The Art of Manliness - The 6 Levels of Wealth and How to Reach Them

00:00:00.000 Brett McKay here, and welcome to another edition of the Art of Manliness podcast.

00:00:11.360 You've heard the advice that to build wealth, you need to earn more, spend less, and invest

00:00:15.740 consistently. But what if there was a clear way to understand exactly where you stand financially

00:00:19.960 and what steps you should take to reach the next level? My guest, Nick Majuli, offers just such a

00:00:25.600 framework. Nick is the creator of the Of Dollars and Data blog, the chief operating officer at

00:00:30.440 Ritholtz Wealth Management, and the author of The Wealth Ladder. Today on the show, he unpacks his

00:00:35.360 wealth ladder concept, taking the complex, often overwhelming realm of personal finance and

00:00:40.180 distilling it into six easy to understand wealth levels, each tied to specific net worth milestones

00:00:45.200 and financial freedoms. Nick walks us through each rung of the wealth ladder, from getting out of

00:00:49.800 financial instability to achieving restaurant and travel freedom, and eventually reaching upper

00:00:54.140 levels of significant financial independence. We discuss the distinct strategies you should

00:00:58.260 utilize on each rung to make the most of that level and move on to the next. And we get into

00:01:02.380 why your spending decisions should be based on your net worth rather than your income, how wealth

00:01:06.560 allocation changes dramatically as you climb the ladder, and why increasing your earning potential

00:01:10.240 becomes more important than penny pinching as you progress. Whether you're just getting started or

00:01:14.280 well in your financial journey, this episode provides actual insights and practical wisdom for

00:01:18.240 climbing the wealth ladder and securing a life of greater freedom and fulfillment. After the show's over,

00:01:22.900 check out our show notes at aom.is slash wealth ladder.

00:01:38.540 All right, Nick Majuli, welcome back to the show.

00:01:41.340 Thanks for having me on, Brett. Appreciate it.

00:01:42.560 So we had you on last time to talk about your book, Just Keep Buying, which is all about,

00:01:46.400 you just got to keep buying and investing in the stock market. Don't stop. You got a new book out

00:01:50.460 called The Wealth Ladder, Proven Strategies for Every Step of Your Financial Life. A really good

00:01:55.160 book. I really enjoyed it. Your book is based on this idea of the wealth ladder that you've created.

00:02:00.080 What is the wealth ladder and how and why did you come up with it?

00:02:04.080 Yeah. So Stuart Butterfield, who's the founder of Slack, had this three levels of wealth framework.

00:02:10.520 Level one was, I don't stress about debt. Level two was, I don't stress about how much things cost at

00:02:16.660 restaurants. And level three was, I don't stress about how much vacations cost. And so I heard

00:02:22.680 about this. Oh, that's a cool idea. At the same time, Jay-Z, you know, that he had this lyric in

00:02:28.160 one of these songs. I'm not going to say the full lyric because it curses and stuff, but he just

00:02:31.060 basically said, what's 50 grand to someone like me? Can you please remind me? At the time, he had a

00:02:36.120 net worth of $500 million. And so at, you know, 50,000 over 500 million is 0.01% of his wealth.

00:02:42.820 And so I realized, Hey, that's like a trivial amount of money to someone. So given that I kind

00:02:48.080 of came up with this levels framework, which is based on Butterfield's three levels, but I made

00:02:53.200 six levels and I actually put net worth values to them. So I'll just walk through those just briefly.

00:02:57.920 So, and just for the record, your net worth, that's all your assets, everything you own,

00:03:02.440 your cash, your stocks, your house, et cetera, minus all your liabilities. That's everything you

00:03:07.960 owe to others. So your mortgage debt, student loans, credit card debt, et cetera. And so once

00:03:12.760 you know your net worth, you're somewhere on the wealth ladder. Level one is a net worth

00:03:16.760 of less than $10,000. Level two is a net worth of 10,000 to $100,000. Level three is 100,000

00:03:24.880 to $1 million. Level four is 1 million to $10 million. Level five is 10 million to $100 million.

00:03:32.700 And then level six is over a hundred million. Now, once you have these levels, it's actually

00:03:37.200 funny. It actually maps up with the data and for United States household wealth, it actually

00:03:41.740 maps up decently. About 20% of households are level one. So that's less than 10,000. 20% are

00:03:48.040 level two. That's 10,000 to a hundred thousand in wealth. 40% of households are level three. That's

00:03:53.540 a hundred thousand to a million. That's what I would call your typical middle class. And 18% 0.79

00:03:58.020 of households are level four. That's one to 10 million. That's like upper middle class. And then

00:04:02.180 over 10 million, that's like the top 2% of households. That's level five and six.

00:04:06.920 And the nice thing about these levels, I've heard a lot of people do levels of wealth and do all this

00:04:11.460 before. I like this because it's a log scale. You know, you divide by 10 or multiply by 10 to move up

00:04:16.600 and down the levels. So if you know one of the levels, you can figure out the rest. So I just tell

00:04:20.080 everyone, memorize level three. That's the middle middle class. That's a hundred thousand to a million.

00:04:24.260 If you know that you can back out all the rest. And then even within that, going back to

00:04:28.800 Stuart Butterfield's three levels framework, you know, level one was not stressing about debt,

00:04:33.240 et cetera. I've applied spending freedoms to each level. So in my case, I said, Hey,

00:04:37.920 I don't worry about what it costs at the grocery store. That's called grocery freedom. That's level

00:04:41.780 two. So level two is grocery freedom. Level three is restaurant freedom. You don't worry about what

00:04:47.060 it costs at a restaurant, which is a hundred thousand to a million dollars in net worth is

00:04:51.640 level three, et cetera. You can get the appetizer. You can get the Southwest egg rolls at Chili's.

00:04:55.600 Yeah, exactly. You don't have to worry about any of that stuff. Right. And then by the time you get

00:04:59.060 to one to 10 million, you can start to have travel freedom. That's where you can like sit in the nicer

00:05:03.080 seat on the airplane. You can, you know, stay at a nicer hotel, et cetera. You can't really fly

00:05:07.000 private yet. Cause that's a little too expensive. Maybe if you got to the very end of level four,

00:05:10.960 I think private or travel is really reserved for people on level five, but you know, putting this

00:05:16.260 all together is a very long answer, but putting this all together, you get the wealth ladder,

00:05:19.460 which is just a new framework for thinking about money and how you make various money decisions.

