10 Levels of Financial Independence And Early Retirement | How to Retire Early

Updated : Sep 02, 2019 in Articles

10 Levels of Financial Independence And Early Retirement | How to Retire Early


Long-term financial goals can sometimes seem
so big that they feel almost unattainable especially when we’re just getting started
on our road to financial independence. I and many others like me in the financially
independent, retired early community have found it helpful to break down the goal of
becoming financially independent into smaller and more manageable levels of financial independence. Not only because it makes it easier for us
to track our progress, which in turns helps us to stay motivated throughout the process,
but also because it helps us get over that initial hurdle of starting to chip away at
this mountain of a task. In today’s video, I’m going to take you
through what I consider to be the 10 levels of financial independence as well as give
an example on how to go from the first level to the top level in your lifetime. Hey everyone Daniel here and welcome to Next
Level Life a channel where you can learn about Investing, debt, retirement, and many other
general financial education videos because the school’s aren’t going to do it for us. So if any of those topics sound interesting
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as well as a list of some books on money I’d recommend checking out, or you can share this
video with a friend, and leave a comment below letting me know what topics you’d like me
to cover in future videos. Now obviously these ideas of the levels of
financial independence are not solely my own nor are they very new as there are many articles
and blog posts that have covered this topic already and have done so for many years. So consider this more of a summary of many
of the ideas expressed in those articles and if you want to learn more about the topic
feel free to check out some of the articles for yourself. I’ve left some links in the description. With that out of the way, let’s get started. Okay so real quick the 10 levels of financial
Independence are Level 0 Financial dependence, level 1 Financial solvency, level 2 Financial
stability, level 3 debt Freedom, level four coasting Financial Independence (also sometimes
known as freedom from employer), level 5 Financial Security, level six Financial flexibility,
level 7 Financial independence, level eight Financial Freedom, and finally level 9 Financial
abundance. The levels are usually defined as something
like the following: Level 0 – Financial dependency is when your
debt payments and other living expenses are greater than your own income. This means that you are in one way or another
dependent on someone or something else to help you pay for your bills or if you happen
to be a kid and don’t actually have any bills you need someone else, usually your parents,
to pay to put food on the table and keep the lights on and have a roof over your head. This is the level that all of us start out
on and it is referred to as level 0 because as a financial dependent you obviously have
no Financial Independence. Level 1 – Financial solvency is when you are
current on all your debt payments and you can meet your financial commitments and your
other living expenses without any outside help. Level 2 – Financial stability is usually defined
as when you have built some sort of emergency fund in addition to being financially solvent. Level 3 – Is again debt freedom and it’s defined
differently depending on who you ask. For some, it is being completely debt-free,
mortgage and everything. For others, it’s being just free of the high-interest
debts like credit cards but you still might have a mortgage or other debts like student
loans. And for some others, it is paying off all
of your debts except for the mortgage but your credit cards and student loans or car
loans all that stuff is all paid off. Level 4 – Coasting Financial Independence
also sometimes known as freedom from the employer, Barista Financial Independence, or Agency
in blogs and other mediums. I personally like the idea of it being coasting
Financial Independence so that’s what I’m going to be using in this video but know that
some people refer to it by one of those other titles but the idea is the same. You have reached the level of coasting Financial
Independence when you could, if you wanted to, step down from a job that may be higher-paying
but may also be either less satisfying or more stressful or both into a new job that
is lower paying but more enjoyable or less stressful or both. This is because in the early years of your
career or just thought most recent years you have managed to save a very decent sum of
money that would be able to provide for the later years of your retirement after it has
grown even if you don’t put much more in. Therefore all you need to do is make enough
money to get you to age 60 or 65 or 70 or whatever your numbers work out to be when
that amount of money you’ve already invested will be able to fund your lifestyle because
it’s been given enough time to grow. So in a sense, you’ve worked really really
hard and been very frugal in the first few years so that you can coast into your retirement. I have gone into more detail on the various
types of financial Independence in a previous video which I’ll leave Linked In the description
if you’re interested in learning more. Level 5 – Financial Security is effectively
when your cash flow from wealth such as you are investments has grown to large enough
that it can provide for your annual basic survival expenses. Now I say survival expenses because I do differentiate
that from living expenses survival expenses are just the basic things you need to survive
