There’s a common misconception that financial literacy is an affair of just the wealthy, but I dare say that having that mindset is a strong indication that you are not in control of your finances. Many people realize too late the importance of taking charge of their finances early in life and by the time they do, they may have missed a lot of opportunities to get it right. If you’re one of those people, there’s still a chance for you to take control of your finances – NOW!
“Millions wish for financial freedom, but only those that make it a priority have millions.” ― Oscar Auliq-Ice
In any community, there will always be the – ‘haves’ and ‘haves not’. Taking charge of your finances puts you on the pathway towards financial independence.
The Financial Ladder
The Financial Ladder is a step-by-step illustration of different levels of wealth. Understanding it gives you a clear picture of where you are financially and helps you recognize where you want to be. After which, you can start working towards achieving your financial goals.
Today, I will be writing about 4 sequential Levels or Rungs of the Financial Ladder:
- The Rung of Survival
It is common for people on this rung to experience difficulty in paying their bills, accrue further debt, resort to payday loans, or even file for bankruptcy. These financial issues can swiftly spiral out of control, with each setback leading to an even greater problem.
On this rung, expenses are roughly equal to or more than income and financial decisions may be driven by the amount of funds available rather than what may be the best choice.
- The Rung of Stability
At this level, your income slightly exceeds your expenses. You are able to pay your bills and depending on how each month goes, put aside some money as savings. The reality is you have little wriggle room and must be careful with your financial decisions as any mistake will take you back to the first Rung.
- The Rung of Flexibility & Independence
Here, your income is generally more than your expenses and you are able to save. You are also able to make short and long-term investment decisions. If you able to keep your head and not lose focus, you will ultimately transit to the next level on the financial ladder.
- The Rung of Surplus
One key attribute of this Rung is that your wealth gives you power & influence. Money is no longer your problem and people look up to you for support.
This Rung comes with great responsibility. Hence, if you believe your trajectory will lead you here, you should start thinking of how you can help humanity.
As you progress in life, your desire to move up the financial ladder heightens as a result of increased responsibilities. This is why you must ensure you are constantly evaluating your financial capacity in order to stay on track in your financial journey.
I am not saying that higher levels of wealth are inherently better, however, they give you more control over your life choices. If you can already spend your money and time according to your values without relying on years of savings, that’s great. But if you can’t, maybe it’s time to pay better attention to your finances and work towards a reasonable level of financial independence.
Remember, You Have Only One Life to Live, Make It Count!