00:05:24.180 You can help with spending decisions, income decisions, investment decisions, and more.

00:05:29.040 One of the interesting things you do with the wealth ladder is you argue that this is

00:05:33.000 a better way to think about how you spend money. Cause I think typically when people think

00:05:37.480 about how they spend money, they think about their income. Well, if I'm making more money

00:05:41.260 this year, I can spend more money. You argue that we shouldn't be doing that instead of

00:05:45.820 spending money based on our income. You say we should spend based on our net worth, uh,

00:05:51.100 which you call wealth. Why is that? Why should we base our spending decisions on our net worth

00:05:57.040 slash wealth? Well, I think the issue is that wealth is generally less fickle than income.

00:06:02.380 I mean, you can lose your job at any moment and now, okay. I'm assuming that's, that's how most

00:06:07.380 people are in their income. So if you lose your job, your income basically goes to zero. It's

00:06:11.740 unlikely your wealth just going to go to zero out of nowhere, even during the financial crisis,

00:06:15.720 as bad as it was, you know, people were saying, you know, their homes dropped by 25%, their stock

00:06:21.260 portfolio get cut by 50%, which is still bad at the worst moment, but it didn't go to zero.

00:06:26.500 So it's not as, it's a little bit more stable as a result. I think your marginal spending decision

00:06:31.720 should be based on your wealth, not your income. And then what we talked about, like just the

00:06:35.260 example you gave, Oh, I'm at Chili's. I want to get these egg rolls. They're going to cost me an

00:06:38.860 extra 15 bucks. Can I buy those? And I say, yeah, if you're in level three, which is, you know,

00:06:44.440 anywhere from a hundred thousand to a million dollars in net worth, you can afford that quote splurge or

00:06:49.080 that marginal choice to spend the $15 on egg rolls. I don't think it's a big deal. And so where does

00:06:54.520 that come from? It comes from what I call the 0.01% rule. And that's kind of comes from that Jay-Z

00:06:59.720 thing where it's like Jay-Z could drop 50 grand, like nothing. Well, if you have a net worth of

00:07:03.820 a hundred thousand dollars, you can drop 10 bucks, like nothing. That's the equivalent,

00:07:07.980 you know, difference, right? That we obviously were not Jay-Z, so we can't drop 50 K, but he also

00:07:12.520 had 500 million at the time. So that's where I start thinking about this. Like, Hey, how much can I just

00:07:17.200 drop as like a, you know, this is trivial to me. And so that number goes up over time. And so I think

00:07:22.880 a lot of personal finance experts tell you, Oh, you can't spend more money, you know, don't allow

00:07:28.040 lifestyle creep. And I don't think that's accurate. I think you should have some lifestyle creep,

00:07:32.580 but it should be based on your wealth, not your income. Because you're right, your income can go

00:07:36.260 up. And if you start spending more of it, you're not necessarily saving anything else. You're not

00:07:39.480 building wealth. So my whole idea with this rule, the 0.01% rule, which is 0.01% of your net worth or

00:07:46.500 take your net worth and divide by 10,000. It's the same thing. That's how much you can spend every day

00:07:51.660 and your wealth will stay stagnant, at least on that amount. And so I think thinking about

00:07:56.300 that is very helpful because that's where you can start to realize, Oh, Hey, I can spend more

00:08:01.160 over time, but only after I built the wealth, the wealth ladder framework, plus the 0.01% rule

00:08:06.320 allows you to spend more over time after you've demonstrated financial discipline. And I think

00:08:11.480 that is very important because I want people to be able to spend more money. I want people to be

00:08:14.960 able to enjoy their lives more. And this is a slower way of doing that. And it's a much better

00:08:18.920 framework in my opinion. Yeah. I love the 0.01 rule. Like that completely changed how I think

00:08:23.340 about how I spend my money. That's great. Yeah. So when you say this 0.01 rule, you spend 0.01 of

00:08:29.560 your net worth. You mentioned earlier, net worth is your assets minus liabilities, but some assets

00:08:36.420 like your home is not liquid. It's like not tied up in cash. So should you spend the 0.01 rule,

00:08:43.520 like including your, the value of your home or should it just be like liquid assets?

00:08:46.880 Yeah. So I think in general, it should be liquid assets. I, I just use, you know, I talk,

00:08:51.500 when I talk about the wealth ladder in general, I use total net worth, but you're right when we're

00:08:55.440 talking about spending decisions, like you can't eat your home, home equity necessarily. Like,

00:09:00.020 yes, you can get something called a HELOC, a home equity line of credit, and you can borrow against

00:09:03.940 your home and do all that stuff. So technically you can pull some of that money out, but I don't

00:09:08.100 recommend it necessarily. So I think the thinking is, yeah, what's my liquid net worth? That's the

00:09:12.940 more conservative thing. So if like, Oh, if my liquid net worth, if I have like, let's say,

00:09:17.400 you know, I don't know, a hundred thousand dollars on a brokerage account, then you're

00:09:19.760 in the beginning of level three. That doesn't mean you can go and splurge everything at a restaurant,

00:09:23.340 but you can start to spend a little bit more at a restaurant. And where that 0.01% comes from,

00:09:27.980 it's just, obviously I just came up with this as a trivial amount, but if we assume your wealth

00:09:33.120 is earning 0.01% per day over the course of a year, if you do that, you know, 365 times,

00:09:39.900 that's 3.7% a year, which is a conservative return. That's basically the assumption. I'm

00:09:44.540 assuming all wealth is growing at 3.7% after inflation, like on average. I don't think it's

00:09:50.120 a crazy assumption. And because of that, I'm just assuming your wealth can throw that off

00:09:54.140 just indefinitely. Yeah. What I love about the 0.01 rule about spending on your wealth is that

00:09:58.380 it's actually kind of encouraged me to spend a little bit more. I tend to be

00:10:01.440 tight-fisted and very frugal. I still think I'm a law student, Baroque. And it's a good paradigm

00:10:06.660 for helping me loosen up a bit. So you have a chapter about how you earn your way up the wealth

00:10:12.320 ladder. So in order to accumulate wealth, you have to make money. So what does that look like? I mean,

00:10:17.700 what I love about your work too is on your blog, Dollars and Data, and then your other books you've

00:10:22.140 done as well, is you're very data intensive. So you're looking at all these obscure economic reports.