Food, Water, Shelter, some form of transportation, clothing and probably insurance. This does not include things like Netflix
subscriptions or cable bills or things like that it is purely survival expenses. So this may not be exactly the ideal spot
to retire and I certainly wouldn’t want to retire at this point but it is an important
level to keep in mind because it does give you… well security. If you were to get fired today and you were
on level 5 you would be okay you could survive until you found another job. This is essentially the first level that really
gives you I guess that piece of mind even if the lifestyle should you have chosen to
live it may not be the most lavish. Level 6 – Financial flexibility is similar
to Financial Security just one step up. It is when you have the ability to live off
of your current cash flow from your wealth assuming that you have a flexible spending
plan that adjusts for up and downs in the market. So if the markets up 20% one year you’re able
to spend a little bit more but if the market is down 20% the next year then you don’t spend
quite as much. I’ve seen it defined many different ways
so it could vary depending on who you ask, but the one that I personally like the most
is that it is roughly half of your full financial independence goal, or roughly about 12.5x
your current annual expenses if you follow the 4% rule to get an idea of how much money
you need to retire like I’ve explained in previous videos. So it isn’t quite Financial Independence yet
but it’s close. Level 7 – Is financial Independence and it’s
usually based on the 4% rule which I have covered in a previous video. You can follow the 4% rule when you have saved
roughly 25x your annual expenses. The vast majority of the time this will be
enough money to allow you to maintain your current lifestyle in retirement and as a result,
you can be considered financially independent. And some articles end it right there but I
think there are a couple of levels that are a bit higher than that that are worth considering
even if some of us may decide to not ever try to achieve them because being at level
7 allows them to do what they wanted all along. So let’s talk about those other levels. Level 8 – Is Financial Freedom which I’ve
often seen defined as the cash flow from your Investments is greater than financial Independence
and a few more life goals. Life goals, of course, will differ for everybody
but this is could be something like taking a trip or two overseas or moving to a new
place you’ve always wanted to live but haven’t had quite enough money to live there up till
now or whatever the case may be for you like I said it’s different for everybody. Level 9 – Is financial abundance and this
is quite simply just that the cash flow from your Investments is more than you will ever
need. You could spend it if you really wanted to
but it would actually take some effort. And the stuff from level 8 doesn’t really
cut into it much at all. So you could up those goals even more and
still have more cash flow left over at the end of the year. This also probably has a slightly different
definition for each person depending on who you ask, but I like to think of it as roughly
3x your financial freedom number because this would allow you to experience a horrible bear
market where your investments go down by 50% and still has 1.5x the amount that you would
need to maintain the lifestyle you lead when you reach level 8. To me, that means that it is likely more than
you will ever need, but again that one is strictly my own opinion on the matter. So those are the 10 levels of financial Independence,
now let’s walk through a hypothetical example of how someone could go from Level 0 to being
financially independent in a single lifetime. John and Jane are recently married couple
each making $20 an hour at age 23 or $83,200 a year between them assuming no overtime. They manage this because they are not only
good hard-working people but got great grades in school and we’re selective about the job
that they decided to pursue. Obviously just like everyone else they would
have started off as Financial dependents and as they were going through college they would
have been building up student loans that they would not have had the money to pay off (assuming
of course that they didn’t earn enough money while in school to keep up with the rising
debt). In all they have credit card debt, two car
payments and the student loans which have balances of $5,000, $35,000, and $60,000 respectively,
but since they got their jobs they are no longer financially dependent and their incomes
have allowed them to become current on all their debt payments without the help of others. In addition to the regular monthly debt payments,
their annual expenses are $48,000 a year. So they are currently in level one Financial
solvency and trying to figure out a way to move to level 2 Financial stability. In order to do that they need to figure out
a way to build up an emergency fund. Now if they’re following the 10 levels system
to a T then they would look to build a 3 to 6-month emergency fund of their survival expenses. However, this is not the only way to approach
it say if you were to follow Dave Ramsey 7 baby steps you would start off with just a
$1,000 starter emergency fund and then get right onto attacking your debts. And other Financial systems and plans may
have you approached it an entirely different way. Either way is perfectly fine because the 10
levels system is not meant to be a financial formula per say it’s more there to give us
some sort of guidepost so that we can better track our progress towards achieving Financial
Independence. But for the purposes of this video, I am going
