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The 7 Stages of Financial Freedom
The 7 Stages of Financial Freedom
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Money Psychology

The 7 Stages of Financial Freedom

Njenga Hakeenah
August 25, 2021

Financial freedom may mean different things to different people as well as different ways to achieve it. A general understanding of financial freedom is being in a financial position where you do not need to work unless you want to.

There are probably thousands of articles and books written about it. Whether they work or not depends on those who have tested the advice offered by the different authors.

Regardless, a good question to ask is whether we are strategic enough to ensure we maintain our current standard of living during our retirement years - whenever that may be. Could you be one of the few who can say they are on track to a blissful retirement or living comfortably without working?

If this is not you, then this could be a good place to start thinking about your financial freedom and how to get there.

But, first things first.

Attaining financial freedom means you can freely do the things you are passionate about without having to worry about your finances since you have enough money to cover your expenses comfortably. The reality is that this freedom with your money does not come overnight and there are stages that can clearly show where each one of us is in the pursuit for financial freedom.

What are the 7 stages of financial freedom?

1.   The dependence stage

This is where one is unhappy with their financial position and things are not easy. Generally, one is likely dependent on others for financial support. It is a short-lived stage especially for those who want to be financially independent.

We are all born in this stage where we all have zero income and basic needs like food, shelter, education and healthcare are catered for by others.

2.  The solvency stage

When in this phase, one is able to meet their financial obligations like paying their bills and not relying on others to help cover one’s expenses.

Solvency is a survival stage when one's expenses are lower than their earnings. Here, one is still financially vulnerable to any unforeseen event like a serious illness or a job loss.

It means that despite one being able to handle all their financial obligations, they do not have a financial buffer to help them withstand shocks to their financial wellbeing.

3.  Financial stability stage

This is where one can consistently meet their financial commitments and have probably reduced some of their debts by paying them off. Also, one is able to keep their expenses down and thus can start saving. Being in this stage does not mean that one is debt free but that whatever they owe, they are able to consistently continue paying off which reduces their debt significantly.

It is okay to be in debt at this stage.

However, building an emergency fund is crucial in this stage since it ideally becomes the first major step towards your financial freedom.

4.  The security stage

Having been able to have some savings in the financial stability stage, this is where one considers putting some money into investments.

It is in this stage that one builds a solid investment base which is a platform towards not relying on an income to cover basic expenses. Again, one could be successfully building and managing their wealth which puts them on a surer path to earning their financial freedom.

5.  Financial independence stage

When one reaches this stage, they have solid and long term investments whose earnings are enough to cover their current lifestyle.  It is in this stage that investments start paying dividends.

6.  Financial freedom stage

If there is a dream that many people have financially, it is getting into this stage.

Here, one can afford not only the basics but comforts and luxuries too. For investors, this is where they are able to take bigger risks and identify big bill opportunities.

7.  The financial abundance stage

This is where ‘making it’ is. Those who get to the abundance stage have more than enough investment income. It is here that focus shifts towards stewarding the wealth for beneficiaries beyond the investor.

Financial abundance gives you the freedom of time and you can be as flexible with your schedules as well as pursue your most cherished courses without ever having to worry about your income taking a hit.

Steps Towards Financial Freedom

Having seen the stages of financial freedom, what then are the steps one can take to experience it?

Step 1

As a foundation, clarify your goals and embrace a positive mindset on achieving financial freedom. Have a budget to help you identify your expenses and savings.

Tip: A financial advisor can help you with your cash flow and goals.

Step 2

The financial freedom journey is unpredictable and therefore it is advisable to have a Plan B. This is where you create a safety net to protect yourself in case of an emergency. Ensure that a portion of your cash is put into an emergency fund the equivalent of approximately 3 - 6 months of living expenses.

Tip: You can take out personal insurance that could include life, income protection, total and permanent disability.

Step 3

You can pay off consumer debt by adopting strategies that can help you pay off what you owe sooner.

Tip: A financial adviser can help you choose the best repayment method.

Step 4

With modesty, handle your wealth without overspending or being overly generous. You can keep reviewing and adjusting your investments when need arises.

Tip: Make sure your financial strategy is up to date since goals change over time.


While financial freedom may appear to be a goal, it is actually more of a journey. Being aware of the stage that you are at in this journey is necessary to enable you employ the appropriate strategies. 

Note that the destination is very personal which is why you have to set your own goals that define that ideal future you are working towards. This will help you avoid the trap of believing that financial freedom can only be you becoming a billionaire like Jeff Bezos.

Njenga has over 8 years experience in multimedia and business journalism both as a writer, editor and producer. He has over 5 years of experience in radio broadcasting as a news reader, reporter and presenter. He is also a 2012 Earth Journalism Network-EJN Fellow.

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