00:10:27.660 When you look at the data, how do people on the different rungs of the wealth ladder earn money

00:10:34.660 to get to that point? Yeah. So in general, across the wealth ladder, people in levels one to three,

00:10:40.740 so that's anywhere from less than 10,000 all the way up to 100,000 to a million, they basically earn

00:10:47.060 all of their money through work. That's how most people earn their money, right? It's through their

00:10:50.380 labor. It's once you start to get into level four, and that's 1 million to 10 million. And obviously,

00:10:56.460 you have some money invested, but we start to see a shift where assets are producing more of their

00:11:01.300 income. And then by levels five and six, it's even higher and higher. People in levels five and six

00:11:05.980 get most of their income from some sort of business or assets they own, not necessarily their actual

00:11:11.660 labor that they do, like the work they do. And so I think that's the big mindset shift. And it takes

00:11:16.300 time too, by the way. We can talk about this a little bit, but the median age of a household in level

00:11:22.360 four, once again, level four is one to 10 million. The median age is 62. So if we put every household

00:11:27.920 in the America in a room, that one to 10 million, and we just took like the middle age, basically,

00:11:33.260 they'd be 62 years old. So this is not something that's going to happen overnight. It takes a lot of

00:11:37.940 time in general or a lot of work. There's a lot of other ways you can do it, but less than 1% of

00:11:43.460 households in level four or above are under 30. So that is not the case. That's a very,

00:11:49.060 very rare thing. So when you look at how people earn money, for most people, it's just they work

00:11:54.000 and they earn money and that's it. But as you kind of move up the wealth ladder, you start to see that

00:11:57.640 those people are earning money off of their assets and not just their labor. And so that's the big

00:12:02.080 kind of mindset shift I think you need to have. And it's what I wrote about in Just Keep Buying,

00:12:06.340 right? It's the continual purchase of a diverse set of income producing assets. That's the mantra of

00:12:11.140 Just Keep Buying. And that's kind of what I push for. But it gets even more extreme at the higher levels

00:12:15.580 wealth. Yeah, I think that's a good point to make. Most people don't make it to millionaire status

00:12:20.120 until their 60s. I mean, I think the problem with social media is that bias, that recency bias where

00:12:25.380 you see, oh, these people who are in their 30s and 40s, just tons of money. And like, well, that's not

00:12:31.460 me. And what's wrong with me? It's like, well, nothing wrong with you, actually. You're probably doing

00:12:34.660 just fine. Exactly. Yeah. I think the media does a really bad job of high. I mean, but then again,

00:12:41.000 that's the point, I guess, is they want to show exceptional stories. They don't want to show the

00:12:46.480 ordinary things like, oh, yeah, I worked, you know, for 30 years and saved my 401k and now I'm

00:12:52.080 a millionaire. Like, that's not as exciting for people, even though that's more realistic.

00:12:56.180 Another point you make in this earning up the wealth ladder is, okay, we talked about wealth is

00:13:00.140 more important than income. But you show the data that income is pretty correlated to wealth. You had

00:13:06.300 that really interesting chart there. Can you walk us through that? Yeah. So basically the idea is

00:13:11.360 that, you know, within each wealth level, like the median income is just increasing across each

00:13:17.540 wealth level to the point where it's the strongest relationship in personal finance. And if you really

00:13:22.860 think about it, it's like a flywheel, like your income creates wealth. And then if you obviously save

00:13:28.300 and invest that, that can create more income. And then it just keeps happening over and over. It's like

00:13:32.600 the snowball. And so if you just look at the median income within each wealth level,

00:13:37.780 it just goes up. So like in level four, one to $10 million in wealth, the median income is almost

00:13:42.880 $200,000. And so that's a big piece of this, right? And then by level five, I think it's like

00:13:47.860 $750,000 or something like that, something close to that. So it's just like it goes up and then level

00:13:52.100 six, it's $4.3 million. So like the people on level six that have $100 million in wealth, it's just

00:13:56.800 their incomes are just super high because they're earning so much off their assets.

00:14:00.060 Yeah, I think that's an important point because I think oftentimes personal finance advice that you

00:14:04.840 see out there, popular personal finance advice, it's geared more towards reining in spending as

00:14:10.980 opposed to increasing income. And we'll talk about this later. I mean, we're going to talk about each

00:14:14.200 individual rung on the wealth ladder and your different strategies to take towards it. Early on,

00:14:19.100 if you're only making, if your net worth is less than $10,000, then yeah, you need to be concerned

00:14:22.760 about how much you spend. But once you reach a certain point, it's not so much your frugality that's

00:14:29.280 going to get you to the next level. It's just you got to increase the amount of money you got coming

00:14:32.700 in. Exactly. I think spending, cutting spending is a short-term decision. It can help, but the

00:14:39.200 long-term solution is to raise your income. And that's what all of the data has shown me.

00:14:43.100 Yeah. I often fall back to when I'm feeling like, oh, I need, I need to do something. It's like,

00:14:47.320 I want to cut spending. Because I think it's, I think people fall back to that because it's easy.

00:14:51.360 It's like, I can do something right away. I can stop the streaming service. I can stop going out to

00:14:56.280 eat. Trying to figure out how to make money, that can be intimidating for a lot of people.

00:15:01.840 I agree. It's much tougher. I mean, it's a much longer term process. You're thinking about,

00:15:05.600 oh, do I need to learn new skills? Do I need to start a side hustle? Do I need to, you know,

00:15:10.620 get some sort of credentials or education? And those are much bigger lifestyle decisions than just,

00:15:16.120 yeah, I can not go out tonight or I can kill my Netflix, you know?

00:15:19.540 Okay. So to go up the wealth ladder, you need to earn more money. And there's different ways you can do

00:15:24.600 that. We'll get in the specifics here in a bit. At a certain point in your wealth journey,

00:15:29.760 hopefully you'll be starting to save money. That's how you build wealth. And you're going to

00:15:33.740 put that savings into assets that make money, like investments and stocks and things like that.

