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The Steps to Financial Freedom

Different Levels of Economic Freedom

Maslow’s Hierarchy of Needs can be easily transformed from a hierarchy for achieving personal freedom to a hierarchy for achieving financial freedom.
Achieving true financial freedom requires climbing the different economic levels of freedom.
Understanding these different levels of economic freedom can not only inform you of what can be achieved but the steps for achieving it:

1. Basic Economic Freedom (Physiological Needs).

In economic terms, basic freedom is having the basic means of survival.

It’s having the privilege of buying food, shelter, clothing, but not much else. Many people can have this basic freedom but still, be living in survival mode.

Many don’t have jobs but are still able to have the basics of food, shelter, clothing, and healthcare through government assistant.

Examples of people who don’t even have this basic economic freedom are prisoners. They can’t buy food, shelter, or clothing. They have no choice (i.e., freedom) in what they eat, what they wear, or where they live.

2. Physical Economic Freedom (Safety).

Individuals on this level of economic freedom are comfortable. They aren’t in survival mode, continually fighting for the next meal or a roof over their heads.

They have more than the basics. They have stable jobs, can afford to buy their own home, live in safe neighborhoods, can afford to eat healthily and work out, and can defend themselves. Their lifestyles are no-frills.

3.  Emotional Economic Freedom (Love and Belonging).

Closely related to level 2 of economic freedom, individuals on this level of economic freedom fill their homes with loved ones. They marry, have kids, and raise them in comfortable homes and safe neighborhoods.

They have the means to nurture their relationships through spending quality time together, like going on vacations and going on family outings.

4. Personal Economic Freedom (Esteem).

People who achieve personal economic freedom are successful and make high salaries.

They have prestigious careers in business, medicine, law, etc. They live in prestigious neighborhoods, drive fancy cars, belong to country clubs. Their vacations are also an upgrade from level 3. They travel to Europe, the Caribbean, Hawaii, etc.

Life is good for individuals on this level of economic freedom, but they still haven’t achieved true financial freedom. They’re rich, but not wealthy. They always trade time for money. Their income is limited to the number of hours they work in the day. They have to keep working to pay for the big house, fancy cars, private school tuition, and country club memberships.

5.  Complete Economic Freedom (Self-Actualization).

Individuals who have achieved complete economic freedom have achieved true wealth. They no longer trade time for money. Time is now the most valuable commodity, and they can now afford to trade money for time.

If they work, it’s because they choose to and not because they have to. They are unfazed by the broader financial markets. They make money in both bull and bear markets.

People on this level think of money and investments differently than the rich on level 4.

The wealthy achieved their economic freedom because their priorities were different than those on level 4 – the rich doctors, lawyers, and executives whose self-worth is tied to the number of hours they work.

The wealthy were more focused on net worth. Building net worth meant increasing income and reducing expenses. They were responsible for their spending – cutting back on unimportant and unnecessary costs.

When wealth and self-actualization are the goals, cutting back on costs is not viewed as a sacrifice but as necessary for accumulating the one vital component for achieving wealth – passive income.

Passive income is what separates the rich from the wealthy. Passive income comes from having your money work for you 24 hours a day, even while you’re sleeping—the rich work for their money.

With the wealthy, the money works for them.

Some examples of passive income include real estate and cash flowing businesses, productive farms, productive oil and mineral rights, and dividend stocks.

Passive income-generating real estate is a favorite of the wealthy because when a crisis hits, while dividends may go away, passive real estate income endures.

People don’t stop needing shelter, and businesses don’t stop needing office and retail space.

6. Transcendental Freedom (Transcendence).

Those who have achieved transcendental economic freedom have achieved generational wealth – wealth that won’t end with their lifetimes but are built to endure for generations and to benefit heirs, charities, and other beneficiaries for years to come.

Learn from the Hiltons and the Waltons whose wealth has endured while the Vanderbilts have fallen into obscurity.

What is the key to generational wealth? To invest in income-producing assets that grow wealth exponentially.

The ultra-wealthy who invested their wealth in income-producing real estate and businesses reinvested their profits back into similar assets, thereby building exponential wealth that continued to pay out long after their deaths.

They also installed legal safeguards for preserving their wealth and growing it even after their deaths through trusts, foundations, and other estate planning tools.

Achievement of transcendent freedom requires going against the norm and what you’ve been taught for years by financial advisors and so-called experts of the financial press.

It requires freeing yourself from the shackles of Wall Street and embracing uncorrelated alternative investments that generate income 24-7 in bull and bear markets.

Only through these types of investments can you achieve the kind of generational wealth that will last long after you’re gone.

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