The 5 Levels of Mindset to Achieve FIRE May 9, 2024
Imagine a life where you feel financially secure, confident, and at peace. A life where you can pursue your passions without worrying about bills, debt, or living paycheck to paycheck.
What if I told you that this life is within your reach, and all it takes is small steps?
The foundation for our mindset and beliefs is often laid during the formative years, typically within the first seven years of life. Early experiences can significantly shape one’s financial mindset and beliefs, influencing future attitudes toward wealth accumulation, risk-taking, and opportunities. Recognising and understanding these early influences can be a key step in reshaping and improving one’s financial mindset for long-term success. Having the right mindset is therefore crucial for achieving financial success because it shapes your attitude, beliefs, and behaviours towards money.
There are in fact 5 levels of mindset that would help you to achieve financial independence, and retire early (FIRE) which represents a progressive journey where each level builds upon the principles and insights gained from the previous one. Skipping a level may compromise the stability needed to sustain financial independence, retire early, or achieve enablement successfully.
LEVEL 1 – GET FINANCIALLY READY
At this level, proper money management is essential, whether you choose to address it now or later. Without it, you might find yourself working indefinitely. This is a skill that anyone can learn, regardless of gender or occupation. It requires initial effort, but the benefits will compound over time.
As an essential resource, money is a powerful tool that can enable you to live your desired lifestyle.
LEVEL 2 – FINANCIAL DISCIPLINE MINDSET
Regardless of your current salary or income, the real issue lies in how you manage it. Living below your means is essential. By cultivating conscious spending habits, adhering to your budget, and regularly reviewing your expenses at the end of each month or year, you will develop strong financial health.
While money can’t buy everything, it can certainly bring peace of mind.
Being well-informed and aware of your current financial situation helps maintain calm in the face of discord and stress. Protecting yourself against uncertainties, being debt free, and having emergency funds are vital steps to achieving this peace of mind.
LEVEL 3 – DIVERSIFIED WEALTH MINDSET
Building wealth involves exploring various avenues. Relying solely on a single source of income is risky while having multiple income streams supports your lifestyle and fosters growth. Diversification has proven to work in achieving financial success.
How many of you believe in the Asian Success blueprint study hard, attend a reputable university, secure a high-paying paid job, and work diligently until retirement? While there’s nothing inherently wrong with this path, it often leads to a sense of dissatisfaction or mid-life crisis. Working for others might provide stability, but rarely leads to significant wealth. It’s crucial to take time to develop secondary or multiple income sources.
“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” – Will Rogers
I have many friends who are always competing with their neighbours, colleagues or parents from school. The desire to impress can lead to accumulating useless possessions. Always remember that you are the average of the five closest people you spend the most time with. If they are extravagant, chances are, you might be too.
LEVEL 4 – FINANCIAL FREEDOM MINDSET
Achieving true financial freedom means having all your essential financial arrangements in place, operating automatically. This includes adequate protection for your family, diverse sources of income, along with a clearly written will to ensure your wishes regarding your assets are respected after your passing. With these things taken care of early, you can enjoy a sense of peace and security.
It’s not how much we give, but how much love we put into giving. Sharing your time and knowledge allows you to leave a meaningful legacy that transcends your lifetime, providing deep fulfillment. This is what I refer to as generational wealth—creating a lasting impact that benefits future generations.
LEVEL 5 – INVESTOR MINDSET
If you don’t know how to make your money work harder for you, and if you don’t find a way to make money while you sleep, you may find yourself struggling. Making enough money to sustain the next 15-20 years, and allow your investments to compound, will not only cover your expenses throughout your lifetime but also enable you to leave a meaningful legacy.
Remember, where the focus goes, energy flows! If you focus on what could go right, you will achieve much better results and have higher chances of achieving financial success.
However, knowledge alone isn’t enough – it’s the application that counts. Emotions often play a significant role in financial decisions, making discipline a very important character trait to achieve your financial goals.
Surround yourself with a supportive community of like-minded individuals. Seek out the right coach, mentor, or advisor who can hold you accountable and guide you towards your financial goals.
FINANCIAL INDEPENDENCE CHECKLIST:
LEVEL 1: Get Ready
- Improve your Money Mindset
- Track your Income and Expenses
- Determine your Net Worth (Your Current Location)
- Calculate Your Financial Independence Number (Your Destination)
LEVEL 2: Get Healthy
- Have a simple money management system in place
- Create a spending plan and pay yourself first before anything else
- Align your expenditures with your values
- Eliminate unnecessary expenses
- Build your emergency funds of 3-6 months for unforeseen events
- Pay off your debts as fast as possible (excluding Mortgage loan)
- Secure family protection through adequate insurance
- Start building your Financial Freedom Funds
LEVEL 3: Get Wealthy
- Learn about different assets classes and choose one (i.e. Stocks, Real Estate, Own Business)
- Start investing in the asset class you choose
- Aim to increase your income or for a salary raise
- Maintain a low cost of living and contribute surplus to your Financial Freedom Account.
- Regularly review and refine your investment strategy to maximise growth.
LEVEL 4: Get Financially Free
- Re-assess your strategy and portfolio allocation into Income generation
- Pass the torch to the next generation, including knowledge, values, and wisdom and not just your money
- Leave your legacy to your community or to the world
LEVEL 5: Get Invested
- Emphasise EQ over IQ! Mastering your emotions is way more important than your Intellectual Quotient. If you struggle with a S$10,000 account, dealing with a S$100,000 account will be more challenging.
- Invest in your education, start small, and gradually enhance your emotional intelligence. Your future self will be grateful.
Conclusion
Achieving financial independence is a transformative journey that requires commitment, strategic planning, and ongoing self-education. By methodically advancing through these five levels—from cultivating a proactive financial mindset to mastering emotional intelligence in investments—you can create a robust foundation for wealth that not only endures but also empowers future generations. Each step is integral to developing the resilience and skills necessary for navigating the complexities of personal finance. Remember, the path to financial independence is unique for everyone, and the pace will vary. Stay patient, stay informed, and above all, stay committed to your financial goals. Your efforts today lay the groundwork for a prosperous and secure tomorrow.
For more Financial, Business and Self-Development content, follow my LinkedIn account: https://www.linkedin.com/in/diegotaira/.
Contributor:
Diego Taira
Wealth Manager
Phillip Securities Pte Ltd (A member of PhillipCapital)
https://bit.ly/TTPDiegoTaira
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About the author
Diego Taira
Wealth Manager
Phillip Securities Pte Ltd (A member of PhillipCapital)
Diego, an investor with two decades of experience and a former IT consultant, achieved Financial Independence and Retired Early (FIRE) at the age of 40. Now, he serves as a founder, educator, community builder, coach, mentor, and advisor.
In his role as a professional wealth advisor, Diego's passion is more than a flame; it's an all-consuming FIRE. This fervor drives his commitment to assisting individuals in expediting their journey to financial freedom, making it less complex, more efficient, and enjoyable.
Diego's vision is centered on instilling the values of Education, Empowerment, and Embracing Financial Literacy in families, empowering them to elevate their financial standing and attain Financial Freedom. His message resonates with the idea that each of us has the power to be the change we want to see in our family trees.
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