The Three Stages of Financial Freedom

What does financial freedom look like to you?

Is it luxury yachts, private jets, and a life of unimpeded opulence?

I’ve spoken with probably thousands of people over the last few years about their financial goals…

And one really interesting commonality is the pervasive idea that you need to be inordinately wealthy to be financially free.

And no wonder.

We’re constantly bombarded with pictures of celebrities and influencers driving supercars, and living in extravagant, sprawling mansions.

Whether it’s Beyonce buying a $28m customised Rolls Royce…

Or Rick Ross flaunting his “$5bn private jet”...

It becomes easy to mistake financial freedom for financial obesity.

And to be honest, when I was just getting started on this journey, I had the same mindset.

My vision board was covered in pictures of supercars, custom tailored suits, fancy watches, and even private islands…

Which, may all be very nice things to experience…

But, what if I told you that financial freedom had less to do with the size of your bank account, and more to do with your mindset?

In today’s letter, I want to take you on a journey to help you redefine financial freedom.

A journey that passes through three distinct stages - confidence, security and independence.

Each stage unlocks a different level of freedom, giving you the power to make choices based on your values and desires, rather than living in fear and lack.

Ready?

Let’s dive in.

Stage One: Financial Confidence

“Your greatness is revealed not by the lights that shine upon you, but by the light that shines within you.” - Ray A. Davis

When it comes to finance, confidence is the keystone.

With it, you can realise freedom without having millions of dollars of assets.

Without it, no matter how much money you have, you’ll always be living in fear.

Which is why the first, and probably the most important stage, is building financial confidence.

And what I love about this stage, is that it is available to anyone who is willing to develop themselves - which means there’s almost no barrier to entry.

Financial confidence comes from knowing that you have developed high value, highly transferable skills, and/or a deep resilience, so that you know you can handle anything that life throws your way.

So, what does this look like in practice?

Well, let’s talk about highly transferable, or highly in-demand skills.

These are skills and attributes that will allow you to work almost anywhere.

For example:

Communication skills: 
The ability to communicate effectively is crucial. From writing clear emails to delivering persuasive presentations, good communicators are in high demand across all industries.

Problem-solving skills: 
Life is full of problems, and so is work. From IT glitches to complex business challenges, employers need people who can think critically and devise practical solutions.

Digital literacy: 
In our tech-driven world, proficiency in using computers, software applications, and digital devices is no longer optional. It's mandatory.

Leadership skills:
Whether or not your job title includes the word "manager", the ability to inspire, motivate, and lead others can give you an edge in many areas of life and work.

Sales skills:
All businesses need people that can help them make more revenue. Learn sales, and unlock the ability to earn anywhere.

Of course, there are heaps more too, and taking stock of your own skills is a great way to identify other potentially transferable, high-value tools in your tool belt.

Outside of skills, there are some other key attributes that might make you eminently employable.

Relentless work ethic: 
If you know that you can outwork anyone, then you know you’ll never be out of work, and thus know you can always land on your feet.

Adaptability: 
As Charles Darwin said: “It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change”. 

Which is why adaptability is a key to unlocking your confidence because you know you can handle any change.

And now, I want to talk about the trait that may be the most important here…

Resilience.

Why does resilience play such a significant role in building your financial confidence?

Well, similar to adaptability, this is all about your ability to bounce back from adversity, from change, and from challenges.

It's about learning from your mistakes and failures, adapting, and persisting in the face of difficulty.

This trait is invaluable because life is unpredictable.

Having a high degree of resilience means that you never need to worry about whether you can pick yourself up again.

And this, is a key element of Financial Confidence.

Because, whilst you probably need to keep working whilst you’re in this stage, you have already unlocked freedom.

Freedom to choose.

Freedom from fear.

You can make conscious, confident choices on what you want to do, and where you want to do it, because you know that you’ve got your own back.

This, in itself, can be very liberating.

Stage Two: Financial Security

“Wealth is the ability to fully experience life.” - Henry David Thoreau

Financial security is the second stage on this journey, and it's all about asset accumulation.

This is where your focus should is on building your wealth in a way that safeguards your future.

Let's be clear: the assets you accumulate here are likely equity-based rather than income-based.

However, these assets form a safety net that you can fall back on, if you need to, when times get tough.

In my opinion, one of the best ways to build wealth quickly and safely is by investing in real estate.

It definitely helps if you can use leverage to grow your portfolio and amplify your gains, too.

A good mental model for this stage is whether you have built enough net liquidated asset value that you have a “get out of jail free” card.

So, what do I mean that?

Well, if you have built enough wealth such that you could, if needs be, liquidate your assets and after all sellings costs, taxes etc have at least a year's worth of living expenses covered (preferably a lot more), then you have built some security.

Of course, the goal isn’t necessarily to sell your assets, but it’s about knowing that you have an ace up your sleeve if the shit hits the fan.

And it’s also about being in a position that if you didn’t need to sell, and you just let your assets compound over time, you’d probably have a nice retirement.

Personally, I have see the biggest transformations in people when they get to this stage, and in my experience, this is usually when they own 4-5 investment properties.

Now, of course, achieving financial security doesn’t mean you can retire instantly, but, it does unlock a whole new level of freedom.

Because your wealth starts to act a bit like armour.

You feel protected, and are able to take more “risks”, knowing that you are safe.

What this often translates to, is people who have been pursuing a corporate career, finally having the confidence to pursue their passions, knowing that they have secured their future.

It could be the difference between you staying in your job for the next 30 years, hoping and praying, or finally taking a leap to pursue a career that isn’t as financially rewarding, but is more aligned with your core values.