00:15:38.940 Talk to us about the research that you did, because I thought it was really interesting,

00:15:41.820 how asset allocation changes as you move up and down the wealth ladder. What does the research say

00:15:47.940 there? Yeah. So the data suggests that those lower on the wealth ladder, so those in like,

00:15:52.960 let's say levels one to three tend to have more of their assets in cash, their vehicle and their home

00:15:59.120 and those higher on the wealth ladder. So that's like those. And let's say levels four to six tend

00:16:04.220 to have more of their total assets in income producing assets. So things like stocks, bonds,

00:16:09.460 real estate and their own businesses. And so in other words, like those lower on the wealth ladder own

00:16:16.040 fewer income producing assets than those higher on the wealth ladder. And on average, it's like,

00:16:20.380 if I remember correctly, those in levels one to three have less than 25% of their assets in income

00:16:26.100 producing assets. But those in levels four to six have over half of their assets in income

00:16:31.820 producing assets. So that's like the main difference between those lower and higher on

00:16:36.560 the wealth ladder. Obviously, like, you know, there's other factors that can be correlated with

00:16:40.760 that. But, you know, once you have wealth, the people that have wealth tend to invest that in assets

00:16:46.180 that produce more income for them, which allows them to have even more wealth, etc.

00:16:50.560 Yeah, we talked about your story a little bit. I mean, I know you grew up, you know,

00:16:54.020 I think like middle class, lower middle class, and you had kind of a rough childhood. But my experience

00:16:58.540 dealing with people who, you know, are in that level one rung of the wealth ladder, you'd see that

00:17:04.120 their assets are tied up in like physical stuff, like car house. And in extreme cases, you see like a lot

00:17:10.600 of hoarding, like, why do you got like this, like junker car, you know, in your backyard, like just

00:17:15.740 get rid of that. That's what I would think. But like, to them, it makes sense. Because it's like,

00:17:18.960 well, I don't have cash, I don't have any income producing assets. I can use that junker car one day

00:17:25.020 to pull a part off so I can fix my car. And you see this, they've done studies about this about

00:17:30.380 individuals who grew up during the Great Depression. They tend to hoard more stuff because like they grew

00:17:35.860 up in a time of scarcity. I guess they couldn't really shake that mentality, even though, you know,

00:17:40.300 they're 80 years old, and they might have a pretty substantial net worth, like they still can't shake

00:17:44.960 that scarcity mindset. Oh, yeah, completely get that. Yeah. All right. So as you move up the wealth

00:17:51.080 ladder, your assets typically should shift to income producing assets at stocks, could be a

00:17:56.580 business, etc. Let's talk about the different like the individual levels and talk about the strategies

00:18:01.760 for it. And then some of the pitfalls of these different rungs and what you can do to, you know,

00:18:06.800 get up the next rung. Let's start off with level one. Let's say you're on level one of the wealth

00:18:11.300 ladder. What should be your focus in order to climb to the next rung? Yeah, I think you have to get to

00:18:17.660 some form of safety. If we're talking about financial safety, that either means an emergency

00:18:21.840 fund. There's other types of, you know, financial safety, like you could find people you can trust and

00:18:26.900 rely on to help you get out of level one, whether that's friends or family. So like wealth is not just

00:18:31.660 financial. I think especially in level one, I think you've got to think about the other types of wealth you

00:18:35.240 have and how you can use those to get out of level one. And the reason I say this is because,

00:18:39.960 you know, something's amplified on every level of the wealth ladder. And I think in level one,

00:18:45.260 the thing that's amplified is bad luck. Like take someone who gets a flat tire, like for someone in

00:18:49.860 level three or four, like that's an annoyance. Oh, I have to go get my tire repaired. But for someone

00:18:54.900 in level one, it could send them into a financial tailspin. They don't have a, you know, a way of getting

00:19:00.240 to work, they could lose their job, then they have to take out debt, etc. Like all sorts of bad things can

00:19:04.800 happen just from that one flat tire. I mean, it's funny, you brought up the junker car, that junker

00:19:09.120 car could actually be that emergency lifeline. Oh, my car broke down, I have a, I have a junker I can

00:19:14.520 take for a week while that one gets repaired, or while I have to wait to save money, so that one

00:19:18.220 could get repaired. So I actually, I understand the hoarding a little bit, because it is a form of

00:19:22.460 safety, if you really think about it, right. And so I think, if you actually look at the data, like just

00:19:28.440 not getting into a financial tailspin, a hole, whatever you want to call it, is like the most

00:19:33.240 important thing in level one. Because over, you know, if you look at the data over half of the

00:19:37.560 financial distress events, like bankruptcies, delinquencies, etc, is committed by just 10%

00:19:43.580 of the US households. So it's a very small percentage of households that are getting caught

00:19:48.040 up in the same financial problems over and over again. And it's very difficult to get out once

00:19:52.200 you're in there. So the whole point is to avoid that as much as possible. So once again, goal in level

00:19:57.200 one is to get to safety. Yeah, I've seen that play out in my church congregation. There's a lot of

00:20:01.620 individuals who just have a hard time financially. And you see that like a messed up car, it just

00:20:08.320 disrupts their life completely, because they can't get to work, and then they end up getting fired.

00:20:13.080 And then in order to fix the car, they got to take out a payday loan, because they don't have

00:20:17.560 the emergency fund to pay for the repair. And so they've got this crazy loan with this insane

00:20:24.080 interest rate that just puts them more and more into a hole. And you got this great quote about

00:20:28.840 poverty from William Volman. It says, poverty is wretched subnormality of opportunity and

00:20:36.580 circumstances. Like, man, that's, that's true.

00:20:40.200 Exactly. I know, I love that quote from him. And I just think, you know, I didn't grow up in level

00:20:44.180 one, I would say, even though my parents declared bankruptcy, like twice before I was 18. I think

00:20:49.480 I was in level two. I mean, just from, you know, we had family with people we could rely on and stuff.

00:20:53.380 So I've never been in true poverty. But like, yeah, we just never had a lot of money going around.

00:20:56.820 So I kind of know what it's like to grow up like lower middle class to middle class, depending on

00:21:00.680 what time in my life.

00:21:02.660 Okay, so level one, this also sounds like where you should think more about your spending,

00:21:08.160 like this is when cutting spending would be the most useful strategy. If you're in level one.

00:21:14.180 I mean, yeah, if you can't, obviously, raising your income is the long term solution. But like,

00:21:17.800 when you're in a, you know, I think the tagline for that chapter in the book is

00:21:21.620 atypical results require atypical actions. And when you're in level one, that is not normal.

00:21:27.260 And so you need to get out of that. Of course, everyone that's everyone's quote default level.

00:21:31.020 And if you have an education, and you're like, Oh, I just graduated college, I'm making good money,

00:21:34.460 you're going to be out of level one before you know it, it's just a matter of like time. So that's

00:21:37.840 what happens for most people. And I would argue you're not even in level one, if you already have

00:21:41.080 a good education and everything. Like I, that's why I said, I've never been in level one,

00:21:44.360 though my net worth obviously was, you know, $0 when I graduated college.

