{"id":3933,"date":"2021-10-11T08:00:34","date_gmt":"2021-10-11T06:00:34","guid":{"rendered":"http:\/\/contattoblogs.timslatter.co.za\/?p=3933"},"modified":"2021-10-11T08:00:34","modified_gmt":"2021-10-11T06:00:34","slug":"levels-of-financial-dependence","status":"publish","type":"post","link":"https:\/\/contattolive.co.za\/north\/levels-of-financial-dependence\/","title":{"rendered":"Levels of financial dependence"},"content":{"rendered":"<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">At the very surface level of constructing a financial plan, the journey can feel linear. We begin with what we have and plan to move towards an end goal of \u2018having enough\u2019 and being financially independent. But this is not where financial planning ends; it\u2019s just the toe-dipping beginning as we gain courage and confidence to engage more with our financial planning.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It feels linear because financial independence has always been closely associated with retirement, and retirement has been seen as our final epoch. There are not simply two stages of financial dependence; there are several, and we don\u2019t necessarily go through them all, neither do we all end up fully financially independent.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Life is a little like snakes and ladders &#8211; we can be moving forward (upward) on our chosen path until illness, divorce, or retrenchment changes our financial dependence status. Or we may have a windfall or unexpected success that boosts us up several spaces in our plan.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The importance is not in sticking to the linear journey but in creating check-in points to mitigate stress and measure success according to our personal milestones.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">This gives us the freedom to make choices that might move us up or down a level in our financial dependence &#8211; like extending our bond to buy a larger house, or turning down a better job offer to spend more time with our family.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Understanding different levels of financial dependence helps us with the framework of our financial plan.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Dependence<\/b><span style=\"font-weight: 400;\"> is where many of us start. At this level, our lifestyle depends on others for financial support. Support from parents, needing to spend more than we earn, or if our debt payments (credit cards, personal loans, student debt) exceed our income, are all common at this level.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Solvency<\/b><span style=\"font-weight: 400;\"> is the ability to meet our financial commitments. We reach this level when our income exceeds our expenses and when we are no longer accumulating debt. We are fully able to support ourselves with our income.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Stability <\/b><span style=\"font-weight: 400;\">is a stage of financial dependence where we have no credit card or personal loans, have established an emergency fund, and are growing our asset base.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">If we can keep growing our wealth, we will start to have <\/span><b>free agency<\/b><span style=\"font-weight: 400;\">, meaning that we can work and live how and where we want. Typically, we will have eliminated all debt (including property loans), and have enough savings and invested assets to have the confidence to quit our job at a moment\u2019s notice.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">After this point, we now have a certain level of financial independence. We have <\/span><b>financial security<\/b><span style=\"font-weight: 400;\"> when our investment income can cover basic needs for the rest of our life. It\u2019s not about luxury or comfort; it\u2019s about financial security to have all the basics covered.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Full financial independence<\/b><span style=\"font-weight: 400;\"> is a stage in life where we can fund our chosen standard of living for the rest of our lives. You can afford the basics and some comforts too. This is what many term as \u201chaving enough\u201d.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Abundance <\/b><span style=\"font-weight: 400;\">is a rare stage where we have enough \u2014 and then some. We can share our wealth with others or indulge in luxury.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Remember, these are levels of financial dependence and not levels of happiness or peace of mind! They are purely a helpful way to frame where we are on our financial journey but do not make our journey wrong or right, or complete or incomplete. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>At the very surface level of constructing a financial plan, the journey can feel linear. We begin with what we have and plan to move towards an end goal of \u2018having enough\u2019 and being financially independent. But this is not where financial planning ends; it\u2019s just the toe-dipping beginning as we gain courage and confidence to engage more with our financial planning. It feels linear because financial independence has always been closely associated with retirement, and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3934,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,27],"tags":[],"class_list":["post-3933","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-market"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Levels of financial dependence - Contatto North<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/contattolive.co.za\/north\/levels-of-financial-dependence\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Levels of financial dependence - Contatto North\" \/>\n<meta property=\"og:description\" content=\"At the very surface level of constructing a financial plan, the journey can feel linear. 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