The nine levels of financial freedom you should aim for

Most of us associate financial freedom with not needing a job. But while a complete retirement may be a few years away, here are nine levels of progress that you can measure yourself against.

In your 20s and 30s

Level 1. You get to decide how to spend your salary.

This happens as soon as you get a job in some cases. In most cases an education loan or family may have a prior claim on your salary. But you can quickly get to a stage when you can cover all that and be able to spend on more than just necessities.

Level 2. You can quit a toxic job and tide over till you get a new one in 3-4 months.

When your savings get to a point where you can ‘walk away’ from a job that’s more stress than it’s worth. We are not saying that you quit on an impulse, but you don’t have to suffer in silence either. Having invested in achieving skills that are in high demand will make this happen quicker.

Level 3. You can take a year, or two, off without it pinching you

This is ‘explore my options’ money as against the ‘walk away’ money we talked about earlier. Take some time off to explore an alternate career, without neglecting your financial commitments over that period. You will need to take a call on whether you are going to live frugally in this period, or maintain the same lifestyle as when you had a salary coming in.

Level 4. You can take a year, or two, off and finance a passion 

When you are able to take an extended period off and not only manage your financial commitments during that period, but also have enough money to spend feeding your wanderlust, pursuing a passion, or creating a startup.

In your 40s and 50s

Level 5. Becoming debt free 

Paying off your loans is a liberating feeling - especially the loan against the home you live in. Besides releasing cash flow, this is a key financial freedom. Being debt free means that no one, but you, has a claim on your income.

Level 6. On track for quitting your job, forever, by a target date

The date may be defined by law, convention, or your own aspiration. You start by figuring out the amount required to help you maintain your lifestyle without an income stream coming in after the target quit date. At this level of financial freedom, you know that the investments you currently have, plus your investing rate will get you to your target amount by your target date.

"Level 8. You can give up on the regular salary credits and the investments you have will take care of your lifestyle for the rest of your life. You may already be at this level and not know it.

Level 7. Your current investments are enough to quit your job on your target date.

You don’t need to save and invest any more. All you need to do is to earn enough to pay for your lifestyle till then. This allows you to switch to a possible lower paying job, switch to gigs and improve work life balance.

It often comes as a surprise to many people that they are, in fact, already capable of doing this.

Level 8. You can quit your job today

You can give up on the regular salary credits and the investments you have will take care of your lifestyle for the rest of your life. You may already be at this level and not know it.

Level 9. You have more money than you need to live on

You can quit your job and your investments will not only take care of your lifestyle for the rest of your life but also be able to fund a passion - travel, charitable work, or create an inheritance.

Please take a moment to think about where you are in this journey. Every time you achieve a level, celebrate your achievement and set a plan for the next level.