Financial independence is not a vague concept it’s a clearly defined and measurable goal. In fact, according to author and financial expert Grant Sabatier, there are seven distinct levels of wealth, each representing a key milestone on your journey to financial freedom.
And here’s the real kicker; even after you reach “independence,” there are still two levels of wealth beyond that. Knowing where you currently stand helps you map out actionable steps to move forward. So let’s break down the journey, starting with the very first Level.
Level 1: Dependence – Living on Love (Maybe Your Parents’ Wallet)
If you’re in the dependence stage, it means you’re relying either partially or entirely on someone else for your financial needs. This could be your parents, guardians, or even a partner.
This category typically includes:
- Children and teenagers
- College students without steady income
- Recent graduates without a full-time job
- Anyone still reliant on outside support to meet basic expenses
In fact, according to a report by Savings.com, half of all parents still financially support their adult children. So, if you’re receiving help with rent, bills, or groceries — even if you’re technically an adult — you’re still considered financially dependent.
Even your friend Chad, who seems to have everything handed to him — wealthy parents, endless opportunities, and maybe a Zen nicotine pouch in one hand while betting on local cornhole championships with the other; is still in this stage if he’s not covering his own costs. Jokes aside, this phase continues until you’re able to earn your own income and consistently pay your own bills and Most people will probably get to this stage and this stage is known as Survival.
Level 2: Survival — Getting Your Financial Bearings
Once you’ve moved out of dependence and are earning your own income, you step into the Survival stage of wealth. This is where you’re able to cover your bills and basic needs — but just barely. You’re not racking up debt, but you’re not building meaningful savings either.
In fact, 61% of Americans currently report living paycheck to paycheck, according to recent surveys. That means the majority of people are operating at this very level. And while survival is a necessary stepping stone on the path to financial freedom, it’s also a stage where it’s easy to get stuck.
You might be earning decent money — maybe you’ve just started a promising career but you haven’t had the time (or financial breathing room) to build a safety net. You could have good intentions, but between rent, transportation, food, and maybe even a new car payment, most of your income disappears as quickly as it arrives.
Let me give you a real life example. I have a friend who’s 29 and she earns about $65,000 a year, which on paper sounds solid. But with the high cost of living, plus a recent car purchase and caring for two pets, her savings each month amount to just a couple hundred dollars. She doesn’t track her spending closely, and one unexpected vet bill or surprise expense could wipe out her entire buffer.
What’s more, she’s been in her job for a while, but it’s not paying her enough for the work she’s doing. I’ve encouraged her to consider a career move, ideally one with a salary bump, to widen the gap between her income and her expenses.
Why So Many Stay Stuck in Survival
When you’re in survival mode, most of your paycheck is funneled directly toward your living expenses. There’s little left to invest, save, or even enjoy. This is why increasing your skills and industry expertise becomes critical, this can lead to higher earnings and more financial breathing room.
But sometimes, it’s a matter of time and experience. sometimes it’s just you don’t have enough time in the specific field that you’re in so you might not have been working in your job for long enough and as your experience goes up it is likely that you will get paid more in your job, so that’s a really good thing but it’s at this level that we really need to focus on controlling our spending because that’s the one thing that we can actually control.
If you want to make progress from this stage, start with this practical exercise: Go through your last three months of credit card and bank statements. Categorize your spending and calculate the average you spend in each area (like food, rent, subscriptions, etc.). This simple act of awareness can be a game changer. You’ll start seeing exactly where your money is going and where you can start making adjustments.
Survival Isn’t Forever — If You Stay Focused
The survival stage isn’t the worst place to be. Most people pass through it, and many will stay here longer than they’d like. But the good news? If you are diligent, committed and disciplined with building your financial skills as well as your knowledge then I could see you easily graduating into the next level which is financial stability
Level 3: Stability — Building a Foundation for the Future
Once you’ve made it through the survival stage, you arrive at a place many aspire to reach. This is where you can start to breathe a little easier. You’re not just getting by anymore—you’re starting to build.
At this level, you’ve got the ability to handle unexpected expenses without falling into crisis mode. You likely earn enough to cover your bills comfortably, set aside some savings, and even enjoy life a bit—maybe take a vacation or two each year. These may not be extravagant getaways, but the point is, you’re no longer in a financial scramble. You’re planning, you’re preparing, and you’re progressing.