to assume that they follow the 10 levels in order so we are going to be building up a
full emergency fund. In order to find how much of an emergency
fund they will need we will need to know how much money they need to survive not necessarily
on their current level of expenses while they have jobs but purely on Survival expenses
which are basically your four walls of your financial house or in other words food shelter
including utilities Basic clothing and some form of transportation as well as the insurances
that are related to that assuming there are any. In this case, I’m going to assume that their
survival expenses are right around $3,000 a month. Which means that in order to get a 3-month
emergency fund they would need $9,000 in order to get a six-month emergency fund they would
need to save $18,000. Both John and Jane feel that their jobs are
pretty darn secure and the market is doing fairly well so it’s not likely at least in
the near-term that they would get laid off because the company has to downsize so they
decide together that they are comfortable with having just a 3-month emergency fund
of $9,000. So with $83,200 a year in income, $48,000
a year and expenses, plus minimum monthly payments of $100 on the credit card which
is 2% of the balance, $550.78 on the car loans, and $621.83 on the student loans they will
have approximately $1,660.72 a month left over to start building their emergency fund. However, both John and Jane have been looking
into their finances and researching a lot lately and they become fired up at the possibility
of becoming financially independent while they’re still young. So they want to see if there’s a way that
they can speed this whole process up. And as it turns out thankfully there are many. After taking a look at the options they decide
that they’re going to work as much overtime as they possibly can (for the sake of Simplicity
I’m going to assume that they manage to work on average 5 hours per week of overtime which
will increase their monthly income by about $1,300 a month, meaning that instead of $1,660
a month they will have $2,960 a month left over) and they’re going to sell both of their
cars and buy some nice used cars with cash to help knock down some of that initial debt. After putting out a couple of ads online they
managed to find buyers for each of their cars that is willing to give them $15,000. So they take that $30,000 and use $5,000 of
it to pay off the credit card balance and another $10,000 to buy a couple of used cars
from someone that they know takes good care of their Vehicles whether that be a family
friend or just a mechanic that they Trust. The remaining $15,000 is thrown at their car
loans. This means that the credit card loan is fully
paid off and therefore the hundred-dollar minimum payment is no longer needed. So John and Jane start throwing $3,060 per
month into their emergency fund and get it fully funded in 3 months with a little bit
left over at the end of the third month to throw out their car loan. Over the course of those first three months,
they managed to bring the car loans balances down to $18,423 thanks in large part to the
$15,000 that they threw at it in the first month after selling the cars and also making
the minimum payments in the first three months. Now that their emergency fund is fully funded
however they’re able to throw that $3,060 a month in addition to the $550 a month minimum
payment at the car loan and get it paid off in 6 months flat. So a mere nine months into their Journey John
and Jane not only have a fully funded emergency fund but they also have paid off both of their
car loans. Now there are just the student loans to tackle. And thanks to the fact that they’ve been making
minimum payments on them for 9 months and the fact that they had a little over $3,000
at the end of the ninth month after paying off their car loans their student loans now
have a balance of $53,263. John and Jane follow the same pattern that
they did with the car loans throwing the $3,600+ which is what they now have left over at the
end of every month because they no longer had a $550 car payment to make and they managed
to get their student loans paid off in full in 13 months. So John and Jane have managed to become debt
free and have a fully funded emergency fund in 22 months. They have now reached level three and because
of that they now have over $4,200 a month left over to start investing. This brings us to level four coasting Financial
Independence. Let’s assume that John and Jane want to retire
by the age of 65. That means that whatever they put in now needs
to be enough to grow to a point where it can support their lifestyle in retirement by the
time they’re 65. If we assume a rate of return on an average
in the market of about 10% before inflation and an inflation rate of about 3% per year
on average then we can get a rough estimate of how much John and Jane need to put away
in order to achieve a state of coasting Financial Independence. In this case, since they’re 24 about to be
25 they will have somewhere in the neighborhood of 39 or 40 years to let the money grow before
needing to take any of it out. If their expenses were $48,000 a year at age
23 then 42 years later if we assume a 3% rate of inflation they would need a tad bit over
$166,000 each year to live on. Again assuming we follow the 4% rule to figure
out how much they need once they fully retire to be financially independent that means that
they would have to have at least $4.15 million invested in the market by the time they turn
65. In their case, they would need about $110,000
saved up give or take in order to achieve coasting Financial Independence and because
they’re able to save about $4,233 a month now that they’re debt free, they’re able
