<prompt> Human: ujdroth submitted a very informative post over on rfinancialindependence that I felt was worth sharing. Head on over and give him an upvote.edit: To clarify, the below text is the original post by ujdroth.---This is a follow-up to a recent post from ufirefirefire2016 about how the path to financial independence gave him the power to quit his job -- long before he was ready to retire. In that thread, I mentioned the idea that financial independence isnt a single fixed point or event. Its a series of stages. This post explains that concept further.As most of you know, there are a lot of misconceptions about financial independence and early retirement. People think you must be rich or have a high income if youre able to quit your job before age 50 or 40 or 30. And sure, having a high income helps. But the key skill, of course, is the ability to obtain a high saving rate, which I like to call profit margin. I find it useful to re-frame personal finance ideas in terms of business ideas. People like to argue that its impossible to save half your income, but they dont get nearly so defensive about the idea you should have a 50 profit margin -- even though its the same exact thing. Go figure.When I first started learning about smart money management, I thought that financial independence meant just one thing: Having enough cash saved that Id never have to work again. After a few years of reading and writing about money full time, I came to realize this over-simplified things. Financial independence actually exists along a continuum. Its not all-or-nothing, but a series of incremental advancements. Its a process.Each stop along the road to financial freedom grants you greater autonomy and self-expression, and these are qualities that contribute to happiness.In early 2009, I wrote an article positing that there were three stages of personal finance. A few months later, I wrote a series of articles expanding that to five stages. Recently, after listening to an episode of Radical Personal Finance I changed my model again. Today my roadmap contains six seven, really stages along the road to financial freedom.The first stage the zeroeth stage is actually a lack of financial independence. Stages 1-3 are what I call the surviving stages. Most of your work in these stages involves day-to-day household operations. Youre building a foundation for greater financial freedom in the future. Stages 4-6 are the thriving stages. Its here that you have enough money to make choices that support higher purposes, whatever that means to you.Lets look at each of these stages in turn. And please note: I realize these divisions are somewhat arbitrary. You might choose to divide things differently. I welcome your feedback on how to improve this model.Stage 0 - Dependence In this stage, your lifestyle depends on others for financial support. We all start here. Were born this way. How long it takes to break free varies from person to person. Youre in this stage if you rely on financial support from your parents. Youre in this stage if you spend more than you earn if youre digging deeper into debt. Basically, if youre not earning a profit, you are dependent on somebody else. You are not financially independent.After you start earning a profit -- and again, this means youre earning more than youre spending -- you start down the road to financial freedom. Up first are the three stages of surviving.Stage 1 - Solvency Solvency is the ability to meet your financial commitments. You reach this stage after you no longer rely on anyone for financial support. This means your income is greater than your expenses youre earning a profit and youre no longer accumulating debt. You might still have loads of loan payments, but youre not adding anything new to the stack. Some people reach this stage in their teens. Some never reach it. Im ashamed to admit it took me 35 years to get there. I just turned 47 yesterday, as a frame of reference.Stage 2 - Stability You achieve stability after youve repaid your consumer debt, established some emergency savings, and continue to earn a personal profit. This is roughly the same place as Dave Ramseys third baby step. Its possible that you still have some good debt -- college loans, a mortgage -- but youve paid off everything else and youve built a buffer of savings to protect you from unfortunate events. One reader suggested this stage should be called resilience because youre able to cope with unexpected events and return to your original state. I like this. I reached Stability at age 38 when I made the final payment on my consumer debt.Stage 3 - Agency At this stage of financial independence, you have the ability to live and work as you choose. Youve eliminated all debt including student loans and mortgages -- or you could do so if you wanted. I know first-hand that there are times you might choose to take out a mortgage even if you could buy a home with cash. You have enough saved that you could quit your job at a moments notice without hesitation. I reached this stage when I was 39.It the final three stages on the road to financial freedom, your concerns move from surviving to thriving. Money is no longer a safety net. Now its a tool to help you build the life you want for you and your family. Truthfully, thats all money ever is -- a tool to help you pursue meaning -- but most people dont understand they should use it that way. Knowing what gives you meaning and purpose is a vital part of financial freedom. I strongly believe it should be the starting point on this journey.Stage 4 - Security You reach the Security stage when your investment income can cover your BASIC needs. That is, based on how much you have saved and invested, you could live a meager existence for the rest of your life without worrying about money. Even if you never worked again, you could afford simple housing, basic food, essential clothing, and health care. I used to joke, for instance, that I had enough saved that I could live in a trailer park and eat TV dinners for the rest of my life without having to work again. Thats the Security stage.For our purposes here, lets use a simple metric. When I say investment income, lets just divide your total net worth -- what you own minus what you owe -- by 25. That number is very roughly how much you could draw down each year indefinitely. This isnt exactly right, but its close enough for the point Im trying to make. So, if you have 100,000 in saved and invested, were going to assume you could take 4000 per year for the rest of your life. If this bugs you, substitute a ration that makes you feel more comfortable.Stage 5 - Independence This is the Financial Independence we all know and love: Your investment income can support your current standard of living. The money you have saved and invested would allow you to live like you do today...until the day you die. It covers the basics and creature comforts. In the words of Joe Dominguez and Vicki Robin, you have Enough. I jumped to this stage just after my 40th birthday. Im still in it today.Note that Independence means different things to different people. For Jacob at Early Retirement Extreme, Independence means his savings will support a 12,000 per year lifestyle. For Pete at Mr. Money Mustache, it means 24,000 per year. For me, it means 36,000 per year more when Im traveling the U.S. in an RV -- ugh. For Jim Wang, it means 120,000 per year! Each of us has to decide what lifestyle matches our meaning and purpose...Stage 6 - Abundance In the final stage of financial freedom, you have Enough -- and then some again, this is how Dominguez and Robin describe it. Your passive income from all sources wont just fund your lifestyle forever, but it grants you the freedom to do anything you choose: indulge in luxury, build a business empire, establish a charitable foundation, explore the world, build a space program to rival NASA.Heres the bottom line: The more money you save, the more freedom you have, and the more risks you can take. As your financial independence increases, you chip away at the wall of worry. Youre able to make decisions proactively rather than reactively.I think this roadmap is useful because it makes the concepts of financial independence more achievable for a lot of people. When I talk to the average person about retiring early by saving half her income, her eyes glaze over. She thinks, No fucking way I could ever do that. Its too great of a leap from her current existence.But if I re-frame things to talk about financial independence as a process, as a series of steps, then things suddenly seem more achievable. Maybe she cant save half of her income now, but she could save five percent. Or ten percent. And with that profit, she could work to move from Solvency to Stability. That is an achievable goal that builds financial confidence. And once shes accomplished that, she can work on boosting her profit margin to 15 or 20 so that she can pursue Agency.Regular readers of rfinancialindependence are like the pro athletes of the personal-finance world. Were all about high saving rates and investment policy statements and safe-withdrawal rates. I think its in our best interest -- in the best interest of everyone, really -- to get more people playing the game. The more folks we can get on the road to financial freedom, the better we all are.There you go. A huge wall of text on an esoteric concept of little use to most people. But I think the folks around here might find it fun. Im curious to hear what you all think. Would you split these stages differently? Would you add stages? Remove stages? What have I missed?  <response>: You made a reader of rfinancialindependence out of me. The climb out of stage zero begins. 