Number of stages
- 7 stages - After goggling "stages of wealth", websites from search results point us to different views. Generally, there's about 7 stages (More info).
- Key stages - I'm going to assume most readers are interested in the later stages: Financial Security and Financial Freedom. People in the early stages mainly consist of students, those owing debts or from the lower salary class.
Financial Security
- Passive Income = Basic Expense - This stage is met when passive income is able to support basic expenses. Passive income can be derived from stocks dividend, collection of property rent or pension / CPF monthly draw-out.
- Safety net - This stage is an important long-term safety net. It provide a peace of mind should one be unable to work or have been retrenched.
Financial Freedom
- Passive Income = Monthly Salary - Many may rebut this formula it differs from the norm. However from observation, most people adopts a comfortable lifestyle which their salary can support. As such, it would be fitting to equate the two.
- Financial Freedom = Job Freedom - Once financial freedom is reached, it enables a person to opt for early retirement. It also enables switching into a new career of passion even if the salary is lower. Most people continues to work out of a sense of satisfaction and the ability to interact with others. Doesn't this sounds like a dream come true.