to hit that goal in 2 years flat. Meaning that in theory, they would be able
to step down from their jobs to a more rewarding less stressful but probably lower-paying job
just 3 years and 10 months into their financial Journey. That is incredible! But like I said coasting Financial Independence
wasn’t their end goal. They wanted to be fully Financial Independent
so they keep working and investing for now. The next level is level 5 Financial Security
which is achieved when your cash flow from your Investments is greater than your annual
survival expenses which remember is $3,000 a month or $36,000 a year in John and James
case. Because they are debt-free, are making good
money at their jobs, and being intentional with their finances they Achieve Financial
Security in a little over 4 years with over $367,000 in their portfolio. It is been a mere 87 months or 7 years and
3 months since they began their financial Journey. John and Jane are 30 years old and they are
able to get by on their Investments alone. In theory, they could retire now, it wouldn’t
be the most glamorous retirement and it wasn’t their goal but it is an option they have. They don’t have to worry about losing their
jobs anymore because even if both of them lost their jobs today they would be able to
make it long enough to either find a new job or some other source of income. This is really the first level where you start
to get that piece of mind when it comes to money at least in my opinion. Next is financial flexibility which as I mentioned
earlier in the video has many definitions depending on who you ask but for the purposes
of this video, I’m assuming that it is roughly 12.5x your current annual expenses which for
John and Jane would be roughly $600,000 or about $855,000 if you account for inflation. This means that they would Achieve Financial
flexibility 9 years and 8 months into their Journey not accounting for inflation or about
11 years and 9 months if we do account for inflation. John and Jane continue investing through all
the highs and lows of the markets until they reach Financial Independence exactly 14 years
into their financial Journey assuming we don’t account for inflation or 18 years and 3 months
if we do. So you might be wondering why did I split
up the accounting for inflation time frames and the not accounting for inflation time
frames should we always be accounting for inflation? Well technically yes but the reason I split
them up is because in my experience taking this journey myself as well as seeing others
take it, this journey changes how you view a lot of things and more often than not those
changes lead to you valuing things such as freedom of mobility and location and freedom
of time to be able to spend with the people you love more and valuing more material things
that cost possibly a lot of money less and less. That’s not to say that everybody becomes minimalist
going through this journey, I’m not saying that at all but I have seen a lot of people
who have gone through this journey become closer to minimalist than they were when they
started the journey as they find out more and more things that they used to buy just
don’t provide enough value or happiness for them to be worth the purchase. They find better uses for their money and
time and as a result, they generally tend to spend less. Which means that even though inflation is
technically increasing your expenses by making every dollar less and less valuable over time,
if you’re also decreasing your expenses because what you value is changing it may even out
or in some cases, you may even see your regular expenses going down year-over-year as you
continue through this journey. So that’s why I split them up. And, before I go, I do want to mention that
based on what I’ve seen on various articles and forums some people really like to have
even more goals to chase as they go through this journey than what I’ve laid out today
in this video so if that’s something that would help you feel free to break down these
levels even further then I have today this is obviously just the list that I used and
what worked for me, but you could take it even further. For example, Debt Freedom could be broken
down into three separate stages: One where you are free from all high-interest debt,
a second where you are free from all debts except for the house (if you have one), and
a third where you are totally debt-free. You could tackle the coasting Financial Independence
level in a similar way breaking it down into two stages: One where are you have invested
enough to survive in retirement and a second where you have invested enough in order to
maintain your current lifestyle, adjusting for inflation of course, in retirement. And the financial independence level could
also be broken down into three stages: Stage one would be where you are at a survivable
level of financial Independence, stage 2 would be where you have achieved leanfire status,
and stage 3 would be where you have achieved full Financial Independence on your current
lifestyle assuming that it is above the leanfire level. So what do you guys think of this 10 levels
system of tracking our progress to financial Independence? Do any of you use a similar system to track
your progress? If so, what is it and what level, step, or
stage are you guys currently on? Let me know in the comments section below. But that’ll do it for me today once again
if you enjoyed this video be sure to subscribe and hit that Bell next to my name so that
you’ll be notified of all my future uploads. I generally upload every single Monday, and
if you have a friend that would be interested in this kind of content be sure to share it
with them and let’s really get this information out there and start our own Financial revolution.

