When we think of financial independence, we imagine a person without working, literally living off rents, dividends and fixed income interest. We are not wrong. This is the main financial independence, the most desired, but did you know that there are five phases in total?
Today’s column features each of the steps. In the video we talk about suitable investments for each one of them.
independence from parents
Sometimes it’s been so long that we’ve forgotten, but that’s usually the first achievement we have financially. This independence occurs when we get enough reserves and income to leave the parents’ house.
Money needs to cover not only essential expenses, such as rent, water and electricity, but also moving, buying furniture and unforeseen events along the way.
We live in a country where debt, in general, does not pay, especially when we talk about expensive credits such as overdraft and revolving credit card.
Debt independence is when we realize that we maintain our standard of living without taking out credit. Of course, for larger plans, such as buying a house or starting a business, we may need to take out loans, but on a daily basis we manage to balance earnings and expenses.
Don’t think it’s too little to reach this stage. In Brazil, 75% of families are indebted.
Independence of the salary cycle
Do you know that month when a customer is late in payment or the employer takes a little while to make their payment? Those who achieve independence from the salary cycle do not have this concern, as they manage to stay a few days or a few weeks without pulling their hair out.
This is important because in these situations the person will not need to resort to credit.
This phase serves two situations:
- Are you dissatisfied with your job: you can maneuver your career and change professions.
- got unemployment: you can spend a long time looking for something new without despairing and ending up accepting the first opportunity.
That is, people can afford to be out of a job for a while while they reorganize, but not for life. Here, in general, people have saved at least six months’ worth of spending.
independence from work
This is the famous stage of living on income. At this stage, the returns on portfolio investments are sufficient to maintain the standard of living.
The person doesn’t need to work. She can stay in the job market, but by choice, not obligation.
What stage are you in? Comment below or on our social networks (Instagram or YouTube).