What Stability Looks Like
Financial stability typically has three key characteristics:
1. You Have an Emergency Fund:
You’ve built safety net, with three to six months’ worth of living expenses saved up. This fund gives you time and breathing room in case of unexpected job loss, medical bills, or any major financial curveball.
2. You’re No Longer living Paycheck to Paycheck
You have enough cash flow to cover your monthly obligations with money left over. That leftover can now go toward building your future instead of scrambling to stay afloat.
3. You’ve Started Planning for the Long Term
This might mean you’ve opened a retirement account, started saving for a down payment on a home, or begun investing. While you may still carry some debt—like student loans or a car loan—you’re managing it effectively and making progress.
At this stage, you’re likely able to plan your finances six months in advance. You might not have the luxury of planning decades into the future just yet, but that’s okay. The critical shift here is that money-related stress has decreased significantly. You feel more in control—and that confidence makes a world of difference.
So, What Does It Take to Be Financially Stable?
Let’s break this down with a real world example. Say your yearly expenses total $40,000—that’s about $3,333 per month. For someone at the stability level with that kind of spending:
- You’d ideally want an emergency fund of $10,000 to $20,000 (covering 3–6 months of expenses).
- Around $5,000 to $10,000 should be kept in your checking account for regular, everyday spending.
- You might also have $5,000 or more tucked away in a high-yield savings account or investments.
This means you’d want roughly $20,000 to $40,000 in liquid cash available at any given time to maintain this level of stability.
To support this lifestyle and still save 8% to 20% annually, you’d likely need to earn somewhere between $65,000 and $90,000 per year. That income range allows you to cover your expenses, maintain savings goals, and build toward future milestones.
Progress Takes Time and That’s Okay
It’s important to remember that moving through these financial levels is a marathon, not a sprint. You could spend 5 to 10 years in the survival stage, and another 5 to 10 years in stability before reaching the next level. But with consistency, discipline, and increasing financial knowledge, you can absolutely make the leap to the next Level.
Level 4: Financial Security — The Turning Point Toward True Freedom
Reaching Financial Security is a major milestone on the path to financial freedom. While it’s not quite the same as full Financial Independence—which we’ll explore next—this level represents a meaningful shift. At this stage, money no longer controls you. You’re not just surviving or stabilizing—you’re thriving and growing.
What Is Financial Security?
Financial Security means you can pay your bills with ease, almost without thinking about them. Your focus shifts away from budgeting for the basics and more toward building long term wealth through your investment portfolio.
At this point, even a major life disruption—such as losing your job for 6 to 12 months wouldn’t completely derail your long term financial goals. You’ve built up enough assets, emergency reserves, and financial momentum to stay on track regardless of temporary setbacks.
It’s Not about How Much You Earn
Here’s something that surprises many people: Financial Security isn’t just earning a high income. In fact, some high earners are far from financially secure. A 2023 study found that nearly 48% of people earning over six figures still live paycheck to paycheck. That would place them all the way back at Level 2 Survival on the financial freedom scale.
So, what does create Financial Security? It comes from living well below your means. That means your income significantly outpaces your expenses—not just occasionally, but consistently.
Why Age & Life Stage Matter
If you’re under 25 or even 30, chances are you’re not quite at this level yet and that’s perfectly normal. At younger ages, life is still full of unknowns:
- Will you have kids?
- Where will you settle down?
- What kind of lifestyle will you maintain long-term?
Because your future expenses are unpredictable, it’s hard to lock in true financial security. That’s why this level is more often reached by people in their mid-30s, 40s, or beyond, when life’s major decisions have taken shape. At that point, you’ve likely built a solid foundation, understand your long-term costs, and can plan for things like:
- Your children’s college education
- Long-term homeownership goals
- Legacy planning or wealth building
Key Characteristics of Financial Security
To understand whether you’ve reached this level, look for these signs:
- You Pay Bills Without Stress: You’re no longer checking your account balance before paying utilities or rent. The basics are covered automatically, comfortably.
- You’re Focused on Wealth Accumulation: Your primary financial concern is growing your investment portfolio and planning for the long term, rather than managing short-term expenses.
- You Have a Robust Emergency Plan: A job loss or economic downturn won’t derail you. You’ve built buffers—emergency savings, diversified income streams, or investments that provide peace of mind.