100 Comments

  • Currently a student, so I guess I canโ€™t enjoy any part of my life until right before I die then? Being rich with being able to do anything I actually love sounds fun. Hopefully I donโ€™t die before then.

  • From having 0 savings and 0 debt just 3 years ago to LVL 5 at this moment… Big goal to be at lvl 7 by 40 and basically retire from 9 to 5 job…

  • Well explained, but I think assuming that people are coupled by age 23 is not realistic. That assumes that their monthly expenses, in particular rent or mortgage, are also combined. The reality is that people are waiting longer to marry and thus are carrying much higher individual living expenses.

  • Level:
    0) dependency
    1) solvency
    3) stability
    4) debt freedom
    5) coasting FI
    6) security
    7) flexibility
    8) independence
    9) abundance

  • already living the dream! the trick is build passive streams + businesses that run without you. The faster you leave the typical 9-5 the faster you'll find a way haha

  • When I saw 22 minutes for the video I thought that i would probably get bored half way through, but the fact is that at the end, i was surprised that it was already over. The topic is well explained and I'm happy I spent the time learning about these concepts.

  • What about health ins. for people who want to retire before age 65 ?? Here in the U.S.A. You don`t qualify for Medicare until you reach age 65 . health ins. is very expensive ??

  • Using your married couple example, how would you account for having children? I ask because only 28.9% of women between ages 30 and 34 are child free. Now don't get me wrong. I really like your presentation but, how would you account for having children?

  • no kids, no additional car purchases when the used cars get too old, and selling a car to downgrade will lower your payments but will rarely give you surplus cash

  • John and Jane aren't so smart. My student loans are 3-4%, the stock market returns an average of 10%. Pay the minimum on your student loans until your Roth 401k and Roth IRA are maxed out.

  • How to achieve it faster! Live in a place where things are expensive and your salary will be accordingly! Make that very plan and move to a cheaper place! Example living in Norway and moving to Thailand ๐Ÿ˜‰

  • It's painful to see how people are complaining instead of taking these awesome advices and running numbers based on their current and future numbers/situation.

  • Iโ€™m 42, divorced with two teenage kids. I should be completely debt free by the end of this month. Iโ€™m currently making about 75k/yr. but thatโ€™s only temporary. I only have about 30k or so in retirement and just about 4K in savings. And I live in one of the more expensive places to live in California. I feel like Iโ€™m on a good track but I also feel I have some catching up to do if I want to reach financial independence in the next 10 years or so. Is this a pipe dream?

  • 23yr old engineer earning about 75k/yr (hoping to hit six figures within the next few years). Contracting for now so no 401k. My expenses are about 30k/yr. Currently I have about 3 1/2 months worth of savings and I'm building up to a 6mo savings. I'm saving about $650/mo for that emergency fund and I also have an IRA that I'm thinking about converting to a Roth IRA. That IRA was my previous employer's 401k that got converted and it has about $2600 in it. I also just started putting in $525/mo. I've got an auto loan on a 4yr old car that has a balance of $2200 on it yet. I have $14,000 in student loans and a mortgage on a condo with a $69,000 balance.

