How Good is your Financial Health Right Now?



Editor’s Note: This new series on Financial Fitness comes from personal finance expert, and new SoFi content partner, Dr. Tony Pennells, founder of The Freedom Club. Using proven tools and systems, Dr. Tony demystifies “financial freedom” with common sense solutions to help people create true wealth (the type that makes money that you don’t have to work for!).

Do you have every intention of setting money aside for your future, paying down debt or creating an emergency buffer, but never quite seem to get there? Do you find that no matter how much money you earn, by the end of the pay period you have almost nothing? If so, you’re not alone. A recent study showed that 47% of Americans couldn’t come up with $400 to cover a financial emergency (via The Atlantic)

The first step to changing your financial situation is knowing where you are at the moment. With this in mind, I’ve identified four levels of financial health to help you figure out where you are, where you need to go and what you need to do to get there.

Level I: Financially Fit

Remember the frustration and uncertainty I mentioned above? Being Financially Fit is about saving regularly by automatically Paying Yourself First every time you get paid—and then living on what’s left—not the other way round. Within 90 days of acting on this idea, you should be less stressed out with a financial house that is in order. That means bills are taken care of, and debt is being reduced little by little.

Related: 4 Financial Strategies for Beating the Millennial Wealth Gap

Level II: Financially Secure

Once you’re Financially Fit, you’ll want the safety you feel now to extend to your future. That means working on your Financial Security by putting money away for emergencies. When the unexpected does happen, being prepared allows you to focus on the situation rather than on your finances. For example, with a cash buffer of at least three months’ expenses (and preferably closer to six months), you won’t have to panic if you unexpectedly lose your job. At this level, you should also have the right combination and amounts of personal insurance in place to protect you and your family should you need it.

Level III: Financially Independent

With the joy of longer life expectancies comes a greater financial burden. Since 75% of retirees run out of savings within the first five years of retirement, Financial Independence couldn’t be more important. Are you on track for your retirement goals? If you are not sure, consult SoFi’s retirement calculator to stay on top of your savings. At the absolute minimum, you want a savings and investment nest egg that is strong enough to last you through at least 90 years of age. You won’t be truly Financially Free at this point, but at least you’ll have a good chance of living your retirement years on your terms.

More From Dr. Tony: 5 Tips for Increasing Income

Level IV: Financially Free

Financial Freedom is the final stage of financial health. This is where the fun truly begins!

At this level, your passive income from investments is greater than your average monthly expenses. You no longer need to work—unless you want to! When you’re Financially Free, you can support your lifestyle, protect yourself in case of financial emergency and leave a positive financial legacy for your family.

Each stage of financial health is a vital foundation for the next step. If you’re not Financially Fit, you can start by Paying Yourself First out of your next paycheck. If you’re Financially Fit, but living paycheck to paycheck, start working on Protecting Yourself. No matter what your financial situation is today, you have the power to change and the choice of what level of Financial Health you ultimately achieve.

Choose Freedom!

Dr. Tony

Editor’s Note: This post originally appeared on our web partner’s site, The Freedom Club.

More From Dr. Tony:

How To Cure Money Stress Ebook

Blueprint to Financial Freedom

Learn More


The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
The individuals interviewed for this article were not compensated for their participation. Their advice is educational in nature, is not individualized, and is may not be applicable to your unique situation. It is not intended to serve as the primary or sole basis for your financial decisions.


ABOUT Tony Pennells Dr. Tony Pennells – founder of The Freedom Club; soon to be MindShift.money – teaches people how to cure their money stress, get out of debt and get on the road to financial security. He is the best-selling author of 3 books, has spoken to audiences as large as 13,000, and has built several businesses recognised as some of the fastest 100 growing companies in Australia by Business Review Weekly.


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