00:21:47.940 So yeah, I think that's the thing to think about there.

00:21:51.680 All right. So I like that. When you're level one, your mental framework,

00:21:55.280 atypical results require atypical actions, you have to cut spending, and then think about ways

00:21:58.820 you can boost your income. I'm curious, like, what do you do? Like, let's say you're fine

00:22:03.740 financially, like, say you're level three, level two, but you got friends and family members

00:22:07.640 proving that level one, you see them struggling. In your experience, what can other people what can we

00:22:13.640 do to help people get out of level one? I mean, I think you have to first make sure that that person

00:22:20.300 wants to get out of that level, like they have a real desire. Because of course, like everyone

00:22:25.740 wants more money, like, everyone's like, Oh, of course, I want that. But like, if they're not going

00:22:30.120 to take any steps or actions to try and move in that direction, whether that's like, Oh, I'm trying

00:22:34.280 to raise my income, I'm trying to learn, get an education, I'm trying to, they're not doing a lot of

00:22:38.640 that stuff, then like, what you can do to help is be supportive and say, Hey, is there anything I

00:22:43.020 can do to help you? And of course, if they just, you know, Oh, just give me a bunch of money,

00:22:46.220 that's not going to really solve the problem. Because if they don't have the means to help

00:22:49.940 themselves at all, they're going to end up back in that spot eventually, right? You can give someone,

00:22:54.760 you know, here's five grand or 10 grand, even get them there. And if their income is not enough to

00:22:59.760 support themselves, they're just going to draw down on that 10 grand until they're back at level one

00:23:03.540 again, right? You know, so you have to, I think it's more about thinking about finding ways to help

00:23:08.620 them help themselves. But at the end of the day, they have to help themselves. You know, you can't

00:23:12.960 force someone to try and better themselves, they have to want to do it for themselves. And so

00:23:17.100 you'll notice, I guess, when I, you know, I've, you know, family members, friends and stuff like

00:23:21.960 this, who have been in this position. And there's a big difference between someone just asking for

00:23:25.720 money, and someone who's like, I need money, but I need it, because I'm trying to do all these

00:23:29.700 things to try and improve my life. And you'll know, it's more, you'll know it through the

00:23:32.940 relationship. So I think that's the kind of the big thing there is to strike that balance as best you can.

00:23:37.000 Yeah, I was talking about level two. So this is where you're making your net worth is 10,000 to

00:23:41.460 100,000. This is grocery freedom, you can buy the Dunkaroos without worrying about it. What are the

00:23:46.920 big challenges when you reach level two? Yeah, I think that the thing to think about in level two

00:23:53.240 is the trajectory you're on and what level that's going to get you to because there's two groups of

00:23:58.200 people in level two. There's people on level two who are going to probably be there most of their life,

00:24:02.860 where they might barely get into level three by the, you know, later in their life. And then

00:24:06.940 there's people in level two who are just there temporarily, they're making good money. And

00:24:09.880 they're, they're kind of on their way to deep into level three or level four. And I think the big

00:24:13.800 difference there is education and what skills you have. This is, you know, level two is the level where

00:24:18.160 getting those skills can really kind of change that you can imagine your your trajectory is like a slope

00:24:22.800 on a line, and that slope can be pushed upward, and change your income, your career, etc, based on that. So

00:24:29.120 it doesn't always have to be a college degree. But I think you need something that allows you to grow

00:24:32.560 your income in a big way, whether that's, you know, a skill that's very useful. I think, for

00:24:36.560 example, sales, if you're a good salesperson, you can make very good money, easily six figures. And

00:24:40.840 you know, there's some sales people out there that make, you know, seven figures or more at the higher

00:24:44.340 end, you know, they're selling a luxury good, like high end real estate, things like that. And so you

00:24:48.360 can make really a lot of money in sales. And that's something that AI is not going to be able to

00:24:52.140 replace. I don't think we're gonna have robot realtors or anything like that. So there are still skills

00:24:56.380 out there that you can learn, and you can make a lot of money that don't necessarily require a

00:25:00.180 degree, but they definitely require a lot of work. We're gonna take a quick break for your words from

00:25:05.920 our sponsors. And now back to the show. Okay, so level two, your goal is just like, figure out the

00:25:14.340 education, the training, the skill acquisition you need in order to make more money so that you can

00:25:19.160 accumulate more wealth. That's the key there. All right, let's talk about level three. So this is when

00:25:24.440 you move to 100,000 to 1 million in your net worth. What are the big stressors there when you reach

00:25:30.980 level three? I think the stressors are more about if you're overspending. And the reason I say that

00:25:37.480 because if you look at people, and I did, there's some data from the University of Michigan has something

00:25:43.600 called the panel study of income dynamics, which just looks at the same set of households over time.

00:25:47.900 So we can follow people's career trajectory, their income, all that are spending over time, we can

00:25:52.620 follow it. And in that data, I said, Okay, let's look at people in level three today. And look at

00:25:57.580 those that made it to level four, and compare it to the people that are in level three today that

00:26:01.980 stayed in level three. And so what are the differences between those two groups, like the

00:26:05.860 people that went from three to four, and the people that stayed in level three, let's say over a decade.

00:26:10.660 And so if you look at that information, the difference is income, that's a big piece of it. So those that

00:26:15.980 made it to level four generally earned more. But I think the bigger thing I noticed was the

00:26:20.000 spending, the people that stayed in level three over time spent almost as much money as the people

00:26:25.500 that made it to level four from level three. So the people that made it from to level four from level

00:26:30.860 three did spend a little bit more, but not that much more than the people that stayed in level three

00:26:35.500 over time. And those people that made it to level four at a much higher income. So it's like,

00:26:39.040 I think the issue the stressor in level three is that people are trying to do the keep up with the

00:26:42.860 Joneses thing, they're overspending on housing, cars, whatever to portray a certain lifestyle when they 0.86

00:26:48.300 don't necessarily have the money for it. And so they don't have the income for it. So I think

00:26:52.800 that's the thing to focus on is like, hey, you know, make sure I'm not overspending in this level.

