Financial freedom. It sounds great, but for most people combining those words is far out of reach. Because how do you become financially free? Well yes, by handling your money wisely, but that sounds vague as well. This blog introduces the Four Money Levels, which help you gradually reach that grand goal: becoming financially free.

Changing your behavior is extremely difficult, especially when it concerns your behavior regarding money. Many lives are driven by financial decisions which are made out of fear, such as: 'I will keep working this job, even though I don't like it that much. The income from this job simply gives me security.' Or: 'I will stay in this relationship, even though I don't enjoy being with my partner anymore. I am afraid of the effects on my living conditions and standard of life if I have to make ends meet on my own income.'

Money for your happiness

When you are financially free, you no longer have to make your financial decisions based on these limiting thoughts, but you have the freedom to look at the opportunities your money gives you. It allows you to use your money in a positive way to create the happiest life possible.

But where do you start in your journey towards financial freedom? We asked Daan, one of the founders of Flow. Daan says financial freedom is a great milestone you can not reach in one go. “Only by breaking up this milestone into smaller parts, you will reach the final goal,” said Daan. Daan figured out those smaller parts are the Four Money Levels.

Living outside your budget

The first Money Level - we call it Money Level 1 - consists of spending more than you earn. You do not have any leftover money for, for example, unexpected expenses or saving targets. Worse still: you are or will end up in debt.

At Flow we will help you change this. We do this by providing you with insights into your expenses, and by stimulating you to make different financial decisions. Do you spend relatively much on groceries and going out for dinner? You can save on that! We let you think about your budget per item of expenditure, and help you split your money over these various items when your monthly income arrives. We help you stick to your budget in this way.

Your first buffer

The next step is Money Level 2. You now spend just as much as you earn, and do not go deeper into debt anymore. You won't be in trouble, but also don't achieve anything with your money. You still do not have a buffer for unexpected expenses. That milestone of financial freedom still is far away.

To get a step closer, Flow will help you assess where you can gain something in your expenses. Consider canceling a gym subscription you rarely use, or spending less on clothes once a month. And you might be able to tighten up existing budgets a bit more. This frees up money for saving. Your goal for Money Level 2: creating a buffer of one month's salary.

Saving goals

When you have saved that buffer, you are at Money Level 3. You will notice you truly enjoy seeing some extra money in your bank account. You would like some more!

Now Flow can discuss saving goals with you: goals you want to work towards. Saving money is a lot easier when you know what you do it for. For a new kitchen, for example, or saving or investing for your pension. You will also expand your buffer at Money Level 3. That one monthly salary will turn into six. You can reach this by further adapting your budgets, by renegotiating your salary, or by starting a side job as a freelancer, for example. The main pitfall before we continue to the next Money Level, Daan has an important message. He says: if you truly want to become financially free, keep in mind that you will only manage to do so by keeping your expenses at the same level, while your income increases.

Daan: Many people think: more money is the solution. But if you do not have a plan, you will find you end up in some sort of rat race of earning more while spending more throughout your entire life. A bigger house, a more expensive car, the latest gadgets - but how happy does that make you? Determine for yourself: this is what I want to spend, and I will not spend anything more than that, but will put it into savings, investments, or real estate, for example. This ensures that you actually gain something from this extra money, instead of just squandering it all and staying at the same Money Level.

Building something for the future

You are at Money Level 4: you created a buffer of at least six monthly salaries and have clear saving goals. If your income increased, this did not change your spending patterns. All your leftover money has a goal: a trip you would like to make, or something physical like an electric bike. But your main goal is not to spend money, it is to use it to build something for the future. By saving, paying off more of your mortgage, investing, or filling up your pension fund.

Flow helps you with this. The app can help you set up things like: if my buffer reaches level X, deposit the remaining amount in my investing account. Or you can choose to deposit a certain fraction of your income in your pension fund.

By building these flows yourself, with infinite options, Flow allows you to gain and keep control over your money. And to experience financial freedom.