about the seven stages of financial independence and how to go from living

with your parents in their basement to owning your own house in the Hamptons

and never having to work another day in your life if you don't want to we first

heard about these seven stages of financial independence while listening

to a podcast by Paula Pant from Afford Anything we'll drop a link in the

description box to her podcast and if you guys aren't listening to it you

totally should and it was an episode where she had Joshua Sheets who has a

podcast and a website of his own Radical Personal Finance and he was talking

about these seven stages and it just made perfect sense to us so we wanted to

make sure we shared them with you guys and these are really important because

it's very difficult to kind of see the bigger picture from starting wherever

you are to really getting to that ultimate goal of being independent and

having the things that that you want and that are important to you and so this

breaks it up gives you these intermediary goals to see where you're

going and how are you doing now yeah alright so let's look at the first stage

stage 0 financial dependence that is where we all start out usually and with

living with our parents as a kid you have no wealth of your own I would say

you that's 99.9% for everybody unless you just started with the trust fund and

you're kind of different yeah so I was in this stage up until I was 18 years

old then I joined the military and I became totally financially independent

at that point so I stopped I left that thinking I was 18 I stayed dependent

longer because it's nice it can be nice yeah

There are pros and cons right. But I had help during undergrad and my parents

bought me a car when I graduated high school that it's still going my brother

has it now and and so I stayed on until I graduated

and I kind of transitioned during college I got a job I was making about

the same as what Tasha was making the military which is sad our military so

underpaid but but that's an extra four years for me Stage one is financial

solvency this is where you are supporting yourself now for me I started

doing that right after I graduated from college then I'm moving on the law

school and my parents said yeah this is this is it you're done first degree we

help and then you're good like I said for me that started when I was 18

because I moved out of my parents house went off to the Marine Corps hundreds of

miles away and that was it I was completely supporting myself my parents

weren't sending me money I wasn't on their insurance anything like that for a

lot of people I feel like this is the kind of sink or swim moment because they

don't always have I think we all could have better financial guidance when we

were younger and so you just kind of have to hit the water and try to survive

hopefully you have have some basic knowledge of how things work yeah I had

no idea my parents didn't teach me like anything when it came to finances not

how to open a bank account not how to write a check like absolutely nothing so

yeah it was a big a big change for me it's probably always a big change okay

Stage two is financial stability this is where you move from just basically being

able to keep a roof over your head to starting to actually be responsible with

your money so you start having a budget at this point really starting to figure

out how everything works how you want to live your life and manage your money

hopefully and this is also where you finally start saving some money and and

that's why it's the the point where you start being responsible with your money

because you're not just spending all of it you're saving some of it for a rainy

day Stage three is debt freedom so this

isn't from all debt but toxic debt so if you during your sink or swim

moment got some credit card debt which most of us do with high interest rates yeah that's all

too all too often this is where you get rid of that you you get on a path and

pay off the bad debt and so like for us so it might not be all debt we might

still have mortgage we might have some low interest debt that will take longer

but any of that high stuff credit cards get that taken care of stage four is

financial security this is where your investment income any passive income a

pension Social Security is going to cover your bare bones expenses so that's

your house your food healthcare any immediate costs and little miscellaneous

things but not bigger things like travel or purchasing a brand-new car just the

bare minimum so and you can consider it financial security because basically as

you can support yourself indefinitely on a bare-bones budget so you're you're

really financially stable you're able to weather a lot of financial changes and a

good rule of thumb for financial stability is you need about a million

dollars for every $40,000 worth of living expenses so that's withdrawing

at what's considered the safe withdrawal rate which is four percent four

percent so that's forty thousand Stage five is financial independence

you've hit this stage when you have enough passive income to cover your bare

bones living expenses actually your current lifestyle the lifestyle that you want to

keep so your bare bones living expenses plus that nice little cushion to do the

fun stuff right so I would say that that this for most people is going to be

substantially higher than financial security so if you've seen our budget we

spend about sixty seven thousand dollars a year excluding childcare and if you

add in another ten thousand dollars for travel because that would be our ideal

lifestyle then we're looking at around eighty thousand dollars a year so we

need to save up two million dollars to reach this stage but of course your

numbers will be different right especially if you live in cheaper areas

very cheap areas and that's actually including keeping our current house so

if we move to a less expensive area and had a much lower mortgage then we

wouldn't need nearly as much money which is definitely what we would do or we

travel more ooh travel more yes and speaking of travel more stay tuned for our Singapore travel

series it is about to start we're gonna be doing weekly videos

talking about the the preparations that we're making and just kind of showcasing

some of the different hotels we considered and all that fun stuff oh

we're going over to it yeah all the things that we considered yeah it was a

lot traveling with the family especially with a small child lots of stuff stay tuned

stage six is financial freedom this is where you have enough money from all

those sources that we talked about and probably working at this point to nail

those big dreams so the only way to get to this stage after going through

financial security and then financial independence is now you're probably

gonna have to keep working yeah you have to that's the only way to keep advancing

up the financial independence ladder through these seven stages because if

you just stop at financial stability well your wealth is gonna is not going

to increase if you stop working if you don't have any income income extra

income coming in stage seven the final stage is financial abundance and

that's where you have more money than you can spend within reason cause I think

it's really possible to spend all your money no matter how much money you have

that's true don't be buying islands but this is the the point in your life where

you're able to I would say I consider it to be being able to pass on

substantial wealth to your to your dependents to donate to meaningful

substantial sums to meaningful causes basically you'll have a substantial

estate that outlives you and can continue to work towards the goals that

you had after you're gone this is something that were

but really looking forward to I think so now you don't really get to see all of

the fun because there's a point where well your estate will continue and you

won't but you can start by giving those donations and I think yeah we definitely

like I want to be able to donate a substantial sum to Yale because without

their generous financial aid and loan repayment programs I definitely would

not have been able to go to that law school so I think it's important for me

to give back too and I'll be doing similar things with different causes and

in my schools as well just amassing generational wealth I mean it's just a

wonderful goal to have everybody should be able to do that it is not something

that should be reserved for people that are already mega-wealthy we should all

be able to strive for this and have it be an achievable goal and reasonable so

those are the stages um we're gonna be talking a lot more about how you move

from one to the other but I think it's really important to notice that they

kind of overlap so right now we are in the working towards completing the debt

freedom stage we'll be in it for a while but we're also working towards the

financial stability stage and we might actually hit both of those right around

the same time so you know it's not necessarily that it's just you can only

focus on one and then the other then the other but it's like a progression as

you move through your life so we hope that you've enjoyed this and can focus

on those steps in your own life and all join us in financial abundance years and

years from now alright guys bye see you next time