- You Still Budget (But Can Splurge Sometimes): You’re still intentional about your spending, but you can afford the occasional luxury without guilt—whether it’s a designer bag or a spontaneous vacation.
What to Aim for at This Level
Now that you’re financially secure, it’s time to optimize your financial habits:
- Increase Your Savings Rate: The U.S. national average savings rate is only around 4.5%. Aim to save 15–20% of your income, if you’re not already.
- Pay down Major Debts: This is a great stage to work toward paying off your mortgage or any lingering student loans.
- Plan Big: Think ahead for your kids’ education, early retirement, or investing in income-generating assets.
Financial Security is a game changer. It’s the first level where money becomes a tool, not a burden. You can handle emergencies. You’re growing wealth. You’re planning decades ahead. But you’re not completely free yet. There’s still one more stage most people dream of achieving is Independence.
Level 5: Financial Independence — When Work Becomes Optional
Financial Independence: the holy grail for many on the path to financial freedom. At this stage, your investments are doing all the heavy lifting, fully funding your lifestyle. In other words, work becomes a choice, not a necessity.
What Is Financial Independence?
Financial Independence (often abbreviated as FI) means you’ve built up a portfolio large enough that you can live entirely off the returns it generates. This is the point where your investment income covers all of your living expenses, freeing you from relying on a paycheck.
This concept is at the heart of the FIRE movement—Financial Independence, Retire Early—a community of people who intentionally save and invest to reach this level as early in life as possible.
The 4% Rule & FIRE Principles
One of the most widely accepted guidelines in the FIRE community is the 4% Rule, which suggests that you can safely withdraw 4% of your total investment portfolio annually without depleting your funds over time. This is based on historical data and assumes average market returns.
To break that down:
- If your annual expenses are $40,000, you’ll need a portfolio worth $1 million.
- $1,000,000 × 4% = $40,000 per year in sustainable withdrawals.
This is also known as reaching a net worth of 25x your annual expenses, a foundational milestone in the FIRE journey.
What Life Looks Like at This Stage
At Level 5, you’re technically retired, but that doesn’t mean you stop working altogether. Many people who reach this stage continue to work not because they have to, but because they want to. Work becomes more fulfilling when it’s done on your terms.
Some may choose to:
- Start passion projects
- Build businesses
- Volunteer
- Travel
- Pursue creative outlets full time
The key is that time is yours now. You’re no longer bound by the need to earn a paycheck to survive.
Financial Characteristics of Independence
Reaching Financial Independence means more than just investment income. It usually includes:
- Little to No Debt: Most people at this stage have paid off significant debts including mortgages.
- Fully Funded Life Goals: From your children’s education to large future purchases, all major financial obligations are accounted for.
- Robust Investment Portfolio: Your diversified investments (stocks, bonds, real estate, etc.) provide predictable income.
- Flexible Lifestyle Planning: Whether you want to live modestly or more luxuriously, you’re now empowered to make that choice based on preference, not necessity.
But Not Everyone Stops Working… and that’s Okay
For some, living on $40,000 a year—while technically “freeing”—might not align with their desired lifestyle. That’s perfectly okay.
Many people at this level continue earning so they can:
- Travel more lavishly
- Invest in high-end real estate
- Leave a legacy
- Support causes they care about
Remember, Financial Independence isn’t about quitting work—it’s gaining freedom of choice.
What Comes Next? If you’ve made it to Level 5, you’ve already won the financial game. But for some, there’s still one more destination worth pursuing: Level 6 Freedom.
Level 6: Financial Freedom — Life Is on Your Terms
Welcome to the stage most people dream about when they think of “getting rich”. It’s the point in your wealth journey where you experience complete control over your time, money, and lifestyle. At this level, your finances are not only secure they’re abundant enough to let you live life on your own terms, without stress, compromise, or constraint.
What Is Financial Freedom, Really?
Financial Freedom is the second-to-last level in the journey to wealth but for 99.9% of people, it’s the ultimate destination. It’s the level where:
- You can do what you want
- When you want
- With whomever you want
- Wherever you want
All without worrying about money ever again.
At this stage, your investments aren’t just covering your expenses—they’re generating more than enough to let you indulge in your ideal lifestyle.
A Taste of “FU Money”
You may have heard the phrase “FU Money.” It’s slang for reaching a point where you can walk away from any job, deal, or situation simply because you don’t need the money anymore. You’ve got the financial flexibility to prioritize your values, peace of mind, and joy over anything else.
