In a world where financial anxieties loom, many Americans wonder just how financially secure they are.
For those wondering, Grant Sabatier, a voice in the FIRE (Financial Independence, Retire Early) movement, offers a perspective with his seven-level framework of wealth. The road map, written in his book "Financial Freedom," is a gauge that might resonate with those seeking to understand their financial journey.
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Sabatier’s first level, “Clarity,” is about taking stock. For some, it might mean confronting the reality of living paycheck to paycheck, which plagues 78% of working Americans, according to a 2023 Payroll.org survey cited by Forbes.
Sabatier’s system breaks down as follows, according to Acorns:
2. Self-sufficiency: Covering basic expenses without external support. While it may still mean living paycheck to paycheck, it’s an important step.
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3. Breathing Room: The end of the paycheck-to-paycheck cycle. This level allows for discretionary spending and marks the beginning of financial comfort. "Just because you make a lot of money doesn't mean you're saving that money," Sabatier said. "Most people in [the U.S.] live through debt."
4. Stability: A solid financial foundation. “At this level, you’re not worried if you lose your job or have to move to a different city,” Sabatier explained. Stability typically involves saving six months of living expenses.
5. Flexibility: The ability to take calculated risks. With at least two years of living expenses saved, individuals can consider major life changes without financial fear. "You could take a year off from your job if you wanted to," he said.
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6. Financial Independence: At this stage, investment income covers living expenses, making work optional. "You either have a large pile of money in an investment portfolio generating interest or you have rental properties and cash flow from the rent covers your living expenses or a hybrid of the two," Sabatier said.
7: Abundant Wealth: More money than needed, allowing for a dream lifestyle and generous giving. "You don't have to worry about money and it's not essential to your day-to-day existence," he said.
Sabatier’s approach offers a more nuanced view of wealth beyond simple income brackets. It acknowledges the psychological aspects of financial well-being, from the stress of living paycheck to paycheck to the freedom of financial independence.
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Critics, like entrepreneur Dr. Jimmy Turner, argue that Sabatier’s frameworks might oversimplify how complex personal finance can be.
"I didn't agree 100% with some of the details in the investing section," Turner said in a review of Sabatier’s book. "For example, he says ‘it's important to rebalance four times a year.' I've read data that demonstrates rebalancing once or twice a year is adequate and most of us can rebalance in an ongoing fashion with new additions without having to sell assets while we're still earning a living."
As Americans grapple with inflation and economic uncertainty, Sabatier’s system does provide a benchmark for progress. It challenges traditional notions of wealth, pointing to financial freedom over mere accumulation.
“With every dollar you save, you give yourself more freedom and options in life,” Sabatier said.
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This article 7 Levels Of Wealth: What Stage Are You At In 2024 According To Grant Sabatier? originally appeared on Benzinga.com
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