7 Levels Of Financial Freedom





The concept of "financial freedom" can vary depending on individual perspectives and goals, but here is a common breakdown of seven levels of financial freedom :

1. Clarity: This level emphasizes the importance of understanding your current financial situation and setting clear goals. Without knowing where you stand financially, it's difficult to make progress towards your objectives.

2. Self-Sufficiency: At this stage, you're able to cover your expenses without relying on outside assistance. This might involve living paycheck-to-paycheck or taking on loans to meet your financial obligations.

3. Breathing Room: Achieving breathing room means having money left over after covering your living expenses. This surplus can be directed towards building an emergency fund and investing for the future.

4. Stability: Level 4 entails paying down high-interest debt and establishing a robust emergency fund. Financial stability ensures that unexpected events won't derail your financial progress.

5. Flexibility: With two years' worth of living expenses saved, you gain the flexibility to make major life decisions, such as taking extended time off work or pursuing entrepreneurial ventures.

6. Financial Independence: At this stage, you can sustain your lifestyle solely through income generated by investments or other passive sources. This level often requires a significant commitment to saving and investing.

7. Abundant Wealth: Those at level 7 have achieved financial independence and can comfortably live off their investment portfolio. The "4% rule" is commonly used to determine the amount of savings needed to support this lifestyle.

Conclusion

Each level builds upon the previous one, with increasing levels of financial security and freedom.


Book a free Consultation here

Visit our website to learn more





Comments

Post a Comment

Popular posts from this blog

Clarification On Taxation Of Meals Provided By Employers

Image
Background:  The Kenya Revenue Authority (KRA) issued a Technical Circular (Ref: 1005/1) in March 2017, outlining guidelines for the taxation of employment income, particularly regarding benefits provided to employees. Among these benefits, the circular stated that meals provided to employees up to a value of Kshs. 48,000 per year per employee were not subject to tax, in accordance with Section 5(4)(f) of the Income Tax Act. Clarification:  Recently, there has been confusion regarding the interpretation and application of this provision. The KRA has clarified that if an employer provides meals exceeding the value of Kshs. 48,000 per annum per employee, the entire value of the meal becomes taxable income for the employee. Essentially, any amount spent on meals beyond the specified limit is now subject to taxation under the Income Tax Act. Implications for Employers: This clarification places the responsibility on employers to ensure compliance with tax regulations regarding emp...
Read more

Understanding Advance Tax: Essential Information for Vehicle Owners.

Image
  Welcome to the latest edition of the RWK & ASSOCIATES CPA(K) Newsletter. In this issue, we focus on Advance Tax , a critical requirement for all commercial and public service vehicle owners. Understanding how this tax operates and how to manage it effectively can save you time and avoid unnecessary complications. Advance Tax is a mandatory prepayment needed before a commercial or public service vehicle can be registered or licensed. The tax amount is determined by the vehicle's type and capacity. For example, vans, pick-ups, trucks, and similar vehicles incur a fee of Kshs. 2,500 per ton of load capacity or kshs 5000 whichever is higher. In contrast, saloons, station wagons, mini-buses, buses, and coaches are charged Kshs. 100 per passenger capacity per month or kshs 5000 annual amount whichever is higher. It is important to note that Advance Tax is not a final tax. Taxpayers must report this payment in their annual income tax returns and settle any additional taxes that ...
Read more

Summary Of The Key Proposed Changes In The Finance Bill 2024

Image
  Income Tax Act: • Introduction of Motor Vehicle Tax at 2.5% of the vehicle value payable upon insurance issuance. • Withholding tax on goods supplied to public entities at 3% for residents, 5% for non-residents. • Taxation of income from digital marketplaces/platforms at 20% for non-residents, 5% for residents. • Introduction of Significant Economic Presence Tax at 30% for non-residents. • Minimum top-up tax for resident entities in multinational groups. • Deductibility of SHIF, post-retirement medical funds, and the affordable housing contributions. • Investment deduction for spectrum license purchase at 10%. • An eco levy for manufacturers and importers will be introduced. • Imported motorcycles beyond a certain price will be taxed at 10% of value instead of a flat rate. • Taxation of interest income from infrastructure bonds for residents. Value-Added Tax Act: • VAT exemptions on bread will be removed. • Removal of VAT exemptions for financial services such as credit and debit...
Read more