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Different stages financial competency life (<3> Financial…
Different stages financial competency life
What do you mean,
ON FIRE
FI: financial independence
RE: retire early
<3> Financial Independence
Live independently of earned income
You're more or less locked into your current standard of living
Get to decide what to do with my time
instead to slave away at my job for 5 days each week
just to get a pay cheque every 2 weeks
Your investment is 25x of your annual expenses
Your passive income equal or exceeds your expenses
No worry about the money even if running out of it
Quit job at any time without hesitation
Your work is your choice, not your responsibility
You're completely debt free
<4> Financial Freedom
The ultimate goal
You can feel free to do something you might have never considered
Order your favourite menu item, rather than the best value
Stay next to the beach, instead of the four block up the street
Spend a year in Western Europe, rather than strictly LCOL destinations
LCOL = low cost of living
Get a motorhome with slide-outs and self-leveling features
Buy the Express Pass at the theme park
Pay for the babysitter more often
Share a bottle of Utopias [insert ridiculously overpriced beverage of choice] with friends
Utopias
Pay for the overpriced internet on the flight to see the rest of the game*
You can withstand the financial challenges that have little to do with choice
Financial Freedom = 25 x (Core Spending + 2 x (Discretionary Spending))
Remarks
Freedom but it doesn't mean you should or will spend all those additional dollars
<1> Financial Incompetence
No clue about personal finance
Don't manage our money well
Spend more than what you earned (i.e. expenses > incomes)
Credit card is your saviour of all problems
Carry a large amount of debt
Celebrate when receiving approval for another credit card to balance the current debt
Retirement account has a lot of zeros ($0,000,000)
Fail to understand the need to gain personal finance and retirement related knowledge
<2> Financial Competence
Start having a budget and track your expenses
Pay yourself first
Live below your means
Pay credit card balance full each month
Start investing for retirement
Look and ask for help to improve your finance
Start reading books and articles on personal finance and retirement related topics
Test Your Financial Literacy in 5 questions
created by Standard & Poor’s, Gallup, the World Bank, and George Washington University
The Five-question Test