    I think I'd consider "debt free" to be no debt besides a mortgage because the vast majority of people always have a mortgage. I've technically hit level 2 already but I'm going for 6 months so I won't really have that until the end of this year. Then I'll kill my student loans and hit level 3! It's kind of fun actually. Unless you don't consider yourself debt free if you have a mortgage. I don't know I mean you can always sell your house and be debt free immediately so I don't think that's the same thing. People who rent aren't really debt free then, they owe hundreds or thousands every month and always will. Same with a mortgage.

  • Whatever you do, don't retire early until you've finalized your marriage and child-bearing plans. A single person can live a simple life on $1M x 4% – taxes = $30k/year. A family of 4 will be poor.

  • And then they had an unplanned pregnancy. Broken transmission on their older car, upgrade to a mini van for a growing family, illness… life happened.

  • What if u want to contribute more into your investments, but have reached your annual contribution limits for your 401k and IRA?

  • Hey, congrats on the video. I agree with ~80% of it. My personal opinion tough is that the truth is somewhere in the middle( spend and save )
    Why would you live on the bare minimum youre 20-30-40's(at this age you have to live youre life ) only to live a lavish life in youre 50-60-70" where you are pretty old ?( you will have a lot of money but even a lot more regret that you havent lived youre life !! ) . It doesnt make much sense to me.
    Also in youre example you forgot about kids and the expenses for them + if the market had 10 % yearly that would be fantastic but it doesnt.

  • Issue: You've conflated an average historical APPRECIATION of equities with the cashflow you can actually expect from those equities. If you buy stock and it averages 10% over 10 years, that could mean 9 bad years and one very good one. Also the appreciation isn't available to spend unless you divest (I know dividends are a thing, but those aren't usually anywhere close to 10% in a sensible portfolio, and you're not getting anywhere near 10% from bonds).

    Good vid, sets some out of whack expectations though.

  • I'm 30 years old starting a business part time, two kids, and a hubby at collage. We are at level 1. But with only $10 000 in debts I hope we working towaerds level 4 in just one year after my husband finish school. (We live in Sweden and only pay about 1% on student loans, so I consider us debt free even though we still have student loans.)

  • As i just hit level 2, at 20 years old. I find it pretty silly. This whole level system assumes that you have gone into mistake no.1 of taking a loan to buy things you can't afford, and don't really need. like new cars and credit cards.

    The problem here is not financial. It is a self control, and cost control problem.

    I have intentionally invested in tools and materials and knowledge for building a tiny house or boat. I have saved from all my birthdays growing up, working while living with my parents, and living frugaly. Thankfully school is not personally expensive where i live.

    With the boat/tiny house i can cut living costs dramatically, but almost more importantly, i don't have space for things i don't need or afford.

    I aim to be financially independent in the next 2 years. And spend my mid 20's living and travelling, and learning like i think young people should.

    Cutting costs in clever ways is my solution. Live alternatively. Live cheap. Do things yourself. Invest and work systematically for yourself, with strong self dicipline. Take good calculated risks and break some rules.

  • Only thing I hate about these is the assumption that the couple will stay together forever (or atleast a longg time). Majority of marriages end in divorce. And if the couple isnt married, there's an even higher chance of them breaking up. My response: do this on your own! I see too many people thinking this is impossible because they can't "find the right partner". Remember: You can only limit how much you can cut your expenses but there is NO LIMIT ON INCOME. Take this from aguy (me) who built a successful blog that pulled in tens of millions of visitors at just 17 years old! I had no marketing experience, no prior blogging experience, nor even basic business experience (no formal training or anything like that). I just jumped in and worked hard. I would say to find ways to pull in multiple streams of income. That's another problem. People think you have to have a "million dollar idea". You do not need to become the next steve jobs. Hypothetical example: If you pull an extra $2k from walking people's dogs in the summer, $150/month from selling your art on ebay/instagram, $600/month from working overtime, $700/month selling your services freelancing, etc etc etc (the list can go on and on and on), THESE ALL ADD UP! You don't have to have one giant idea that will magically bring you in an extra $10k/month or selling a business for $2m to some corporation. You can do it incrementally with multiple streams of income. And there are alot of sources inwhich you can get these streams of income. There is no magic niche.

