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The Four Levels of Wealth

Aug 17, 2007
There are basically four levels of wealth you must aim to attain.

Level 1: Financial Stability

The first level of wealth is known as financial stability. This is the most basic level of wealth that you must first attain.

You have achieved Financial Stability when:

1. You have accumulated enough liquid assets to cover your current expenses for a minimum of six months.

2. In addition, you have life and hospitalization insurance to protect you and/or your family's lifestyle should you be permanently disabled, unable to work or if you pass away suddenly.

When you have attained this first level, you will have the peace of mind that should any unexpected challenges befall you (like retrenchment, business failure, pay cut, death or disability), you and your family's lifestyle will not be compromised. Or worse, you or your family will not slide into debt.

Once you have achieved this, you must then aim to achieve:

Level 2: Financial Security

You have achieved Financial Security when you have through the investment of time, money and ideas, accumulated a critical amount of Positive Cash Flow Assets that generate enough passive income to cover your MOST BASIC expenses.

In other words, when you reach this level, you can stop working and maintain a very basic lifestyle. It also means that if you continue working, all your active income can be channeled towards your investments and this will further compound your assets and increase your income streams.

Of course, we shouldn't be satisfied at being at this level. Once accomplished, you must then aim to go for:

Level 3: Financial Freedom

Many of us have heard of the dream of achieving financial freedom but what does it really mean? Well, Financial Freedom is when you have through the investment of time, money and ideas, accumulated a critical amount of Positive Cash Flow Assets that generate enough passive income to sustain your CURRENT LIFESTYLE.

When you reach this level of Financial Freedom, you can choose to stop working and still maintain your current standard of living indefinitely! In reality, most people who achieve financial freedom love their work so much that they continue working not because they have to, but because they choose to. I can tell you from personal experience that it is a great feeling to have, being free of financial pressure & worries and working purely out of passion!

Obviously, the more expenses you have now, the more luxurious and indulgent your standard of living, the longer it will take for you to achieve financial freedom. So besides increasing your passive income, reducing your unnecessary/frivolous expenses will accelerate your way towards this fourth level. Finally, you must aim to achieve:

Level 4: Financial Abundance

So what is the ultimate level of wealth you can achieve? Financial Abundance is when you have through the investment of time, money and ideas, accumulated a critical amount of Positive Cash Flow Assets that generate enough passive income to sustain your DESIRED LIFESTYLE.

Your desired lifestyle is the amount of monthly expenses it will take for you to live the life of your dreams. This is totally subjective depending on the lifestyle that you desire.

If your desired lifestyle is to live in a 20,000 square-feet bungalow with a swimming pool, send your kids to the best schools and drive a Mercedes Benz S-Class, then you could be looking at a monthly lifestyle that'll cost a cool $50,000. Of course the more luxurious your desired lifestyle, the longer it will take for you to achieve financial abundance.

The moment you reach the level of Financial Abundance, you will be able to choose to stop working and live your dream lifestyle indefinitely.

Again, most people who do reach this level usually love what they do so much that they keep on working for fun, channeling 100% of their active income towards charitable causes and further compounding their wealth.

With the right strategies and plans in place, you too will be able to achieve this ultimate level of wealth.
About the Author
Adam Khoo is an entrepreneur, best-selling author and a self-made millionaire by the age of 26. Discover his million dollar secrets and claim your FREE audio CD program '7 Steps To Financial Freedom' here.
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