A few years ago, I found myself feeling embarrassed in the parking lot after swiping my debit card and seeing “Insufficient Funds” flash back at me. It wasn’t the first time. I had a stable job, but after rent, groceries, and debt payments, there was never enough left to breathe, let alone save. I promised myself that I would make the most of myself so I never end up in that situation ever again. It took me years of hard lessons and smarter money habits to go from financial survival to something I now call financial freedom.
But here’s the truth no one tells you: financial freedom isn’t one destination. It’s a daily journey with clear milestones that you need to follow to stay financially free.
In this article, we’ll explore the 7 levels of financial freedom and how you can move through each one, no matter your starting point.
The 7 Levels of Financial Freedom
Level 1: Financial Survival
I think, we all have been here. Working nonstop just to barely male it at the end of the month.
You’re hustling just to keep the lights on.
At this level, you’re stuck in survival mode. There’s no savings, and you might be using credit cards to float basic expenses. According to the Federal Reserve, 37% of U.S. adults can’t cover a $400 emergency without borrowing or selling something. Pretty sad, isn’t?
Signs You’re Here:
- You’re living paycheck to paycheck.
- Bills are paid late or missed.
- You’re constantly stressed about money.
- Any extra expenses put a lot of pressure on you.
What to Do:
- Track every expense with apps, Excel, or whatever works better for you, but do track it.
- Prioritize needs (housing, food, medicine).
- Seek community aid, meal programs, or financial coaching resources.
- Change your mind, worry more about how money goes out rather than when it comes in.
- Focus on expenses, and sacrifice yourself for a better future.
- Get rid of expenses that make you happy but are not a necessity, you can get them on the next levels of financial freedom.
- Read my article on How to Stop Spending Money You Don’t Have.
Once I heard the phrase “Be uncomfortable for a year or two, to be comfortable for the years to come”. Read that again. It shocked me.
Level 2: Financial Stability
If you’ve passed survival mode, the next level is literally a breather.
You’re paying your bills and starting to breathe.
Now, you’re meeting your monthly obligations and have a small emergency fund (think: $1,000 buffer). But one surprise—like a car repair—could wipe it out or make you go back to your credit card.
What to Build Next:
- A 3–6 month emergency fund. Start little by little, every penny matters, believe me.
- Automated savings (start with 3-5% of your income if possible).
- Basic credit improvement strategies.
- Keep following the same steps from Level 1, don’t get too excited about your emergency fund.
Bankrate reports Americans often pull out of their emergency fund between $1,000-$2500 for emergencies.
Level 3: Debt Freedom
You no longer owe anyone your peace of mind.
Reaching this level means you’ve eliminated high-interest debt—especially credit cards and payday loans. You now keep more of what you earn.
Best Practices:
- Use the debt snowball or avalanche method.
- Avoid lifestyle inflation.
- Replace monthly payments with savings or investments.
- Don’t go back to get new debts, it sounds tempting now that you have free money.
- Keep building your emergency fund.
- Start building your investment fund, you will need this later.
Psychologically, this is the turning point where people regain a sense of control and hope.
Level 4: Financial Security
Emergencies don’t derail you—they just annoy you.
You’re debt-free, have a robust emergency and investment fund, and sleep at night. Your insurance is in place. Now, you’re focused on building wealth and protecting it.
Smart Moves Here:
- Invest 15–20% of your income in retirement accounts (401k, Roth IRA).
- Get proper insurance (life, disability, health, home).
- Start estate planning: will, beneficiaries, power of attorney.
- Investigate passive income strategies.
A comprehensive 10-year analysis by Fidelity Investments, revealed that women investors achieved annualized returns 0.4% higher than their male counterparts.
Level 5: Financial Flexibility
You can make choices based on values—not desperation.
At this point, you’ve gone beyond just “being okay.” You’ve designed a financial foundation that allows you to explore what you really want—whether that’s launching a creative side hustle, taking a mental health break, or shifting into a purpose-driven career.
Flexibility isn’t just about money—it’s about freedom of time and energy.
What Opens Up:
- Career freedom: You can pivot to a job you want, not one you need. It can also be a job that pays less but gives you enough free time.
- Time for You: Travel more, spend time with grandchildren, or volunteer for a cause you care about.
- Less risk, more alignment: You can say yes to values and no to burnout.
What to do now?
1. Create Purpose-Driven Passive Income
- Invest in rental properties near colleges or tourist zones that require little management.
- Use your experience to build an online course, write a book, or offer coaching in your area of expertise.
- Dividend-yielding ETFs or annuities can offer dependable monthly income with less hassle.
Aim for income streams that support your values and give you time back—not more work.
2. Review and Realign Your Investments
- Ensure your portfolio supports stable, income-producing assets for near-term flexibility (like bonds or conservative mutual funds).
- If eligible, catch up on contributions to your Roth IRA or 401(k).
- Meet with a financial advisor to rebalance risk and ensure your money is aligned with your retirement timeline.
3. Redefine What “Success” Looks Like Now
- Ask: “Does my spending reflect the woman I want to be in this next season?”
- Cut expenses that don’t bring joy, and redirect those funds toward experiences, education, travel, or wellness.
Level 6: Financial Independence
You work because you want to—not because you have to.
This is when your investments produce enough to cover your living expenses. Many use the 4% rule (save 25x your annual expenses) as a benchmark for “FIRE” (Financial Independence, Retire Early).
What Life Looks Like:
- Freedom to retire early or work part-time.
- Time for causes, hobbies, or travel.
- Less reactive to job markets or economic downturns.
Fine-Tune:
- Use a fee-only financial advisor.
- Tax-loss harvesting and charitable giving strategies.
- Explore geoarbitrage if it fits your lifestyle.
Level 7: Financial Abundance & Legacy
You’re building more than wealth—you’re building impact.
At this stage, you have more than enough. The focus shifts from accumulation to impact: legacy, philanthropy, and purpose.
What This Looks Like:
- Donor-advised funds or foundations.
- Helping family members responsibly.
- Teaching the next generation about wealth stewardship.
Tip: Partner with a financial planner who specializes in legacy and impact investing. Make sure your wealth reflects your values.
You are on top of the levels of financial freedom, it’s time to make an impact and feel good about it.
Bonus: How to Move Up the Ladder from Any Level
- Mindset > Money: Progress starts by believing change is possible. Be patient and sacrifice yourself.
- Automate: Savings, debt payments, and investing should run in the background.
- Avoid Pitfalls:
- Lifestyle creep
- Procrastinating investing
- Comparing your journey to others
- Desperate on getting out of it and dropping every effort you made.
Conclusion: True Freedom Is Gained in Layers
You don’t need to win the lottery to be financially free. You just need a map, patience, and a few smart decisions each day. As you climb from survival to abundance, each level unlocks a deeper sense of ease, control, and joy. Trust me, every step matter, don’t get ahead on the game.
So… share with me in which of the levels of financial freedom are you at right now—and what’s your next step?
Last Updated on 28th May 2025 by Emma