  • Public schools need 3 teachers per class. Or bums will be results in our Streets. Pay teachers or see homelessness its Your Choice really

  • All I know is that if your over 45 and making under 40,000 they should just issue universal income. Cause what you stand to produce vs. The impediment you are plus the health care bill your going to be carrying weight smoking eating to hold that job. That health care bill when you retire at 65. Will exceed every tax you paid from 45-65. Just retire us now. And we can stay in shape at get out the way of the younger generation.

  • What if you have no debt, but also have no assets whatsoever, including skills or education beyond highschool? ๐Ÿ˜… No one ever starts there. They always assume people have like, a bunch of debt, but a $50k+ job.

  • Very informitive and organized. Hope this will be translated to other languages and make mandetory to all fresh graduates

  • For all dissagree ppl with ROR, regardless of all numbers and percentage in the video u have the formela nad the idea .. adjust it to fit ur ror.

  • pro tip: NEVER leave your money in a savings account. Put your emergency account into some relatively safe stocks that will reliably grow ideally at least 3% a year. This ensures your savings will stay at the value they are today

  • Hi, I am new to this channel and wanted to say thaI love this video. Maybe I have just been looking in the wrong places but you your 10 steps broke everything down so simply, that it makes you want to stay why hasn't anyone else explained it like this. Are there any specific books that you would recommend if I want to follow these steps in more detail. I am a late bloomer as I will be turning 50 this year. I want to achieve level five by 62. And seven by 67.

  • sounds good but not sure where you get 10% for investments from, you would be lucky to get 2% here in the UK

  • I has anyone noticed they have no life? Every penny of spare cash goes into investments after they've paid their expenses. Great. Where's the children? Where's the social life? Where's living? You've got to balance it out otherwise if you just spend 13years hitting level 8 with nothing to show for it apart from a burnt out relationahip and a high bank balance then that's no way to live.

  • Daniel. My wife and I are debt free except for our home. We have 6mos expenses saved. Do I just slow roll paying off my mortgage, say, taking 17-18 years to do so and max out my Roth and 401k, or pay off my mortgage first, then max out retirement but invest 15% of my income while I slowly pay off my house?

  • So the people who bought there cars didnt ask for the title since the couple still had a car loan and wouldnt have the titles

  • How do i escape from the rat race? I dont pay attention what the jones, the shmoes and the shmuck guy from the corner street who likes to brag what he has.

    I set goals within my financial capability and know the difference between the needs and the wants

  • 1. Your assuming they womt ever get a divorce. 63% of marriages in America end in divorce.
    2. If they are making 60k at a regular job that is being tax which means they are really only taking up 48 thousand dollars max per year.
    3. They don't plan to have any children because that is another 10k a year in expense.
    4. Jon and Jane are living exactly where ?
    5. YouTube gives the most placements to strategies that dont work ๐Ÿคฆ๐Ÿพโ€โ™‚๏ธ

  • >Implying college will lead to good jobs.
    I regret attending college entirely. It's nothing but a money hole. I'm going into the trades so that I can pay off the debt I accrued for no viable reason.

  • The 10 Levels of FI
    Level 0 – 2:25 Financial Dependency
    Level 1 – 2:57 Financial Solvency
    Level 2 – 3:06 Financial Stability
    Level 3 – 3:13 Debt Freedom
    Level 4 – 3:36 Coasting Financial Independence
    Level 5 – 5:05 Financial Security
    Level 6 – 6:02 Financial Flexibility
    Level 7 – 6:51 Financial Independence
    Level 8 – 7:31 Financial Freedom
    Level 9 – 7:58 Financial Abundance

  • I really liked your more detailed breakdown and definitions,We are going to incorporate some of this into our plan. We have been using the Dave Ramsey method since 2016 and it is working well for us so far. We are currently simultaneously doing Baby-steps #4 #5 #6. 5 and 6 should be done over the next 5 years and then we will be focused on 4 and 7. That is the financial dream for now.

  • The example is not valid. Apparently the couple is not paying taxes on their income. There are so many wrong assumptions in the example better not go over them. Most people cannot live on minimum expenses for 10 years. Life happens. Anyways, the po principles are still ok.

