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Creating Freedom Through Financial Independence


Financial Strength – Which Level Are You?

December 11, 2017

Financial strength is what I’m preaching here at Strong Money Australia.

Specifically, getting you in a stronger financial position, than where you are today.  And helping you save and invest more, putting you on the rocket-path to early retirement!

Even though it’s early days for this blog, we’ve already covered a few of the lifestyle-spending traps.  Topics like housing, cars and smartphones.

But today, let’s take a minute to see where you currently sit on the Financial Strength scale.

Once we determine where you’re at, we can see roughly how long your early retirement journey will take.  Hopefully, along the way you’ll learn a few things, to speed up your journey and shorten that time-frame to freedom.



Levels of Financial Strength

Remember a while back I suggested that all households are running a business.  That’s whether they like it or not!  And in that post, I made this point – your savings rate is basically your household profits.

Also, just like companies, we should invest those profits to earn more income.

The company/household with the highest profits/savings rate, displays the most financial strength.  Creating low expenses and large savings, means there is always a huge surplus of cashflow.

They can cope with large unexpected bills and tricky financial times, with no sweat.

With that in mind, let’s just look at the household level.  And the different levels of financial strength we can operate at.

I’ll highlight, based on each level of financial strength, how long it’s going to take to reach early retirement.

Obviously, I’ll have to make some assumptions around investment returns.  So I’ll assume the household receives 5% income from their portfolio, on reaching retirement.  Also, I’ll assume a starting net worth of zero.

Okay let’s go…


Light Strength – Level 1

Savings Rate:  10%

Time-frame to retirement:  47 years

See calculator example here.


Medium Strength – Level 2

Savings Rate:  30%.

Time-frame to retirement:  24 years

See calculator example here.


Full Strength – Level 3

Savings Rate: 50%

Time-frame to retirement:  14 years

See calculator example here.


Super Strength (Beast Mode!) – Level 4

Savings Rate:  60%+

Time-frame to retirement:  10 years.

See calculator example here.


(Financial Independence – Level 5)


Where Are You?

As you can probably imagine, most of the population is operating at Light Strength, or less.

And on the other end of the spectrum, many in the Financial Independence community, operate at Full Strength, or even Super Strength (Beast Mode).

There’s quite a few bloggers these days (mainly US based), who have reached early retirement.  And from their stories, they all seemed to get there by operating on either Full Strength, or Beast Mode.

Of course, there’s more to it than this.  But I think it’s a good gauge for the financial strength we’re all operating at.

And I think strength is an accurate label to use.  Because as we move up the scale, we become less reliant on our work income – hence our position is stronger.  But those at lower strength levels, are almost fully dependent on their jobs.

What I mean is…those saving just 10% of their income, are fully reliant on the other 90% to survive.  But those saving 70%, for example, are only dependant on the other 30% of their wage.

After realising which level of financial strength you’re operating at, you can then aim to level-up!


It’s A Long Way To The Top

Make it your mission to reach the next level of financial strength.  Since you’re on the journey anyway, you might as well aim for the higher levels.

Hell, go into Beast-Mode if you can manage it!

I started out my journey at around medium strength.  After learning more and becoming excited at the prospect of early retirement – I levelled up to eventually reach Super Strength (Beast Mode!).

We ended up operating at Beast Mode for a fair bit of our journey.  Our savings rate maxed out at around 70%.  Having low expenses and reasonably good incomes, gave us huge surplus cashflow, which we saved and invested religiously.

In this context, the most profitable household in percentage terms, is the strongest.  And the higher savings rate, means financial independence much sooner!

Clearly, this is easier for high-income households.  Or households with two incomes and no kids.  Some households simply won’t be able to reach the highest levels, through no fault of their own.  That’s okay.

But remember, we do have pretty good incomes in this country – the median full-time wage is $73,000, according to the ABS.  And even the lowest wages are quite high, globally – see this article.

For most of us – if we’re brutally honest, we don’t have an income problem…we have a spending problem!

The largest factor in our savings rate and time to retirement, is our own lifestyle choices.  Each of our choices, either puts us at a lower level, or higher level of financial strength.

We can progress in physical strength through practice, focus and learning the right techniques.  It’s exactly the same here.

It doesn’t matter where you start.  What matters is the effort you put in, and the progress you make.

Hopefully, as you learn more and get excited about your future, you will progress to the higher levels.

For many of us, after realising that saving money is not some sort of torture to endure, it becomes pretty damn exciting to reach a high savings rate, and see your future changing before your eyes.

Plus, it’s empowering to be in complete control of your finances.


Cashflow Counts

It’s relatively simple, really.

It’s all about your cashflow position.  Not so much about how much equity you have.

We know this because most Aussies are equity rich, cashflow poor.  And they’re still stuck at work, dreaming of winning the Lotto!

They’re 100% job reliant, because they don’t have income producing investments.  Instead, they focus on their equity.

Sure, they might use their equity to buy further investments.  But usually, this is done with the aim of creating even more equity, not income.

In Australia, we’ve been convinced that investing for income is bad, because tax is bad.  And the best way to invest, is leveraged property for capital growth.  After all it’s tax free, until the asset’s sold – yipee!

Admittedly, yes there may be no tax.  But there’s usually no income to go with it.  In fact, there’s usually a steady stream of bills instead!

While the approach can work, and we still hold a number of properties, I no longer believe this is the best way to invest.  And it’s not at all necessary to reach early retirement – despite what a ‘free seminar’ might sell you…oops, I mean tell you 😉

By focusing on saving and buying strong income-producing investments, like Aussie shares, the whole early retirement journey is much simpler.