00:26:57.420 Now, once again, I don't think cutting spending is the way to build long term wealth. I do think it

00:27:02.460 can be something especially on the big ticket items like housing in particular, I think is very

00:27:06.360 important, you have to think about your spending there. And then in terms of what to focus on in level

00:27:10.280 three, I think it's really about your income and specifically your income from investments. That's where

00:27:15.480 as you start to invest, by the time you have a portfolio in the six figure range,

00:27:19.620 that's throwing off real money. You know, if you have $10,000 invested, and you get a 10% return,

00:27:24.040 that's 1000 bucks, that's not really going to change your life. But by the time you know,

00:27:27.860 you have 100,000 invested or more, now it throws off that same 10% return throws off $10,000 is a

00:27:33.580 much more significant change in wealth. And so I think that's where you start to see, hey,

00:27:38.440 the flywheel really starts to grow in level three. And by level four, it gets even bigger. But I think

00:27:42.640 that's where you should focus, spend more time focusing on is investing in income producing

00:27:46.500 assets in level three. And your research, what's the average age for someone who's in level three?

00:27:53.040 So yeah, the median age in level three in the United States is 54 years old.

00:27:56.980 Okay. So it's still like, I say that's middle class, but it's also people who've been spending

00:28:02.080 their life, you know, buying their home, you know, saving the retirement account, etc. Like it

00:28:06.920 doesn't happen overnight. And just for reference, the 25th percentile age is 40. So that means one

00:28:14.020 in four households in level three are 40 or younger. So a lot of people can get to level three before

00:28:20.060 40, but it's still rare. It's only one in four people that get into that level are younger than

00:28:24.780 40. So something to keep in mind. Yeah. And so the tactic there is when you reach level three,

00:28:30.300 your focus should start being spent towards how can I have more of my income come from income

00:28:36.260 producing assets. So that's investments. And the mental framework there is just keep buying. That's

00:28:40.780 from your first book. Like just start socking away as much money as you can in your investments,

00:28:46.060 because that's going to add up over time. Yeah, exactly. And that's why it's the perfect

00:28:51.920 book for someone in level three going to level four, or even, you know, kind of level two going

00:28:57.080 into level three. But it's really made to shift your mindset from just, oh, I go and I save money.

00:29:02.580 I work and save money to, oh, I go and I save the money. I invest it in assets that then pay me

00:29:08.360 money. And then that money can be reinvested. And it just goes from there. All right. So let's move

00:29:13.240 to level four. This is when you get to 1 million to 10 million. That's a big range. But the point you

00:29:19.440 made, though, is, you know, once you go higher and higher up the wealth ladder, like an increase of

00:29:25.020 just one isn't going to be that big of a difference. Like if you have a million dollars and then you

00:29:29.340 increase your net worth by another million. I mean, that's a lot of money, but in the grand

00:29:33.700 scheme of things, it's like not that big of a jump, really. One of the things you talk about

00:29:38.180 in level four, this is the place where a lot of people, this is where they stop. This is where

00:29:42.320 they stop the trek up the wealth ladder. And to remind people, meeting age for this is like 62.

00:29:47.600 So this is like, you know, your end of your working career. And, you know, if you get to this range,

00:29:52.040 like you're probably, you know, you're good for retirement. Why do people get stuck on level four

00:29:56.300 though? Why don't they continue to go up the wealth ladder? They get stuck in level four because

00:30:00.640 the actions that get you into level four aren't the ones that get you out of level four. So there's

00:30:07.220 like this Marshall Goldsmith book called what got you here won't get you there. It's a career book.

00:30:11.720 It's about career strategy. Now you have to change your career strategy over time to like get promoted

00:30:15.440 and stuff. But I think it's the same idea. Like you need to change your strategy if you want to keep

00:30:20.540 climbing the wealth ladder. And once again, getting stuck in level four is not a problem necessarily. I think

00:30:25.340 there's a lot of people that like, great, I'm never going to get out of level four. It's not a

00:30:29.480 problem. Realize that, accept it, be happy. Like the simplest way I can say it. But if you do have

00:30:36.200 aspirations to go beyond that, you really are. And why we can get into the psychology of that. But

00:30:40.940 if you do, then you have to kind of change your strategy. And for most people that get into level

00:30:45.140 four, you can get into level four with a few things. You have a decent job, you know, making you good

00:30:50.180 money. You're saving that money. You're investing it and reinvesting all that income and enough time.

00:30:55.340 Right. So like job, you know, good job plus investing plus time. And you get to level four

00:31:02.060 in the United States. But to get to level five, which is 10 million plus, it's a whole nother

00:31:07.300 thing. You're going to basically have to either start a company and basically own all the equity

00:31:10.860 and sell it for a decent amount of money. Or you join a startup early, get a good amount of equity.

00:31:16.320 And that company sells for a lot of money. Right. You either own a small piece of something

00:31:20.340 that's very big or a big piece of something that's decently sized, let's say. So that's where

00:31:25.760 I think the difference is. And we can even run the math on this. I do this in the book where I'm like,

00:31:29.720 hey, let's say you like today you made it to a million dollars. And let's just say you have a

00:31:34.160 portfolio just to keep it very simple. You have a million dollar brokerage account that's earning

00:31:38.620 five percent a year and you're saving one hundred thousand dollars a year after tax. Like that's a

00:31:42.680 considerable amount of money. Assuming that's all true. How long would it take you to get to 10

00:31:47.720 million? The answer is 28 years. It's crazy. So if you imagine the typical person gets there,

00:31:53.300 let's say it's in their mid 50s or early 60s. Do you want to grind it out for three more decades

00:31:58.880 just to get to 10 million? No, you don't want to. You're not going to do that. Most no rational

00:32:03.040 person would do that. They would say, hey, I've done enough, you know, and they stop, you know,

00:32:07.220 even if you're saving 300K a year, which means you're probably making close to a million bucks,

00:32:11.180 you know, pre-tax everything. You know, you're saving 300K a year, earning five percent. You start

00:32:15.380 worth a million. It still takes you 17 years to get to 10 million. So the math is not friendly

00:32:20.300 to you once you get into level four. That's why I call it the no man's land on the wealth ladder,

00:32:24.740 because once you get in there, it's hard to get out. And then, you know, succession has that joke,

00:32:28.260 five to 10, five to 10 is a nightmare, right? Because it's true. Like you, there's no real

00:32:32.120 incentive to keep working because your income is not going to really move the needle anymore.