Again, you haven’t replaced your income at this stage, so you will still need to work, but you have the freedom to follow your dreams.

Speaking of income replacement, let’s talk about…

Stage Three: Financial Independence

“Financial independence is about having more choices.” - Robert Kiyosaki

Welcome to the final stage of your journey: financial independence.

Financial Independence is unlocked when your assets generate more passive income than your active income.

When your non-active investments throw off enough free cashflow to support your lifestyle, and you’re making enough cash, with enough consistency, that you no longer need to work for money.

Sounds pretty good, right?

But…

Before you get carried away with delusions of grandeur, let’s actually dig into what this means.

Because even at this stage, you probably still aren’t buying a Bugatti and hiring Elton John to sing at your birthday party.

This isn’t about excess, but access.

Access to a life where you can wake up every day, knowing that you never need to work again.

Where you can, if you want, travel the world endlessly.

Or, take a year or two to write that novel you always dreamed of.

And, it’s probably far more achievable than you think.

You see, most people think they need “7 sources of income”, and hundreds of thousands of dollars every year pouring in on autopilot…

Which isn’t necessarily true.

Imagine if you woke up tomorrow, and everything in your life was the same, but you never had to go to work ever again.

You’re still living in the same place, wearing the same clothes, and eating the same food.

But…

All of your time is your own.

You could wake up, and read a book all day…

Go for a long walk…

Or just spend time with your family and loved ones without the pressure of needing to get back to the salt mines.

How would that make you feel?

You see, I would argue that the minimum requirement for you to be financially independent is simply to not have to work again.

To be in total control of your time.

But, have you ever stopped to work out what that might look like in reality?

Well, I have.

And luckily for you, I developed a handy formula to help you work out what you need to achieve, by when, in order to unlock financial independence.

I call this the Minimum Viable Freedom (MVF) Formula.

Here's how it works: (Current Living Expenses - Any Direct Work-Related Expenses) x (Avg Annual Inflation ^ Years to Goal)

This formula helps you generate a realistic estimate of the passive income needed to maintain your current lifestyle without having to go to work any more, and maps it over a timeline that you can practically work towards.

Let's break it down a little further:

Current Living Expenses: 
Start by calculating how much money you need to cover your everyday living expenses. This includes rent or mortgage, food, utilities, insurance, transport, leisure activities, and so on.

Direct Work-Related Expenses: 
Subtract any costs that are directly associated with your job. These might include commuting costs, work clothes, and any other expenses that you wouldn't have if you didn't work.

Avg Annual Inflation ^ Years to Goal: 
Finally, adjust your resulting figure for inflation, and also, how long you’re planning to work toward this goal.

This step is important because the cost of living tends to rise over time.

Your estimate needs to account for this increase to ensure that you have enough money to maintain your lifestyle in the future.

Let's put the MVF Formula into action with a hypothetical example:

Say you currently spend $50,000 a year on living expenses, but $10,000 of that is directly related to your work (think commute costs, business clothes, work lunches, etc.).

So, your adjusted annual living expenses would be $40,000.

Next, let's assume the average annual inflation rate is 2% and you plan to reach financial independence in 10 years.

When you put these numbers into the MVF formula, you get $40,000 x (1.02^10) = $48,810.89.

This calculation means you'll need a passive income of approximately $48,810.89 per year to maintain your current lifestyle without needing to work actively for money in 10 years' time.

Of course, this is a simplified example, and everyone's financial situation is different, so feel free to change the numbers as you see fit.

The point here is to work out the minimum amount of residual (passive) income you need in order to be able to unlock financial independence.

Now…

You may also notice that there are two sides to this equation.

Income and expenses.

And, you can influence both.

So, if you’re wanting to get to this stage faster, it’s as much about looking at how you can live with less, as it is about how you can make more.

And, it’s also important to remember that financial independence doesn't mean you should stop working.

On the contrary, it's about having the freedom to choose to work on what you're passionate about, without worrying about the income attached to it.

Conclusion: Freedom, Above All

Each of these stages—financial confidence, financial security, financial independence—offers a unique level of freedom.

The freedom to choose.

The freedom to follow your passions.

The freedom to live life on your terms.

They are not endpoints but stepping stones on a continuous journey.

As you embark on this journey towards financial freedom, remember that it's not about becoming extravagantly rich…

But about gaining control over your financial situation, providing for your future, and ultimately, achieving a fulfilling life.

This journey is as much about personal growth and self-realisation as it is about money.

The skills you develop, the resilience you build, the security you achieve, and the independence you earn—all contribute to a richer, fuller life that transcends monetary wealth.

Let's redefine what it means to be wealthy.

After all, being rich isn’t measured by who has the most money, but by who has the most fulfilment.

Now, armed with this new perspective on financial freedom…

How will you choose to navigate your financial journey?

P.S: Whenever you are ready, here are a few things you might be interested in:

1. Learn More About Me: Discover how I went from being homeless and broke to generating over $20m in revenue in under four years, and now travelling the world as a nomad.
   

2. Escape The Status Quo Quiz: Uncover your personal potential in the areas of Lifestyle Design, Business & Entrepreneurship, Personal Evolution, Financial Freedom, and Mindset.
   

3. 1:1 Growth Consulting: Want to grow your business fast? Work with me directly to rapidly grow your business and unlock more freedom. Very limited. By application only.
   

4. Youtube: Every week, I release a new video designed to help you succeed in Business, Lifestyle Design, and Personal Evolution.

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