5 Levels of Financial Freedom Black Americans Should Work to Achieve

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According to a report by the Federal Reserve Board, Hispanic and black American families’ wealth is less than 15% of that of White households, at $24,100 and $142,500, respectively. As you work towards building wealth, it’s essential to understand the different levels of financial freedom. 

This understanding will guide you toward greater autonomy, security, and generational wealth. Continue reading to discover the five tiers of financial freedom you should strive to reach as an African descendant. 

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People Also Read: 7 Ways to Become Financially Independent as an African American

5 Levels of Financial Freedom

Discussion on Financial Freedom. Video Credit: @TomBilyeu

Being financially free is something that people of all races desire, including the African American community. Here are the five levels of financial freedom people of African descent should work towards attaining. 

Solvency

The first level of financial independence starts when you can fully meet your monetary needs without needing aid or support. Even if you have a negative net worth or huge debt to pay, you’re solvent if you can pay your bills and cover your full living costs.

However, in this stage, there’s very little freedom. You’ll be paying your bills and making decisions, and it’ll feel like a treadmill since you’ll be spending everything you earn. To leave this level, you need to make more than you spend. Here are guides on Amazon that can teach you how to make passive income. 

People Also Read: 10 Financial Tips From Black Financial Experts (Grow Wealth Today)

Stability 

5 Levels of Financial Freedom Black Americans Should Work to Achieve
A-man-counting-money. Image Source: Pexels. Licenced under CC BY-SA 2.0

To be at this level, you need to build up good emergency funds and have no consumer debt. Being in this stage means earning more than you need to maintain your standard of living and having wiggle room in your budget.

The stability stage gives you a little freedom since you have an emergency fund and can take risks. You’ll also be free to choose what to do with your extra income since you’re earning more than you spend. 

Many black people stay at this level for a long. They simply use their extra earnings to upgrade their lifestyle each time it comes in. To move to the next financial level, you need to save and invest your excess income

Security

This is the first real level of financial independence. It’s a stage where your return on investment can cover your basic living costs. Financial experts call this stage “Lean FI”. 

At this level, you have attained financial freedom, and you no longer have to work to pay your bills and cover your basic living costs. But the thing here is that you won’t have enough for extravagant spending and personal luxuries.

When you attain financial freedom, you may want to chase new hobbies, travel, or give to charity. To achieve that, you need to make your spending projections more flexible by adding more income. Check these guides out on Amazon if you would love to learn how to invest your money correctly. 

Independence   

This is the stage many people are striving for. You can say that you have reached financial freedom when earnings from your investment can fully pay your bills and fund your lifestyle.

When you’re at this level, it’s unnatural for you to have lingering worries about money. Although it’s not the final stage. You still need to work, save, and invest to get to the next stage. 

Having More Than Enough

5 Levels of Financial Freedom Black Americans Should Work to Achieve
Hundred dollar bills. Image Source: Pexels. Licenced under CC BY-SA 2.0

At this level, your investment portfolio generates more than you need in life. Wealth continues to grow over time with little effort from your end. 

This level gives you ultimate freedom. When making decisions, you don’t consider money again because you can afford anything you want, regardless of the price. At this point in your life, you’ll only make decisions based on happiness and pleasure. 

When you attain the level of financial abundance, you’ll be in a great position to give back to society, help friends and family, or build generational wealth

People Also Read: How Black Culture Influences Financial Planning and Decision-Making

Being financially free allows you to live life on your terms. However, you should know that it’s not a rat race. Enjoy the process as you work towards reaching any of the six levels of financial freedom covered here. You can get one or two books from Amazon to discover the type of assets you can invest in to build general wealth.

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Uchenna Agwu
Uchenna Agwu
Hi there! I’m Uchenna Agwu, and I love to write. When I’m not writing, you can usually find me reading books or watching documentaries (I’m a bit of a nerd). But I also like to get out and explore – whether that means going on hikes or checking out new restaurants.

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