00:32:36.080 Your wealth is throwing off so much wealth on its own. So you're in this weird spot where you're like,

00:32:40.580 hey, you know, I don't know what to do here. And I think for most people, the rational response is,

00:32:44.760 hey, take your foot off the gas, enjoy life more. Do you like a type of coast fire thing? Find work

00:32:49.640 you just find enjoyable and not just for money and go from there and stop worrying about getting

00:32:54.400 to level four. Yeah. Be okay with level four. Level four sounds pretty awesome. You mentioned

00:32:58.180 coast fire. What is that? You wrote an article about that. What is coast fire for those who

00:33:01.940 aren't familiar with that phrase? Yeah. Sorry. I try not to use so much semantics,

00:33:06.040 but coast fire there's, you know, I'm assuming many of most of your audience sort of fire,

00:33:09.900 which, you know, financial independence, retire early. Coast fire, the idea there is you save up

00:33:16.620 just enough for your retirement. We're like, hey, I have enough money now where if we assume it grows

00:33:21.160 at a conservative rate, let's say you assume it grows at 4% a year. So you say between now and when

00:33:26.240 I retire, let's say you retire at 65. So I'm 35 now. I'll just use myself as an example. So I let's

00:33:31.500 say I have enough money now where I assume it grows at 4% a year between now and, you know,

00:33:36.120 when I'm 65, 30 years from now, I'm going to have X dollars. And then at that point I can then pull

00:33:41.260 from that money and use that money to live off in retirement. That means you've hit coast fire once

00:33:45.660 you don't need to save any more money for retirement. That's the point where coast fire lives.

00:33:50.640 And so does that mean you don't have to work anymore? No, because you still need to cover

00:33:54.780 your current consumption. Like that's not, you're not supposed to use your assets to cover your current

00:33:58.880 consumption. You're supposed to use any income you have to cover your current consumption,

00:34:02.320 but it means you don't have to save more for your future. That's kind of the big difference in

00:34:06.960 thinking here. And so I think coast fire is actually the exact place for it is level four

00:34:12.380 because people will get there and say, Hey, and especially if you get there like relatively

00:34:15.680 younger, like let's say in your forties or something, you might be like, Hey, you know,

00:34:18.960 this is a time for me to like, I can take my foot off the gas. I can chill out a little and I can

00:34:22.800 work on something that's maybe more meaningful to you, or maybe doesn't make you as much money.

00:34:26.460 And you don't have to worry about saving as much. You just need to cover your current expenses

00:34:29.840 and you know, the rest will take care of itself basically.

00:34:33.440 Yeah. Or I mean, even if you get there when you're in your sixties, so you have a long,

00:34:37.640 productive working life, you saved for retirement and you don't have to work full time anymore,

00:34:43.280 but you could still get a part-time job if you wanted in your sixties. Like my dad, he did that.

00:34:48.060 He had a government job, forced retirement in his early fifties because he was in law enforcement

00:34:51.800 and he's got a pension, you know, he didn't have to work, but he kept working. Like he took contract work

00:34:56.860 and he's still working. He's like 70, he's almost, I think he's like 75 still works and he enjoys it.

00:35:02.140 But I think it covers like their, my parents' consumptive costs. Yeah, that's great. That's

00:35:06.000 how I think a lot of people should do it. And I think, you know, we always look at work as like,

00:35:09.460 Oh, wouldn't it be great if I never had to work again? Like people idealize that at the same time,

00:35:14.520 I think a life without any work or any work doesn't necessarily have to mean paid work by the way,

00:35:19.460 but a life without any work I think is a difficult life if you do it for a very long time. I think

00:35:24.620 it's very tough, you know, mentally to do that. Of course you may reach a point in your life where

00:35:29.080 you're like, you know what? I'm happy to do that. And some people are okay with it, but I think a

00:35:31.820 lot of people want to have some sort of purpose or something they're working on. And so, you know,

00:35:36.340 I've looked at all the research and the data on this and overwhelmingly people do find a lot of

00:35:40.960 positive benefits from work. Now, of course, if you're in a job you hate, you want to get out of

00:35:45.140 it as quickly as you can. But you know, for most people, you want to do something you enjoy

00:35:48.960 working on what, and whether that's a creative endeavor, whether that's volunteering,

00:35:52.800 like the options are very numerous. And so it's just figuring out what you want and then

00:35:57.000 building your life backwards from that. Okay. And so level four, again, this is the 1 million to

00:36:02.320 10 million range. This is achievable through increasing your income, through acquiring new

00:36:07.460 skills, increasing your education, asking for raises, investing, and then just time, like the

00:36:12.640 time factor. I think that's an- Time's a big piece of this. Once again, the median age is 62.

00:36:16.260 Yeah. I think that's an important thing to feel. If you're like in your 30s or 40s right now,

00:36:19.640 you're like, I'm not in level four. It's like, okay, you're fine. You've got 20 years

00:36:23.240 to make that happen. Yeah. Just for the record, you know, less than 1% of households in their 20s

00:36:29.480 are in level four. Less than 5% of households in the 30s are in level four. So only like one in 20

00:36:36.180 people in their 30s are in level four. 15% of people in their 40s are in level four and et cetera.

00:36:42.500 And this is in the book. It breaks down by age cohort, by decade 20 to 29, 30 to 39, et cetera.

00:36:47.880 It shows the percentage of people within that cohort that are in each wealth level.

00:36:51.700 What are the biggest risks or stressors once you reach level four, you think?

00:36:56.460 I think the money stressors in level four are similar to level five. And I think

00:37:00.400 the stress is usually from a lack of diversification. You know, it's like concentration.

00:37:06.080 That's the issue as really the only way to lose wealth quickly. Obviously, you know,

00:37:10.140 there's divorce and other things outside factors. But if we're just talking pure

00:37:13.580 monetary factors, it's really going to be concentration. So it's like, how is your wealth

00:37:18.260 allocated? And how concentrated are you? Because the more concentrated you are, the more likely

00:37:23.160 you could lose wealth quickly. Of course, that's also how you can build wealth quickly. But

00:37:27.320 it's a double edged sword. And I think realizing that it's a double edged sword is what's important

00:37:31.400 here.

00:37:31.660 All right. So diversify.

00:37:33.320 Yeah, yeah.

00:37:33.800 That's the key there. And then, yeah, move to level five. It's like you said, it's what got

00:37:37.900 you to level four is not going to get you to level five. You're going to have to do something

00:37:41.320 radically different. And for a lot of people, that might not be rational. What causes people to like,

00:37:47.020 they reach level four, they've got the vacation money, they can like, I can just take a nice

00:37:51.580 vacation whenever I want. Life's good. Why would someone want to make that leap to level five based

00:37:57.780 on your experience interacting with people who've made that leap?

