Everyone says, “I want to make lots of money.” But what does that really mean?
The distinction between different levels of financial status is important because it helps to conceptualize what you really need. Money is a means to an end. You don’t want a lot of money, per se. You want what it can afford you. So what does that mean? Let me explain.
There are actually four levels of financial status:
- Financial Insecurity
- This is where most people operate. It means living paycheck-to-paycheck. If you were to lose your job tomorrow, you would be in serious trouble. Obviously, it is not a good place to be. Getting out of it requires a lot of discipline and a bit of luck.
- Financial Security
- Some people operate here. This means having enough of a financial cushion that if you lost your job tomorrow, you would be okay for up to six months. In other words, your savings account should be able to cover up to six months worth of living expenses (rent, food, insurance, etc). This should be enough time for the average person to find employment elsewhere.
- Financial Comfort
- Few people are at this level. This means having enough money that you don’t mind losing your job because you have enough saved up for years. You can afford the occasional item of luxury and comfort. While you still have a budget, you aren’t scrambling to make ends meet. You don’t have a lot of anxiety about money. In short, you are comfortable about your financial situation.
- Financial Wealth
- Very few people are at this level. This means having enough money to afford the luxuries all the time. You can afford to be a philanthropist who donates hundreds of thousands of dollars. You can afford to pursue your hobbies and interests at will. Your life is one of leisure. Ironically, many of those who become financially wealthy overnight don’t know how to hold on to their money and lose it just as quickly.
Me, I am aiming for financial comfort. I don’t need financial wealth – though, sure, if I achieved it, I sure ain’t gonna cry.
To reach financial comfort, I know I must live my life a certain way. For one, I can’t be an employee all my life. Owning a business is one great way to get there and that’s the path I’ve chosen. It also means practicing financial discipline, like keeping a budget, saving money, being smart about investments, taking calculated risks, learning how to be financially savvy, etc.
It is possible to achieve financial security and financial comfort. Very possible. Anyone can do it, even you.
So which financial level do you want?