Financial freedom scale
Contents
About
|
NEWSFLASH: I've also published a shorter version of this article to medium.com! Please support me by adding a "clap" at: The Financial Freedom Scale |
I created this 0 to 10 "financial freedom" scale to encourage you to save and become more financially free. Any idiot can make a numeric scale of your base income, but that would never scale for: (1) different countries with different costs of living, (2) changes in the economy over time and (3) different types of people in spending versus saving. Some people save for a better future while others constantly live outside their means for a more exciting today, but big troubles tomorrow! This scale is heavily based on an 7 levels of financial freedom article by Ryan Ermey. Feedback is encouraged!
My Graphical Representation of the "Financial Freedom Scale" (0-10)
Debt in The United States
According to a 2022 MagnifyMoney survey, half of working Americans say they live paycheck to paycheck, which puts them at Level 4 or below on my chart. But what is surprising is that even with people who make $100,000 or more, 31% are still paycheck to paycheck. Coming from Australia I find that mortifying. The United States has basically set itself up to give people debt, by trying to get people comfortable with taking loans at an easy age with college loans. I feel like half the people I know in the US (including girls I've dated) had debt issues, whereas I hardly know anyone in Australia with debt. And in my mind, if you live pay-check to pay-check on a credit card, it means you are living outside your means.
Don't get me wrong, I'm sure debt is very tough - I watched the whole "Shameless" series to better appreciate how bad things can get - but you still have to ask yourself if you are really trying hard to clear debt? Was the hand you dealt as bad as you think, or are you just playing it really badly. To break out of debt, how about not going to restaurants for a month? Aim to clear your debt and/or get your bank balance into four digits in one year and you'll already step up one notch on this chart. Don't ever let your bank balance fall below that new figure - aim to increase your new base level. One notch in one year is already fantastic, maybe you can clear two! America has promoted the idea of consumerism and flashing cash to an extreme fault. If anything, I've been guilty of not spoiling myself enough, but at least I can say I have saved over a million dollars and thus if I got into a serious medical accident I wouldn't necessarily become homeless. Actually in my case, even if I had a zero balance, I could just move back to Australia and they'd take care of me. In a country like the United States it's really critical to have breathing room, so I hope this inspires you to aim further. I've saved over a million by being thrifty, and when friends accuse me of being cheap, I remind them looking at the prices on a restaurant menu before ordering is how I got relatively high on this chart. And hopefully this chart will inspire me to one day find passive income and get one step higher again. Unfortunately I'm not a trust fund baby either, and paid my own way through college with scholarships and tutoring jobs, so yes, I understand better than most that saving money is not easy. Never take the advice of a trust fund baby who doesn't understand the value of a dollar. Take the advice from someone who started where you are, or below.
Financial Freedom is More About Lifestyle than Income
I don't like that dating apps ask for your income. I mean I get why they do - financial stability is an important factor in a relationship - but it also feels cold. More importantly, this differs so much by county. A $100,000 USD a year salary in New York is standard and often "just enough" to maintain a typical New Yorker standard of living, but the same amount in the Ukraine or Southeast Asia, and you are filthy rich. When I was a neuroscience postdoc in San Diego I made $43,000 a year, which is a lot to some, but not a lot for living in San Diego. Yet even then I was making sure to save and it helped that all my academic friends were intelligent enough to be thrifty and set goals. They didn't "spoil" themselves outside their means. The best things in life are free, and the second best things in life are very expensive. Why not focus on the best things. Human connection. At the time of writing I still have been too scared of commitment to buy a house, but that's on me. I need to investigate my own relationship with money and introduce just a little bit of risk into my investments instead of just trying to put my Google income into safe shares and (more than I should) into just cash. Let's not talk about financial risk though.
I really hope this scale makes you think about what it might take to change your mindset around money and get to that next level of freedom.
Sincerely,
Andrew Noske
PS: Feedback is most encouraged! :)
| Acknowledgements: The 7 levels of financial freedom by Ryan Ermey article, plus my therapist Aditya who asked me to consider my relationship with money in the same week I discovered the article. |
