FinLEAP (financial leap) your finances – Part 1: Which financial stage are you at?
Many people want to get rich over a short period of time. Is it really possible? It can happen but whether you are able to maintain the wealth is another big question mark. Instead of chasing fast wealth and losing it fast, why not understand the sustainable way to gain and maintain wealth?
Let’s do this by understanding where you are currently. Knowing your current situation will help you identify the right pathway and the right strategies to improve. Imagine, if you want to cook a good meal for your family, but you don’t even know what you have in your fridge, it will be merely talking and dreaming. You need to understand what ingredients you already have and identify what you need to buy more.
Same goes to financial situation, if you are not able to identify your current situation, it will be hard to find the right strategies. Many of us keep looking for opportunities, but are those opportunities suitable? There are many investment opportunities out there in the market, ranging from starting capital of RM 100 to even RM 1 million. Can I propose RM 500,000 investment to those who cannot even save? How about proposing a RM 100 investment to someone who is earning RM 1,000 an hour? It is definitely a mismatch.
Now, let’s understand the several financial stages in general. See which stage you are at. Then we shall progressively discuss what you need to do to improve the situation over the next few weeks through the articles.
There are 3 financial stages as shown here. First is financial security. Second is financial freedom and third is financial abundance.
If one is below the stage of financial security, he or she can either be financially struggling or surviving. If one is financially struggling, it means that he or she does not earn enough money to sustain his or her basic lifestyle. He or she will be borrowing money to live on. His or her debts are getting more and more. If this situation is not being discovered earlier, the financial problem will get worse and hard to be resolved. On the other hand, one can also have financial security and is able to survive with the earned income every month. It means one is having enough money every month to pay for the basic expenses with not much saving left. However, if there is any emergency event happens to him or her, he or she will suffer financially.
The second stage is financial freedom. At this stage, one does not need to rely on active working to get income to pay off the basic expenses. He has the freedom to stop working. However, one still need to be careful on spending as unplanned spending might make him need to work again.
The third stage is financial abundance. In this stage, one has the leisure to do what he wants to do without worry on the financial impact.
After knowing these 3 stages, where are you currently? Which stage you want to go for? Financial abundance is the stage which most people dream to seek for but without understanding the current situation, the financial gap cannot be identified. With no gap identified, how to determine the strategies to bridge the gap? We all need a financial roadmap to guide us to where we want to be in the future. This is the fastest route to success.
If we merely spend all the time to find out strategies on how to earn more money without understanding what has gone wrong, it is just spending effort and time without any results – tiring and disappointing.
After knowing where you are now, let’s understand the main issues for each stage. For people who are still at financial security stage, the main issues are on 2 items – the incomes and the expenses. The incomes are very less to cater for the expenses required or the expenses are too huge. In the next article, I shall discuss more about how to increase incomes and reduces expenses.
For people who has achieved the first stage and going to the second stage, the issues are on the balance sheet items – assets and liabilities. This group of people requiring skills and knowledge on how to grow their current savings to a stage that they can stop working. This will be covered in the part 3 article after next week.
Understanding this will make you effectively handle the issues in trouble. There is no use to learn the wrong thing when that is not the main issue causing the problem.
Watch the Youtube video here on this topic.
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