Financial freedom often begins by becoming financially independent. Many people do not realize how financially dependent they’ve grown or how easy it is to find oneself there. Some people never really break free from financial dependence on their parents. For others, debt is what is holding them back and keeping them from the economic freedom they seek.

Fortunately, it’s not an all-or-nothing process. There are various stages of financial independence. When your income grows, your spending habits improve, and your ability to save becomes more commonplace, you can move on to higher-level stages. Moving from one step to the next takes time and slow and steady progress with your finances until you reach your goal of financial independence.

Stages of Financial Independence

Financial independence rarely happens all at once. Not unless you win the lottery or created the next million dollar wonder app that everyone has to have. In other words, it’s a long-term strategy.

Therefore, you shouldn’t feel frustrated about not achieving all at once. Most people get there in seven stages that take years, if not a lifetime.

Stage One – Financial Dependence on Others

Most children are completely dependent, financially and otherwise, on their parents. Others who may fall into the category include:

• Adults still depending on their parents, heavily, for financial assistance such as college students or adults who live at home.
• People who depend on social welfare programs to eat or live.
• Homeless people.
• People with physical or mental disabilities that render them unable to provide and/or care for themselves.

Your goals for gaining greater financial independence at this stage may include finding a job or more lucrative employment, surrounding yourself with people who have different economic priorities, and seeking financial advice and guidance from a trusted source.

While acting to move to the next stages of financial independence, it is essential to begin building your credit, arranging transportation, and finding a place of your own to live – even if your first apartment or home involves roommates.

Stage Two – Financial Dependence on Debt

If you cannot make it from payday to payday without putting purchases on credit, taking advantage of payday loans, or otherwise borrowing money, you are financially dependent on debt, and that can be a frightening place to be.

At this stage, it’s time to make lifestyle changes that focus on saving money or even considering a second job, at least part-time, to get out of debt and the continuous need to borrow.

Stage Three – Financially Dependent on Your Paychecks

Many Americans ( 75 percent, according to CNBC) fall into this “stage three” category. In this stage, you are making enough to get by, and little else. Some refer to this as living paycheck to paycheck.

At this stage, the only thing left to do is eliminate the low-hanging debt fruit you have and then chip away at all other debt, one debt at a time until you can move forward with your financial independence goals.

Stage Four – Early Stages of Financial Independence

At this stage, you are still on the edge of financial instability. You do have many debts paid off, but you must continue bringing in income from your job to maintain your current standard of living.

You are a lot more comfortable and better prepared for the financial realities that lay ahead when you are in stage four. Now is the time to ramp up your efforts to save for the economic freedom you seek.

Stage Five – Moderate Financial Independence

During this phase of financial independence, you can see the light at the end of the tunnel. You have saved enough money and could conceivably manage several months of unemployment but are not ready to face life without a reliable income or salary.

You have more personal freedom at this stage. You may consider changing careers to one that provides greater fulfillment, even if it does offer fewer financial rewards. Continue saving until you have prepared for the final stage of your journey.

Stage Six – Partial Financial Independence

At this stage of financial independence, you can shift your focus to work you find meaningful or take pleasure in doing. You do not depend on your income to survive, though you may not be financially free enough to live the lifestyle you desire without continuing to bring in some form of income.

Stage Seven – Complete and Total Financial Independence

At this stage, you never need to work a day in your life again unless it is work you genuinely want to do. With this degree of financial freedom, you can live the lifestyle you desire without being forced to tighten your belt to make ends meet.

“The journey of a thousand miles begins with one step.” – Lao Tzu. So, begins your journey to true financial independence. These are the stages involved.