Where Do You Stand On The Financial Freedom Spectrum?

One major focus of this blog is to showcase alternative FIRE strategies that help you claim your time back sooner so you can live your best life.

I firmly believe that we don’t have to (and most definitely shouldn’t) wait until we reach our “magic number” before we start enjoying the benefits of the FIRE lifestyle.

We can all enjoy the vast majority of the freedoms and lifestyle options Financial Independence creates long before we get to the finish line.

However, many of us get hung up on numbers and financial milestones instead of seeing the bigger picture and the freedom we’ve already gained.

In this article, we’ll explore the Financial Freedom spectrum and discuss how you can use it to unlock the best parts of FIRE… now! We’ll also talk about the importance of developing an abundance mindset in order to reach the real goal behind Financial Independence – happiness and living a fulfilled life.

So, let’s find out where you are on the Financial Freedom spectrum.

Financial Milestones Don’t Tell The Whole Story

Financial Independence isn’t a black-and-white, one-size-fits-all concept. It’s a spectrum.

When we speak about the FIRE spectrum and the different levels of Financial Freedom, we usually think of different FIRE milestones, often presented on a graph like this:

Note how the growth is exponential – that’s the nature of compound interest. The financial progress is slow at the start and gets faster and faster over time.

There is nothing wrong with these types of graphs. In fact, we use a similar chart to track our own progress toward Financial Independence. However, we must remember that these graphs only track one dimension of Financial Freedom: wealth accumulation. And that’s only part of the story.

Measuring Lifestyle Improvements Along the Path to FI

We often forget that the further we progress along the wealth creation path, the more freedom and lifestyle choices we gain – and we don’t have to wait until we hit some arbitrary number to make use of them.

Sure, some FIRE milestones unlock specific lifestyle options – like semi-retirement in the case of Coast FI and Flamingo FI, for instance. However, there is a whole spectrum of lifestyle improvements that are not directly correlated with a specific milestone or number.

The best thing about this is that most of the lifestyle design options and benefits Financial Independence creates become available early on in the FIRE journey. The reason is that they are linked to the exponential decrease in financial dependence we experience right from the start instead of the slow initial growth of our nest egg. Consequently, we get to enjoy the best parts of the Financial Freedom lifestyle long before we reach the FIRE finish line.

Here is an illustration of the Financial Freedom spectrum and its characteristics:

As you can see from the chart, much of what we hate about being broke and dependent on a job starts to disappear as soon as we reach the first levels of financial security (think debt freedom, an emergency fund and some savings in the bank).

You immediately gain some breathing space and can stop basing all your decisions on financial considerations. You can now focus on the actual goal we are trying to achieve when we pursue Financial Independence: happiness.

Immediate Benefits and Choices

As soon as you’ve made some initial financial progress, the green area of the chart starts opening up. You now have options.

You could, for instance, give up your exhausting evening side hustle or stop working overtime in order to spend more time with your kids. You could save up for a family trip overseas. You could take some unpaid leave to unwind and regroup. Or you could invest in a course to upskill and transition to a more enjoyable role at work. The options are endless. 

As you continue to get ahead financially, more and more lifestyle design options become available – regular travel, mini-retirements, time and money for new hobbies. Maybe you want to take a sabbatical and focus on a passion project for a while. Perhaps you want to try out entrepreneurship without too much financial pressure.

Eventually, you might transition to part-time or seasonal work or even semi-retire. Just spend some time thinking about your goals, make a plan and go from there.

It is important to note that you have access to almost all of the options and benefits in the green area as soon as you reach the first financial milestones on the first chart above. However, you might have to focus on just one or two items to start with. It is a bit like Paula Pant‘s motto – “you can afford anything… just not everything”. As you make headway financially and mentally, you can incorporate more and more options in your life. 

Will taking time off, working les and traveling more slow down your FI journey? Maybe. Maybe not. Sure, taking time off and/or spending money on things like travel, hobbies, and personal growth will set you back financially – initially, at least. However, if you start living a better, healthier life, work on your mindset, take some risks and surround yourself with positive people, that might actually create change that benefits your FIRE plans.

