The 5 Emotional Phases of Financial Freedom

Updated: November 12, 2021

When you want to finish a triathlon, then you need to train for it. Learn proper form. Develop your endurance. Practice often.

When you want to become an actor, then you need to hone your acting skills. Attend workshops. Improve your empathy. Audition often.

When you want to achieve financial freedom, then you need to save and invest. Get financially educated. Follow a budget. Build a good portfolio.

The things you need to do to achieve such goals in life are already known. There are thousands of resources out there that can teach you, step-by-step.

However, only a few tackle one of the most common reasons why people fail at reaching the finish line. And that is, developing the right mindset to soldier through difficult times.

It’s not a walk in the park

Any goal worth pursuing will not be a walk in the park. And when it comes to achieving financial freedom, it would probably be the most challenging pursuit you’ll ever take.

Financial guru, Dave Ramsey is credited for saying that personal finance is 80% behavior and 20% head knowledge. And I agree with him.

From experience, learning how to save and invest is easy. But persistently applying that knowledge is the hard part.

I’ve met a lot of people who are financially educated, but only a few execute what they know. They don’t save nor invest even though they know they should. And thus, they continue to remain financially poor.

Which now begs the question, how can one improve their behavior when it comes to money management and building wealth? Because knowing so will definitely improve a person’s chances of becoming rich.

Well, what I’ve learned is that — becoming aware of the emotional phases, which one will go through during their pursuit of financial freedom, is a good place to start.

Through this awareness, one will have better chances at successfully managing financial stress. One will be able to objectively make good financial decisions and avoid making costly mistakes.

So what are these emotional phases? I’ll talk about them below.

1. A feeling of inspiration

It is an inspirational moment — making that decision to take control of your finances.

A lot of people make it their New Year’s Resolution to spend less and save more. Because it brings forth an optimistic feeling and hopeful joy to the start of their year.

This positive experience is enough to encourage you to take the first few steps toward financial freedom. You’ll seek ways to learn about money management, and you’ll finally start saving and investing.

2. Self-doubt and fear of missing out

You began your journey by learning all about investments. And you even bought books and attended seminars.

After several weeks, this emotional hurdle usually comes.

Feelings of self-doubt begin to creep into your head. Those who are trying to save more money will wonder if the habit is something they can sustain.

The fear of missing out takes center stage as you realize the things you need to sacrifice and the lifestyle changes you must do if you want to continue saving money.

Meanwhile, those who are learning how to invest begin to feel overwhelmed. All the information about stocks, mutual funds, insurance, bonds — starts to become confusing. And they start to doubt their ability to understand them.

Analysis paralysis is a common cause of why people don’t invest. The fear of making a wrong investment decision and missing out on that “best investment” often makes people to instead just hold on to their money and not invest at all.

When you’re at this stage, the best thing to do is to talk about your doubts and fears with someone who understands what you’re going through.

This can be a financial planner or adviser. But you can also seek advice from a community of financially educated individuals — and Facebook has a lot of these types of groups.

It is at this stage that you most need guidance and encouragement from those who have been there. Don’t be afraid to ask questions, share your doubts, seek help on how to manage your fears.

3. A moment of clarity

With proper guidance and determination, you’ll eventually reach this stage. And when you do, you’re already done with the most difficult part of your journey towards financial freedom.

This phase starts the moment you experience clarity on your financial goals. It’s when it all becomes clear what you must do to achieve your dreams.

Personal finance is personal. Your goals will determine the best investments for you. And each individual, each family, must leverage their own unique skills and available resources to help them reach financial freedom.

Once you’re able to understand these facts, then you’re on your way towards the next and longest emotional phase of your journey.

4. Boredom and impatience

It took me two years to build my emergency fund. I was able to pay off all my credit card debts a year after that. And my investment portfolio reached one million in value only after five years of consistent investing.

This is the most boring part of your financial life, and it will test your patience. Because lasting wealth can only grow slowly while it compounds year after year.

At times, feelings of self-doubt will come to you. You’ll ask yourself: Am I really doing this right? Why is my money not growing fast enough?

Some people begin to take higher risks at this stage. They withdraw money from their portfolio and abandon their original financial plan.

Then they begin putting money on get-rich-quick schemes or trendy investments. And unfortunately, most of those who do will fail and lose money.

When you find yourself at this stage, the best thing to do is to focus on your active income. Find ways to increase your cash flow — so you can invest more and grow your wealth faster.

Invest your time and energy in building new sources of income. Develop and pursue a freelance career on the side. Or maybe try your hand at starting a business.

What’s important to remember at this phase is that you should leave your investments alone and let them passively grow through the years. Let the power of compounding do its work.

5. A sense of financial wellness

Recently, a long-time reader of this blog sent me an email. He shared that he’s been following my financial advice since 2011 and has been persistent and patient with his money and investments.

He wrote to me because last month was the first time he realized that he’s already a millionaire. And he was able to do this with a public school teacher’s salary. Isn’t that a great achievement?

It took him around six years to reach this milestone, and I told him that it will take less time to make his second million. But he needs to continue what he’s doing.

This phase is when you feel a sense of financial wellness. It’s when you realize that achieving financial freedom is possible for you.

You’ll look back and see how difficult the journey was. But you’ll thank yourself for not quitting. And tell yourself there’s nothing left to do but to soldier on towards the finish line.

It’s a personal journey

These five emotional phases are based on my own experience, as well as on the financial success stories I’ve heard from peers and colleagues.

I hope that by sharing these with you. You’ll be better at handling the emotional roller coaster that comes with pursuing financial freedom.

I know a lot of people who have reached the finish line. And it’s your turn to cross it this time — with proper discipline, unwavering determination, and the right mindset.

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