Although I admit, the sharemarket does seem scary at first.  But educating yourself and learning a few important key lessons, puts the worries to rest.  Investing in shares for dividend income is also more predictable and less hassle.



It’s true, none of this stuff is groundbreaking.  But hopefully, you get something out of it.

Financial strength is incredibly important.

There’s many sides to it.  And this is just one of them.  But I think it’s a fun little guide to see how each of us are operating!

Financial strength helps you reach your goals and overcome money problems, that would simply crush many people.

Remember, this is just one blogger’s point of view, of how I see things.  You’re free to choose your own investments, your own spending level and your own goals.

But I’m sharing this stuff and writing this blog, because I do think it can help people.

Often, what I did and what I would do again, is different.  This is the important part.  Because you get to learn what I would improve on.  That’s the whole point!

Basically, my plan is to provide all the things I wish I knew at the start of my journey.  And in doing so, share what I think is the best way to reach financial independence, as quickly as possible!

But first, it’s helpful to see where you’re at.  And give you something to shoot for!

So…which level of financial strength are you on?


16 Replies to “Financial Strength – Which Level Are You?”

    1. Interesting. Just checked it out. Pretty similar indeed. I guess that’s bound to happen, since we’re all really talking about the same thing – just in a slightly different way.

  1. love it ! i m a bit shy to give out numbers but i m a somewhat high income earner but two kids… and an at full for the last 3 years.
    i actually complitely agree with your comment regarding escaping the rat race: you need cashflow not equity to FIRE! glad i have someone agree with me on that point.
    good work and good analyse

    1. Thanks mate. No numbers needed – we’re just looking at percentages 🙂
      Full Strength is an excellent effort! The longer you can keep that up, the better.
      Yeah, it took me a while to change my mind on that topic – I was focusing on equity before. Much debate on the topic, and it will continue. But now I firmly believe that strong saving and income focused investments are the easiest route.

  2. Love the article SMA, I really like you approach to FIRE. I, like many others had been sold on the idea of using equity to achieve FIRE, however because of you and some others my opinions and approach are certainly changing.
    I’m not afraid to admit I am running a Light Financial Strength, I am reasonably Equity rich but definitely cashflow poor(ish). As the new year approaches I am certainly planning to turn this around.

    One thing I would like to ask is how you would consider kids in the early retirement equation? Based on your articles and about page I am assuming you do not have kids, are you considering it? I would be interested to read your take on having kids whilst also achieving/maintaining Early Retirement. They can be quite expensive 😉

    1. Thanks Spreadsheet Dad! Good to have you here!
      Love the honesty, and your aim for improvement. It’s great that you’ve got a solid equity position, that helps in the overall net worth picture – things can be shuffled around to suit.

      I don’t consider kids in my scenario, as it’s not on the cards at all. I have a dog, and he’s enough of a handful!
      Haha yes I’ve heard they can be quite expensive, but there’s always ways to optimise. Mr Money Mustache (in the US) seems to sustain his low-cost lifestyle easily, while having a son. To be honest, I probably won’t write about reducing child-related costs, since I can’t comment from experience – so it’s a little hypocritical perhaps 😉

      Like many things though – while it’s not free, it can be as expensive as you want to make it.

  3. I’d like to say that 2018 will be the year we enter level 4, but we’ve been at level 3 over the past year mostly.

    Super should hopefully be a bonus and should help the money go even further. Or perhaps be an incredible round-the-world holiday when you hit withdrawal age 😀

    Mr DDU

    1. Mr DDU, level 3 is still truly awesome. It means you guys will be retired in less than 15 years!

      Super, while along way away, will sure come in handy as some ‘old man’ money 🙂 Or at least, a juicy tax free income stream!

  4. Really good article, I’m trying to get to level 4 paying down mortgages on 2 investment properties and reinvesting all my dividends. Your right about investment property its just a drain on money that could be invested in the stockmarket, even though they both only cost me about $500 a month. I’m in rented property in remote WA so I have a lot of free cash every month which I try and invest or at least put in an offset account until an opportunity arises

    1. Thanks Sparky. Sounds like you’re all over your finances and making the most of your situation – excellent job!

      The cash drain continues – just paid to repaint and carpet one place along with fix a few things, now have new tenants who’ve reported electrical and plumbing problems…haha great!

      1. That’s what I love about shares, they don’t need upkeep or maintenance. They just happily sit there and pay dividends!!

  5. Beast mode here. 2 kids but manage to save about 91k per year. 65% savings rate. Still got a while to go though same as most.

  6. So based on this scale, last FY we were probably around Medium level with no effort (before discovering the FI/RE concept) but all savings just accumulated in an offset account against our PPOR, which is now paid off (hooray!).

    This FY we’ve made a plan to be less wasteful and reduce/cut expenditure where we can so we should be at Full level for the year IF all goes roughly according to the plan, and this will all be invested in the share market.

    Would love to squeeze out an extra 1 or 2% in future years as we optimise further, but around 55% is probably the best we can hope for with 2 small munchkins and 2 adults both working part time. Sure, we could bump it up by increasing our hours, but then we’d pay for childcare and miss out on more of the little years when they are oh so cute! We think ~50% is pretty awesome right now, given our other lifestyle choices, even though the gamers in us would LOVE to be able level up to BEAST mode.

    We don’t know whether to expect our expenses to go up or down as the munchkins get older. Nappies are expensive(!), but I’m sure other expenses crop up along the way. Maybe someone with kids can enlighten us about what to expect with regards to kids expenses as they grow.
    Both are not yet school age. ????

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