The Five Stages of Personal Financial Independence

I previously introduced this information in one of my introductory posts outlining my goals, but it’s such a central tenet to my blog that I figured it was time to give it its own post.

I explained that Unchained55 was about my journey to achieving Financial Freedom by the age of 55, and that because “Financial Freedom” may mean very different things depending on who you’re talking to, I defined five of the major stages.

The 5 Stages of Personal Financial Independence

  1. Financial Instability: The stage at which your present income is not enough to cover all of your expenses to live comfortably and you are incurring debt just to cover living expenses. Obviously, the definition of a “comfortable” lifestyle will vary greatly from person to person.
  2. Financial Stability: The stage at which your present income is high enough to cover all of your expenses while living comfortably without having to incur any debt.
  3. Financial Security: The stage at which your present income is high enough to cover all of your expenses while living comfortably today as well as building a comfortable future (i.e. Retirement savings are on track.)
  4. Financial Freedom: The stage at which you no longer are in any debt and no longer have to work to be able to cover all your expenses because you have accumulated enough wealth to sustain a comfortable lifestyle for the rest of your life. Typically achieved at retirement age.
  5. Financial Wealth: The stage at which you have accumulated enough wealth to sustain a lifestyle of luxury indefinitely.

5 Stages of Personal Financial Independence

I started this blog in a position of Financial Instability, and so Goal #2 for 2015 was to achieve a position of Financial Stability by October 31. I’m super happy to say that as of our Financial Health Check #3, we achieved this goal 50 days ahead of schedule!

Goal #1 was to pay off our HELOC balance, after which we will only have a few other small debts to pay (e.g. TFSA over payment penalties, HBP repayments, etc.) before we can start saving towards our retirement, meaning we’ll be in Stage #3 – Financial Security!

My ultimate goal is to achieve Financial Freedom by the age of 55, so we’ll (hopefully) be in a position of Financial Stability for many years as we prep and plan to graduate to Stage 4. If you’re curious as to why I’m not striving towards Financial Wealth, check it out here.

Mrs. Unchained55


  1. Very nice graph. I just crossed over into Financial Stability, but I still sometimes feel like I’m teetering on the edge back into Financial Instability. This is a good way to visualize where you are in your “financial” life.

    • Thank you very much! I’m no graphic designer (obviously) so I struggled with it for awhile lol but I’m glad you liked it 🙂 And congrats on getting into the Financial Stability stage!

  2. I like the graph, but don’t know if everyone goes through financial instability, in that I don’t think you need to take on debt – it is a choice you make. Maybe if you include taking out a home loan as taking on debt, but I think you’re probably just talking about credit card debt and so on. Too many people try to live beyond their means, which means it takes them longer to get to financial freedom, if they ever do.

    I also think your sites are set too low. I think you can make it in about 20 years, which means about age 46. It’s just a matter of putting a few thousand dollars away each year and investing it.

    • No, you’re completely right! Not everyone goes through the same stages, and it isn’t always linear. Those born with silver spoons go straight to Financial Wealth and can probably stay there their entire lives. Similarly, had I not quit work to go back to school, we would have never “gone backwards” into Financial Instability – we only incurred debt in the last few months of me not working. We would have probably been in a very good position of Financial Security on track to Financial Freedom, but I would have been absolutely miserable until we got there.

      I also think that it would be possible to reach Financial Freedom earlier than 55 based on our current situation. However, I set our goal at 55 for now for a few reasons:
      1) We don’t have kids yet, but I’m sure that when we do, it will slow down our savings significantly and for quite a few years
      2) In the new year when I’ve hopefully finished my CSC, I’ll be able to start applying for entry-level jobs at the bank. But those entry level jobs also come with entry level paychecks.
      3) I think it’s important that we balance living for today and saving for the future. I’ve heard of people who’ve saved and saved and saved and put off enjoying their life because they wanted to retire well, then not be able to enjoy their wealth for one reason or another. And then on the flip side, there’s the all-too-common consumer who lives for instant gratification and spends him/herself into bankruptcy. My hope is to find the middle ground between the two, like going to Asia for a month at the end of this year.

      Thanks for sharing your thoughts! 🙂

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