As you can see from the chart, the red area starts shrinking exponentially as soon as you move in the right direction. This means that we see the most significant lifestyle improvements at the start of the journey. The law of diminishing returns tells us that the additional benefits we experience get smaller with each FIRE milestone we reach (or Million we add to the portfolio?).

Where Am I On the Financial Freedom Spectrum?

After I started my first job I felt trapped in the rat race. I was broke and hated the 9-5 grind. At that time I lived on the left side of the Financial Freedom spectrum. My thoughts and actions were dominated by the red part of the chart.

However, this changed quickly after Mr. Flamingo and I got serious about FIRE in early 2016. As soon as we had some FU Money in the bank, everything in our lives got better and easier. The green area of the Financial Freedom spectrum started to unfold in front of us. We started to enjoy work more. We slowly started designing and living our ideal lives. We built a life on our terms and pursued the things that make us happy. I would say that at this point, we were already in the middle of the spectrum and enjoyed many of the benefits of the FIRE lifestyle (without being anywhere near FI).

When we eventually hit Flamingo FI in 2020, we transitioned to part-time work. That was (and is) awesome because we get to spend more time as a family. Semi-retirement is fantastic. However, we had already been living a pretty fantastic lifestyle for several years at this point. Consequently, reaching this milestone didn’t feel as liberating as the transition we experienced earlier on in the journey.

Now we are very close to actual FIRE (about 80% at the time of writing), I don’t feel very different at all. I know that nothing will change in my life when we hit our FIRE number. And that tells me that we have achieved the actual goal of Financial Independence – we are happy and enjoying life.

We are at a stage where I can confidently say that a few extra years of living expenses in our portfolio won’t affect our lifestyle or life choices. I would say that we already enjoy 95% of the lifestyle benefits of full Financial Independence.

My message is clear: You can start creating a life on your terms and enjoy most of the benefits of Financial Independence long before you actually get there. You just have to realise it and take action.

The Importance of an Abundance Mindset

You might be one of those people who roll your eyes when you read terms like “abundance mindset” – I get it, I used to be (and in some ways still am) one of them. It sounds new-agey and might bring to mind images of self-help books, tarot cards and crystal collections. But trust me, this is a concept worth exploring and an essential piece of the puzzle.

Increasing wealth is not the only factor determining how well we use the options available in the green area of the chart. The other factor (and probably the more important one!) is the right mindset.

We are stuck in the red part of the Financial Freedom chart when we have no savings (or even consumer debt hanging over our head) and live paycheck to paycheck. Money is on our mind constantly, and we feel trapped and utterly dependent on your job. 

Many people continue to feel like this even when they make good progress toward Financial Freedom. They get stuck in the scarcity mindset that comes with financial insecurity. When this happens, FIRE can become a bit like a prison. When you think about it, this is ironic because we often use Financial Independence to escape the prison of the 9-5 rat race. So the last thing we want is to just exchange that prison for another one.

One person I recently worked with had accumulated a whopping 40x their family’s annual expenses and was well and truly in Fat FI territory. However, they could not bring themselves to take some time off work and buy plane tickets to attend a family reunion in Greece. They eventually bit the bullet, paid for the trip and never looked back. They actually ended up extending their trip by two months. This episode kicked up a whole array of positive changes in their life. Now they jokingly refer to themselves as “a reformed Scrooge McDuck”. This is an extreme case, but it illustrates the misalignments between financial progress and lifestyle we often see.

A prime example of someone with an unjustified scarcity mindset!

The green area of the chart is characterised by an abundance mindset. In order to tap into the possibilities that open up once we start getting ahead financially, we have to stop living in fear of not having enough. We have to stop obsessing over our spreadsheets and investment returns. We have to give up on the need for 100% certainty – there are no guarantees in life. We have to embrace change and take some risks. We have to stop using delayed gratification and FIRE as an excuse. We have to realise that there is more than enough to go around and that it is ok to enjoy life. This massive mental shift is often an ongoing process for many people.