To put it another way:
“Look what I found in my pocket… a year’s salary. What I call them? Fun coupons.”
You might not be flying private jets or buying mega-yachts, but that’s not the point. What matters is you don’t have to think about the price tag. You can book the luxury vacation. Buy the car you love. Support causes close to your heart. Upgrade your home. Or just spend your days doing things that make you truly happy.
At this level, the focus shifts entirely to quality of life and personal fulfillment.
You’re asking:
- What brings me joy?
- How can I make the most of my time?
- What experiences do I want to create for myself and my loved ones?
You might:
- Travel the world in first-class comfort
- Own multiple properties
- Start a passion project or non-profit
- Focus on health, hobbies, and relationships
- Spend more time with your family or mentoring others
The possibilities are endless because you’ve earned the freedom to design your ideal life.
Financial Snapshot of This Stage
At the Freedom level, the numbers will vary depending on your preferred lifestyle. But typically, your portfolio generates significant passive income above and beyond your annual expenses.
Examples of your financial profile might include:
- A fully paid-off home
- Multiple streams of income (investments, businesses, real estate)
- A diversified investment portfolio yielding steady returns
- No debt
- Generous travel, entertainment, and lifestyle budgets
- Legacy plans and philanthropy in motion
Most importantly, you’re no longer thinking in terms of affordability—you’re thinking in terms of alignment with your values and desires.
Is There Anything Beyond Financial Freedom?
For most people, Financial Freedom is the final stop. But for a rare few the ultra-high earners, serial entrepreneurs, and legacy builders—there’s still one level left Level 7 Abundance
Level 7: Financial Abundance — Wealth without Limits
When it comes to building wealth, most people aspire to reach Financial Freedom, where their investments comfortably cover their lifestyle. But beyond even that lies a level so rare and extraordinary, it almost feels surreal to talk about Financial Abundance.
This is the final level in the wealth journey, and while few ever reach it, it’s a powerful concept to explore because it represents not just having enough, but having more than you (or your family) will ever need.
What Is Financial Abundance?
Financial Abundance is the ultimate state of wealth. It’s a level where money is no longer a factor in your decision making because you have so much that it becomes irrelevant.
At this stage:
- Your own needs, wants, and desires are fully met.
- Your children’s futures are secure—possibly even your grandchildren’s.
- You’re no longer asking “How much can I afford?” but rather, “What kind of legacy do I want to leave?”
- You’re contemplating how to shape the world around you.
How Do People Reach This Stage?
Reaching Financial Abundance is incredibly rare. Most people won’t get here through traditional means like saving and investing diligently over decades—although that discipline helps lay the groundwork.
More commonly, people who reach this level have:
- Built and sold highly successful businesses
- Received large IPO windfalls
- Inherited significant intergenerational wealth
- Made extraordinary investments that paid off exponentially
It’s not luck alone but it often includes a combination of opportunity, risk-taking, timing, and vision.
What Life Looks Like at the Abundance Level
If you’re financially abundant, your lifestyle has expanded beyond even the highest tier of luxury:
- You own multiple properties—not just across the country, but globally.
- Private jets, yachts, or exclusive memberships are common.
- You attend high-profile events and experiences simply because you can.
- You donate generously, often creating charitable foundations or leading large philanthropic efforts.
- You may invest in ambitious ventures—space travel, clean energy, you don’t have to be Elon Musk or Richard Branson but you get the idea if you’re financially abundant you just have a lot of money.
In this phase, your biggest currency is time and impact. You ask questions like:
- What kind of legacy am I creating?
- How can I use my resources to improve lives or shift industries?
- What do I want to be remembered for?
Ironically, at this level, money becomes the least interesting part of your life. You’re not driven by financial goals anymore. You’re driven by purpose.
Your decisions center on meaning, contribution, and fulfillment. You don’t just live comfortably—you live consciously.
A Word to Everyone on the Journey
Most people will never reach Financial Abundance and that’s okay. It’s not a race. Every stage in the wealth journey from Survival to Freedom—offers its own growth, challenges, and rewards.
Understanding the levels gives perspective. It reminds us that wealth is a tool, not the goal. It empowers us to think not just about how to earn more, but also how to live better. So wherever you are, whether you’re budgeting carefully or building your investment portfolio—keep going. Your version of abundance might look different, and that’s what makes it meaningful.
