This video talks about down each phase of FI journey to help you understand where you are and how to move forward with clarity and confidence.
Financial independence isn’t a single milestone—it’s a journey through evolving stages of growth, freedom, and choice. Also, it isn’t an overnight-get-rich-scheme (…unless you are on this blog after winning a lottery … Congratulations!). Most likely, you are on that slow and steady journey to financial independence and in one of its stages, based on the age bracket that you are in. (By the way, the age brackets are rules of thumb. A stage can happen sooner or later. The sooner you can enter the next stage the better, as it accelerates your journey to financial independence).
Let’s be real—this journey can feel like watching paint dry. It’s slow, it’s steady, and sometimes it’s just spreadsheets and side hustles. But the secret and fun lies in tracking your progress through different stages, celebrating the small wins and enjoying the journey more than the destination.
If you’re new to the concept of financial independence and wondering what this whole FIRE thing is about, don’t worry—I’ve got you. Before diving into the stages, you might want to check out our blog on basics of F.I.R.E to get the big picture first.
As we keep saying, it is such an unfortunate thing and pity that during our education – schooling and university years and even during our professional life and career we are not taught about personal finance so our financial awareness is fairly low. We are taught about all Pythagoras theorems, Battle of waterloo and all so and so forth but we are never taught about bucket strategies, sequence of returns, how do you double income every 5 years and so on so forth and that is why Financial awareness is a very basic foundation in the journey to financial independence that everybody should have and they should start in their 20s.
Your 20s should be for more than just figuring out your career or travel plans—they’re the perfect time to learn financial concepts by building money habits that actually stick. Start small: track your spending, build an emergency fund, and learn how to make your money work for you. Because the earlier you get financially aware, the more freedom you’ll have to design the life you want.
Honestly even while we are in our 50s we are still building our financial awareness and this is one of the channels where all the interaction is also enriching our financial awareness day in and day out.
1. Financial Awareness
2. Financial Security
But financial stability isn’t just about paying off debt—it’s about gaining control. That means being able to cover all your living expenses from your primary income source without relying on credit or external help. Ideally, you’re also starting to consistently save a portion of your income, even if it’s small. This is where the magic of compound interest begins to work in your favor—the earlier you start, the more powerful it becomes.
A key milestone in this stage is building an emergency fund—typically 3 to 6 months’ worth of expenses—to protect against unexpected setbacks like job loss or medical bills. This financial cushion brings peace of mind and helps you avoid falling back into debt when life throws a curveball.
You may still be figuring out your long-term goals, but this is the time to develop healthy money habits: budgeting, tracking expenses, and resisting lifestyle inflation. The focus is on creating breathing room in your finances so you can start thinking beyond survival—and toward growth.
3. Financial Stability
The financial goal is to make sure you no debt other than the mortgage and your monthly / annual mortgage payments are less than 30% of your primary source of income. Anything higher than 50% of your salary / primary source of income could potentially mean either of the following:
o You bought a very expensive house,
o You are based in a HCOL (High Cost of Living) city,
o You have a lower primary source of income.
Any of these may require a rethink or some sort of remedial action, as this could potentially stretch your path to financial independence. Yes, I agree a house is an investment but …
o Mortgage comes with interest payments and >50% of mortgage to salary ratio means your interest payments are eating into that capital growth of your property.
o An expensive house also adds the risk of an expensive lifestyle. If most people in your neighbourhood are paying <30% of their income into their houses – either in form of rental or mortgage – means you are most likely earning less than your peers in that neighbourhood. This just increases the risk of ‘Keeping up with the Joneses’ (Do watch our YouTube video on ‘Being Rich versus Being Wealthy’ where we talk more about this topic).
o A high mortgage due to being based in an HCOL city is nothing but a ‘premium’ towards the city that could’ve gone into having your money make money instead. Post Covid lockdowns and with flexible working, more and more people are relocating to MCOL (Medium Cost of Living) or LCOL (Low Cost of Living) cities to maximise their savings, even if it means a comparatively lower salary (‘Gross salary is for show. Net savings is the real dough!!’).
The other goal in the Financial Stability stage is not only are you investing your savings every month but also have cash available in your bank to take care of 6-9 months of living expenses. This helps with any emergency situation that may arise in family or any one-off expenses towards weddings, kids education etc.
4. Financial Independence
Welcome to the Financial Independence Club – the stage where you achieve financial independence! The main ‘eligibility criteria’ to become financially independent is that – you are saving 100% of your salary / primary source of income as your passive income is sufficient to meet all your living expenses. This simply means you are no longer financially dependent on your salary or your primary job as your money is making enough money for you.
It could be that your investment strategy has not been about generating passive income but growing your capital instead. That can also make you financially independent if your total investments portfolio (or your ‘net worth’) is at least 25 times that of your annual expenses (to be even more safe and robust, it should be 35 times your annual expenses).
Important to note: Ideally the house that you are living shouldn’t be considered part of the net worth as it doesn’t give you any returns and you aren’t able to monthly / annually ‘withdraw’ from that investment.
In summary, the journey from Financial Security to Financial Independence is a long journey and depends on many factors – how you manage your expenses, how you control ‘lifestyle inflation’, how you plan your career, what is your investment strategy etc. Simply put, the more you plan properly, the sooner you achieve financial independence.