A positive mindset is the secret sauce when it comes to Financial Freedom. Without it, you will probably lose out on 90% of the benefits of your financial success. However, if you have an abundance mindset, you get to tap into the green area of the chart and build a fantastic lifestyle long before you hit your “magic number”. I really believe that is the key to achieving happiness and fulfilment on the path to FI.

So, where are you on the Financial Freedom spectrum? Are you making the most of the lifestyle choices you have already gained?

20 thoughts on “Where Do You Stand On The Financial Freedom Spectrum?”

  1. all you need to be free is enough for bail.
    the rest is attitude. thinking otherwise is the problem, not the solution.
    How many people have fallen for get rich quick (or get rich slow) schemes with the vain promise of happiness at the end of the rainbow? All they had to do was appreciate what they had.

    Reply
    • I love this! Very well said. I guess everyone who joins the FI community believes that reaching that certain number will be the key to happiness. And pretty much everyone figures out (sooner or later, usually later) that money alone is not enough…

      Reply
  2. When I first looked at your graph, I thought that the FU Money should be after Coast Fire but reading through your article I can see why you have put it first, as FU Money doesn’t have to a huge amount of cash to be life changing.

    Reply
    • It’s just an example. FU Money is highly individual, we felt pretty good with 2+ years of expenses in the bank, for others it might be more or less. The Coast FI number is highly dependent on one’s age, so it could be much closer to the FI milestone for people in their 40s and 50s.

      Reply
  3. Great article! We were moving from the middle of the chart towards the right. Then kids came along, expenses went up, and we became more risk-averse… Now we are back in the middle, but pretty content with everything. We don’t stress about money, but it’s certainly not an afterthought just yet. Will share this article with my partner.

    Reply
    • Yep, I can relate to the changes that happen when kids come along. It’s an adjustment and comes with a higher price ticket. The middle of the chart is still a great spot and you’ll continue moving towards the right. All the best!

      Reply
  4. Good article, although I found the comment comparing the diminishing returns of โ€œadding another millionโ€ (like that is an easy thing) a bit hard to swallow, or perhaps I have misread the aim of the site and target audience as a whole ๐Ÿ˜‰

    Reply
    • Where does it say it’s easy to do? I think what was implied here is that the first million or even 100k brings more benefits than the 3rd or 4th if that makes sense.

      Reply
    • I wasn’t trying to say it’s easy to accumulate “another million”, it certainly isn’t. However, I would argue that the first million brings the most benefits. Someone who is broke and goes from 0 to 1 Million in the bank will feel much much more relief than someone who goes from 1 Million to 2 Million. It’s not about the actual numbers but the diminishing rate of return.

      Reply
  5. Excellent ideas here. I can 100% vouch for this, it’s all about mindset and “enough”. Once I got that, things fell into place. I’m living my life in the green section and I’ve never been happier.

    Reply
  6. This is exactly me right now. Another great visual map representing this stage MF. Well done and thanks.

    I have been at FI for some time, but had still been focussed on maximising the end goal. However at the start of this year I quit my side hustle AND have also reduced my day job down to a 4 day week.

    Mindset change was key, I need to enjoy the now. Happy in the knowledge that my pension in growing in the background I no longer need to save anything, so am diverting these funds to luxury spend (well whatโ€™s leftover after the income hit in reduced working)

    I have 3 kids the eldest is 15. So I see the next 3 years as so important to spend time together and make some memories whilst they are still kids.

    Obviously inflation and the global economy at the moment are making this decision harder, but at the end of the day, once my expenses are covered, I may just need to work an extra year or two on the tail end.

    Glad to say I am now enjoying the power of now.

    Reply
  7. Really enjoyed this article and the graphs! Iโ€™m afraid the recent lockdowns have brought out my inner Scrooge, but gradually trying to reform.

    Reply

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