Thread by @TihoBrkan

The 5 stages of your financial journey.

1. Instability (learning to live below your means)
2. Stability (succeeding in living below your means)
3. Security (learning how to save for the future)
4. Freedom (high savings rate, passive income)
5. Abundance (focus on helping others)

Financial Instability.

This is a phase where you are in survival mode & do not have a healthy relationship with money, nor enough personal finance knowledge. In most case, you spend more then you earn & the shortfall is made by increasing your debt level. Furthermore...

...you could even be dependent on parent's money or government benefits.

The solution here is to start educating yourself in personal finance basics. You start reading the classic books, watching YouTube videos and following financial figures who share money wisdom.

Financial Stability.

This is the phase where you are starting to balance things out. You are basically at a break-even level and have the ability to survive. A lot of people are at this level, which is commonly known as living from paycheck to paycheck. Progress is being...

...made the day you know you're not taking on any new debt to survive, and instead have started reducing debt either via a snowball method or the avalanche method.

Furthermore, you continue to educate yourself in personal finance and start to develop a passion for this field.

Financial Security.

You're growing in the field of personal finance. You're educating yourself where the schools failed you. You've started tracking your spending (very important), making sure you live below your means & have built an emergency savings fund. More importantly...

... you've become a goal setter. You have also started tracking your net worth, so now you can approximately project where you might be in 2 quarters or 2 years from now. And also what you might want to achieve in 20 years from now. Setting goals & accomplishing milestones.

Financial Freedom.

Along your financial journey, you have implemented disciplined spending, forced yourself into higher & higher savings rates, managed your debt levels very well (understanding the difference between good & bad debt) and started investing your excess cash.

Eventually, the magic of living below your means together with compound interest (invested in positively cash flowing assets) is delivering on its promise of giving you more freedom.

You can see the light at the end of the tunnel as you slowly realize that passive income will...

...at first cover half of your living expenses, eventually all of your living expenses and finally passive income will outearn you & your active income capabilities. At this point, you have achieved financial freedom.

Financial Abundance.

However, compound interest is so powerful and continuous, that the fastest gains and most profits are backloaded, precisely occurring where you have most likely already achieved financial freedom.

All these excess capital continues to grow at such...

...a fast pace, creating financial abundance. At this point, it is really up to you to decide how to use this wealth & power — after it becomes a great responsibility. And also it is up to you to decide how you live your life and what to do with it.

While I haven't reached the level of financial abundance (in my view these are your typical 9-figure centa-millionaires & billionaires)... if I did, my focus would be to on giving back.

Not just in financial means, but sharing the knowledge and wisdom with the next generation.