There are four stages of wealth. Master them to attain financial independence. The stages can be represented by the acronym, LIFE. But you start from E and work your way up until you reach L. Let me break things down for you.

E is for expenses

Start a job or business and keep hustling until you make enough money for your daily needs. If you’re not making ends meet, it’s not yet time to invest.

However, once you have some disposable income, start saving at least 10% of every income for investment. That’s stage 1 and the first step to escaping the poverty trap!

F is for favourites

At this stage, your basic needs are already met. You can choose to travel, buy a car or send your kids to better schools. You have extra income to spend on things you like.

You can even change jobs or start a business, because you have savings to tide you over, if you make the wrong choice.

At this point, increase the percentage you invest to at least 30%. Stop spending the excess on shiny new toys. I see people make this mistake all the time – wasting their seed in times of plenty.

I is for independence

As your investments finally become significant, the returns will be enough to live on, if you stop working.

At this stage, you work at your pace because there is no fear of poverty. You have enough assets to last a lifetime. That’s stage 3 of wealth.

My advice at this point is to never touch your principal or core holdings, but to spend the returns instead. This is an efficient way to keep your wealth and pass it on to the next generation.

L is for legacy

At this juncture, your preoccupation isn’t making money per se. It’s about how best to structure, protect, document and spend it.

Your discussions now should revolve around Trusts, Wills, Philanthropy and Influence. Employ financial professionals to take care of your interests and then please enjoy your life in peace and prosperity. You’ve reached stage 4 and have surely earned it.

In Conclusion

You can attain all four stages of wealth in 5, 10 or 20 years. The choice is yours, but you will need discipline, financial literacy and credible investments along the way. 

Thank you for reading!

If you would like to learn how to navigate the stages of wealth, please take my investment course.