In our financial life we go through different stages, there are about 6 stages of levels of wealth.
To become Wealthy in 2020. There are 6 levels of wealth.
What you will gain from this article is clarity with confidence and also walk away with a sense of direction.
Let’s do this.
I want you to imagine you are in a car you want to go to Victoria island or if you stay on Island you want to go to Ikeja , Lagos. Then you turn on your GPS on the google map. What if the GPS only shows you only the destination you are going and not where you are now.
What are the chances of you getting to the destination in either Victoria Island or Ikeja Lagos, it is zero to none.
When it comes to money and finance, what is the most important you have to do is figure out where you want to go , where is the destination and second where you are at where you are today ,otherwise you cannot you cannot get to that next level.
Level Number 1. Financial Dependence
At this stage you are relying on someone else to provide for you financially now they could be your parents, it could be your grand parents, it doesn’t matter it has nothing to do with age. It has to do with where your money is coming from.
Because there are people who are in their 30s and even some cases 40s still relying on other people to provide for them financially. They are at level one now maybe you are a full-time mom or Dad. When it comes to parenting you are at level six because you are taking care of your kids but when it comes to your finance. We are talking if you are relying on your spouse to provide for you 100% financially ,you are at level one financially.
Everyone started at level one , the key is how quickly we break free from level one to level 2 or 3 and 4 ,5 and 6.
Level 2 is Financial Survival
At this stage you are living from paycheck to paycheck, relying on a Job to provide for you. Maybe you have a debt or even a student loan, maybe you have a mortgage. You are struggling , You are just surviving barely month after month. In-fact many people experience this stage , infact I was struck here for many years because of business failures dependent on parent, aunties or uncles and remember those nights I couldn’t sleep constantly worrying about my finances and how I am going to pay my bills, how I am going to eat and wake up in the middle of the night and be sweating because of this state of fear all the time that is level 2 that is the level of financial survival, unfortunately most people are stuck in level 1 and 2
Level 3 Financial Stability
You are financially stable when you have an income that is greater than your expenses.
Secondly, you have at least 6 months cash that is equivalent of your monthly expenses in the bank or a saving account somewhere. So let’s your monthly expenses is 5,000 Dollars about 1.8 M naira at least 30k dollars set aside you don’t touch for your emergency.
You have no bad debt or consumer debt. It doesn’t matter with being self employed or being an Entrepreneur. Most Successful People do this by increasing their income dramatically by improving their skill sets by upgrading their High income skills.
Skill-sets that they can offer and sell to the market place in exchange for money. This is how many successful people get out of level 2.
Level 4 Financial Comfort
This is a level that most people never reach in their lifetime. Chances are that when you are at level 4, maybe you have a portfolio or a stock portfolio that are growing and maybe you have a couple of income producing properties that are throwing off cashflow. Chances are that you are already a Top Earner in your industry because you have a lot of income and you are putting that aside . it means that you are regularly contributing to your retirement account as just one of the investment strategy.
2. You have already 2 years of living expenses already already put aside. This means let’s say your monthly expense is 5,000 dollar about 1.8 M naira.
It means you have at least about 120,000 dollars expenses in cash that you put aside in a savings account on top of your investment account that you invest for the long term and let the power of compound interest work for you. Maybe you own a couple of properties also it means that you have got a couple of insurance policy in place incase of an emergency your family is covered and protected.
That is level number 4.
Level 5 Financial Independence
Many people say this I want to be financially independent what does it actually mean. When you arrived level 4 and it is all good and you are financially comfortable.
Financial Independence means now you have your investments working for you maybe you are collecting dividends from your stocks, cashflow , rental income from your real estate investments. You got your investments that are producing cash. Your money is making you money.
Your overhead or living expenses let say is 1.8 M about 5,000 dollars.
When your investments ( Residual income) can pay for your living expenses. That is when you can say you are now financial independence.
There is one last level
Financial Abundance this is a level you should aspire to be.
When you are financially Living in abundance.
Your level of cashflow from Investments is far more than you are earning right now. Let’s use the 5000 dollars example again.
Your monthly expenses is 5000 dollars but your investment income is producing a 50, 60 or 100,000 dollars a month. Way more than what you are spending and now you are financially independent and in abundance because you never worry if you lose that Job or business it doesn’t matter ,if the economy goes up and down you are protected and financially secured you know because you are financially abundant because you got more money coming in not just savings you have got that but you have got cash flow coming , income coming , investment income coming that is way beyond what you could spend. Then life is very very interesting. Now your vocation becomes your vacation. Now you don’t have do something when you don’t want to.
This is what you call VEX MONEY.😠💰😁
Here you don’t have to do anything you don’t want to do because you don’t really need anything from anybody. You are okay.
Question of the day
Where are you right now? because you have to brutally honest with yourself and that is okay
Everyone started from level one.
None gets to level 4 or level 6 overnight.
What is your goal, what is your time frame where are you now and where you want to get to?
Some people never get to level 6 in their lifetime , level 4 is still a great place
Thanks for your attention.
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I am Jeje Abiodun
Acknowledgement: Dr Laide Okubena