple lifestyle. Certainly, this is subjective and vary from people to people, country to country, but generally your BASIC expenses should include the following:
(1) Shelter – the rent or mortgage of your primary residence
(2) Food – groceries for your household
(3) Transportation – public transportation expense
(4) Debt – interest payments for debt owned
(5) Insurance – insurance premiums for your basic insurance
(6) Giving – basic giving or donations to your church or charity you support
The scary part is, most people in the world NEVER achieve Level 2 Financial Security in their entire lives.
Some has never thought about it (remember Alice in Wonderland?); some didn’t think it is possible for them so they never even tried; some didn’t know how to go about getting there; but in most cases, they just live by the old saying “go to school, study hard, get good grades, get a good job and work hard until you are 65 years old to retire.”
The truth is, the economy is getting more and more uncertain, people can get laid off easily from their jobs and even if you work and save money until you are 65 years old, there is still no guarantee that you can retire comfortably and have enough money to spend until you pass – What if there is an economic crisis after you ’retire’, what if you found out after retirement that you didn’t save enough money, what if you live longer than you have expected?
I have seen financial difficulties happened to perfectly kind hearted, hard working individuals who are still subscribing to the old, traditional formula of “go to school, study hard, get good grades, get a good job and work hard until you are 65 years old to retire.” Often times, they live from pay check to pay check, trading time for their money day in and day out their entire life without a Plan B.
Don’t let that happen to you. Learn and take actions on how to build and acquire your businesses and investments and build your residual passive income streams.
Now, moving onto the next level and towards true freedom…
LEVEL 3: FINANCIAL FREEDOM
Many of us have the dream of achieving “Financial Freedom” (I believe you are one of them since you are reading this post now) but what does it really mean?
Well, “Financial Freedom” is when your monthly residual passive incomes exceed your monthly total expenses of your CURRENT lifestyle.
In other words, at this level, your passive incomes cover your basic expenses (such as Shelter, Food, Transportation, Debt, Insurance and basic Giving) and more (such as having a car, going on one or two annual vacations, occasional entertainment and dining out with your family, donating more to your favorite charities, investing in yourself through personal development seminars and courses).
Reaching this level of wealth means that you have the option, the freedom, of never having work (for money) for another day of your life and still maintaining your current lifestyle!
Learn from people who have already done it and find yourself a Mentor. If you follow the right path and take massive actions, “Financial Freedom” can be attainable within 3 to 5 years.
I can tell you from my personal experience that it is AMAZING to achieve Financial Freedom – being free of financial pressure and worries and working purely out of passion, having the time to spend with your children and loved ones!
Obviously, the more expenses you have, the more luxurious and indulgent your standard of living, the longer it will take for you to achieve Financial Freedom.
Now, if you have achieved Financial Freedom, a BIG congratulation! You have now achieved a level that 95% of the population never gets to. But, there is one more step above “Financial Freedom” – let’s move on…
LEVEL 4: FINANCIAL ABUNDANCE
So what is the ultimate level of wealth you can achieve?
“Financial Abundance” is when your monthly passive incomes can cover the total monthly expenses of your DREAM lifestyle. Obviously, this is totally subjective depending on the lifestyle your heart desires.
If your desired lifestyle is to live in a 5,000 square-feet house with a nice sea view and a swimming pool, send your kids to the best schools in the World, drive a Ferrari, own a yacht and travel the world 12 times a year or more in first-class, donating a school to charity each year, then you could be looking at a monthly lifestyle that will cost you a cool US$ 150,000 or more (depending on which country you live in).
Obviously, the more luxurious your dream lifestyle is, the longer it will take for you to achieve “Financial Abundance”.
Most people who do reach this level usually LOVE what they do so much that they keep on working just for fun, channeling 100% of their active income towards charitable causes and further compounding their wealth.
So which level of Wealth are you currently at and what level of wealth would you like to achieve?
Take inventory of where you are financially today, keep learning and keep taking MASSIVE actions towards your goals. It is never too late to start building your residual passive income streams through your businesses and investments.
With the right strategies and plan in place, you too will be able to achieve your desired level of wealth, be able to take care of your family, have the peace of mind, give back to the society more and do what you truly love in life.
I hope this post has added value to you. Sharing is caring! If you have enjoyed it, do ’like’ it and ’share’ it so that your friends and loved ones can also benefit from this.
With lots of love,