The Four Financial Stages of Life

There are four financial stages in life.  Below are links to individual pages with details and resources relevant to each stage.  Below each link is a summary of the key points to identify if you are currently in that Financial Stage; the focus of each Financial Stage; and how you move on to the next Financial Stage.

Stage 1: Surviving

  • No Detailed Budget or Financial Plan
  • Little, or no, Savings
  • Not Investing
  • Living Paycheck to Paycheck

In Financial Stage 1, we will focus on assessing where you financially by calculating your net worth.  We will walk through what it looks like to develop a financial plan, including a lot of detail on creating a budget you will actually use.  In this Financial Stage you will consider what it looks like to build giving into your financial plan.

You are ready to enter the next Financial Stage once you have calculated your personal net worth, developed your financial plan and budget, and you are working on a positive money mindset.

Stage 2: Stabilizing

  • Implementing Financial Plan and Budget
  • Saving Financial Independence Fund
  • Paying off all Consumer Debt
  • Working on a Positive Money Mindset

In Financial Stage 2, you will establish a proven track record of being able to live day-to-day following your budget and overall financial plan.  Create it, refine it, live by it.  You should be saving for your Financial Independence Fund (see the detailed page on why we call it this versus saying we’re saving for an emergency) and then pay off all consumer debt.  In other words, you will no longer be living paycheck to paycheck and you will be on the path to increasing your personal net worth.  You should be starting to be generous with your money because at this Stage you can afford to give.

You graduate to the next Stage once you have no consumer debt and have saved your Financial Independence Fund.

Stage 3: Thriving

  • Start Investing
  • Aggressively Pay Off all Remaining Debt
  • Pay Cash for Large Purchases
  • Generous Giving

In Financial Stage 3, we are focusing on building your net worth and being generous. You are still following your financial plan, including a budget. The biggest change is going to be that you are now starting to invest and very aggressively pay off any and all debt.  You are also not going to obtain any new consumer debts, ever again.  In this Stage we will go over how to set investing goals and things to be aware of when investing.  You are able to give in a very generous way.

You are ready for the next Financial Stage once you have paid off all of your debts, you are on track to reach all of your investing goals, you are increasing your net worth regularly, and you are giving generously.

Stage 4: Overflowing

  • Paid off all Debts
  • On Track to Reach all Investing Goals
  • Increasing your Net Worth Regularly
  • Giving Generously

You are in Financial Stage 4 once you have paid off all of your debts, you are on track to reach all of your investing goals, you are increasing your net worth regularly, and you are giving generously.  In this Stage we explore some additional ways to invest that focus on passive income, including detailed info on investing in rental real estate.  This is the Stage where you really make a huge impact to the world around you financially.  You are being extremely generous and your wealth builds wealth.

Financial Stage 4 is never complete.  Your biggest concern should be not moving back into the earlier stages.  This Stage is infinite because generosity is infinite, it knows no bounds.