  • My husband and I are currently on level 5….but I'm torn between "coasting" for the rest of my life and working towards level 8 or even 9. We worked so hard for so long I'm not sure I have much left in me and I'm only 33….lol. Early retirement does come at great sacrifice,which why I'm coasting right now and need a break.

  • Crack is smoked with a pipe, and this video requires a crack pipe to be believable. Total and compete unreality. You forgot taxes which take out 20% of the figures you used and don't forget little things known as babies, they like to eat or they will scream your head off, so drop some of your fantasy money on the little one. Please don't forget the 50% chance of a divorce, so forget the savings and say hello to child support and lawyer fees. So if Santa comes around tell him I said "hi(gh)".

  • I used a calculator on an article about retiring early and it said I can retire when I'm 74 ๐Ÿ˜‚๐Ÿ˜‚ sad

  • Stock return 10% p.a. versus 3% p.a. average annual world economic growth. Where do you think will this lead to in the long run? Any idea how the entire monetary system works? The world is not that simple as you are suggesting.

  • Are you saying 100% of the proposed saved money in your example has to go in the stock market in order for the plan to work?

  • Wtf, John and jade are doing each 83,000$ a year?! something is wrong with these stats.
    which average workman is doing such a high income like this?

  • The example of the young couple shocked me, I can't believe many Americans start their working life with such a huge amount of debt.

  • $20 an hour is good??? Ya'll tripping, I earn minimum wage in Australia for my industry (retail) and that's $20.79 an hour and I'm a uni dropout

  • You should be ashamed at the example you have of the couple, so many WILD ASSUMPTIONS!!! if only every one sailed through life that easy!!!

  • I'm confused. How does 5 hours of overtime per week, per individual, make $1,300 of extra monthly income? Are we assuming they make time and a half and not paying taxes?

  • There are an awful lot of unrealistic assumptions in the video….who works for an employer with "overtime on demand"? I don't and never have….in fact, because of the expense to an employer of time and a half, most I think are like my current employer – no overtime allowed unless there are very unusual circumstances. And then selling your car to buy a different, cheaper car? Well, let's face it – if you're driving a car that's more than a year old, you're driving a used car already. If you bought it new, you've likely experienced somewhere around 20% depreciation already. So really what you're doing is selling a used car to buy another used car. Given that buying any used car will entail a down payment, taxes, etc, I have to question this decision unless maybe you're driving a Mercedes and intend to downgrade to a Ford Focus or something like that. And I notice the video conveniently neglects to mention that with older, used cars come more maintenance costs. Lastly, retiring at 65 is "early" retirement? Seriously? Please. I don't know anyone who thinks of retiring at 65 as retiring "early". The whole point is to retire early enough to enjoy life. By the time you're in your mid-60's, it's not uncommon to start having health problems, medical needs, medications, a need to be near health care facilities, etc.

    All these "retire early" videos remind me of the old Steve Martin joke…."I've discovered how you can be a millionaire, and pay no taxes! First, get a million dollars…."

  • How the hell did they sell their cars and not pay off the full balance?? My banks don't release titles until they're paid off.

  • Great video guys, its very inspiring and uplifting. I just started doing some investing, don't know if Im on my way to financial freedom, but definitely would like think so. Congratulations and God blessings on all your future goals.

  • There's also an element of luck, like maintaining a job and hoping your country won't collapse into ruin, etc.

    Other than the countless obstacles in the way, this is it. This is how you do it. Several years on the wheel to power up the system that will give you economic freedom.

    A lot of people either lack education, have a low IQ, are anxious, impatient, spendy, have kids young, etc.

    You need to live as a child(say no to yourself) for as long as needed to have enough to buy a passive income that will give you abundance, then once you're at that point, you can spend big.

    Bonus: You can afford kids if you think it through. You can help the poor and needy by creating jobs and giving the profit from those jobs, plant trees, send relief, pay for ministries or hobbies, etc.

    Because of the years being frugal, you don't care about materialism. You care about building a community.

    Only those who sell their souls will lavishly spend on materialism and let communities rot.

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