00:38:01.100 There could be a lot of different reasons. One, some people want to create really big generational

00:38:06.060 wealth for their families. Some people want to fly private. Some like the ego boost of being

00:38:11.320 like, oh, I'm, I'm not just upper middle class, I'm upper class, right? I'm really wealthy. You

00:38:15.060 know, I can go and buy supercars and all these other things that you see the stereotypically

00:38:19.240 rich people do, which funny enough, you know, not most rich people don't even own supercars,

00:38:24.180 right? People with that level of wealth, they don't spend money like that. So it's only really

00:38:27.480 the media's depiction of it that that makes it look like that. So why do people do I mean,

00:38:31.700 in the book, I say, you know, the most expensive thing some people own is their ego. So if the

00:38:35.800 most expensive thing some people own is their ego, that's why, you know, that's the answer,

00:38:39.060 the short answer for you. Yeah. So we talked about rungs one through five on the wealth ladder

00:38:43.760 rungs six is a hundred million dollars plus, and that's going to apply to just a very small

00:38:50.160 amount of people. There's only 11,000 households in the U S who are on, who are on rungs six. And

00:38:56.380 these are basically people who've sold their businesses for huge amounts of money or, you

00:39:00.720 know, like athletes or entertainers, but even very few of those, those people reach that level.

00:39:06.140 So let's talk about mobility up and down the wealth ladder. Let's talk about how often people

00:39:12.440 fall down the wealth ladder. Let's say someone gets to level four. How often do they stay there?

00:39:18.340 It's usually pretty rare how people fall down. So for example, over a 10 year period,

00:39:22.560 11% of households fell down one wealth level and 2% of households fell down two wealth levels.

00:39:29.340 This is based on the historical data where I'm following the same set of households over time.

00:39:32.520 We can actually control for by level. And it's actually a little bit more interesting

00:39:36.200 because you can say, okay, Hey, if I started in this wealth level, what's the probability

00:39:40.180 I'm going to be in another wealth level in the future. So for example, going to what you just

00:39:44.000 asked, if you start in level four, after 10 years, there's a 23% chance you'll be in level three.

00:39:50.460 And there's less than a 1% chance you'll be in level two or one. So it's very unlikely 72% of

00:39:56.440 households that started in level four are still in level four after 10 years. And that's like the

00:40:01.240 highest out there. And we can even, we can look over 20 years and it's roughly the same. That's

00:40:05.140 why after 20 years, if you start in level four, there's a 64% of those households are still in

00:40:10.820 level four after 20 years, only 8% make it up the wealth ladder to level five. So it's very rare to

00:40:17.100 see that kind of mobility switching, but it does happen. What about mobility going up on those lower

00:40:21.820 rungs, like from one to two to three, is that still happening? I mean, you hear all this talk about

00:40:26.200 like the American dream is dead. There's no income mobility or wealth mobility. What does

00:40:31.100 the research say about that? So this research is historical. So it's going backward looking from

00:40:35.880 like the 1980s when we first had the wealth data through 2021. So the question is, is it still

00:40:40.100 happening now and will it happen in the future is remains to be seen. But in general, like there is

00:40:45.180 mobility. So for example, let's just look over 10 years. If you start in level one, after 10 years,

00:40:51.120 there's a 54% chance you will be out of level one, there's a 30% chance you're going to be in level

00:40:56.240 two, there's a 22% chance you'll be in level three, etc. So there's a decent chance that you can kind

00:41:01.880 of get out of level one and get higher on the wealth ladder. You know, 46% of households stay

00:41:06.160 in level one after 10 years, but the rest don't. So there is mobility. And there's some healthy

00:41:11.400 mobility. And it's just I think a lot of its time as well, because people get older. And so they

00:41:14.660 save money and they age out. Let's talk about mobility across generations. There's that phrase,

00:41:20.420 shirt sleeves to shirt sleeves and three generations. So yeah, there's a generation

00:41:26.220 that got a lot of wealth. And then by the third generation, that generation, like the money's

00:41:31.600 just gone. There's actually I think there's a book that came out a couple years ago, like

00:41:35.000 where all the billionaires, these guys look at the missing billionaires, these guys look to the

00:41:40.320 Vanderbilt family. So like Vanderbilt, he left an inheritance, I think it's like $100 million.

00:41:44.900 It's almost like $3 billion in today's money. But if you look at the descendants, like there's

00:41:50.060 like no more billionaires in the Vanderbilt family. What goes on there? Like, why is it

00:41:54.480 so hard to maintain a family on a rung in the wealth ladder?

00:42:01.240 Well, I think there's a lot of reasons why this is I mean, I can talk about the Vanderbilt

00:42:04.540 specifically, or just like, like level six wealth, let's just call it, and then compare

00:42:09.520 it to other wealth levels. But in level six, and most people that have that much wealth,

00:42:13.540 it's usually concentrated. And so unless they diversify, it's very unlikely that that's going

00:42:18.100 to last. This is why I think Bill Gates and Warren Buffett are so smart, because of all

00:42:22.440 the billionaires out there, they may not be the richest on the list, but they're the most

00:42:25.620 diversified. They're the ones that are least likely to see their wealth just, you know,

00:42:29.860 disappear or see a massive change in their wealth, because they're very diversified. Like

00:42:34.220 Bill Gates is the largest private landowner in the United States. He owns more US land than

00:42:38.740 any other individual. So he owns a lot of different assets and things that are going to allow

00:42:44.140 him to have wealth for multiple generations. And I think if you're like an Elon Musk, even though

00:42:48.220 he's richer on paper, if something happens to Tesla, that's like the majority of his wealth. So he

00:42:53.060 could easily fall below Gates at any moment. And so that's a piece of it. I think, if you look at

00:42:58.880 like the growth of families, like they're growing faster than the wealth is. So like, let's say you

00:43:03.620 have two kids, now they have two spouses, that's now four people, and then each of them have two

00:43:08.040 kids, right? And so now, four people is now eight people. And then those kids get spouses,

00:43:12.960 and they have, right? You can just see how the, it's growing at such a fast pace and your wealth

00:43:17.460 is not keeping up. So it makes sense why the Vanderbilts couldn't do it at just some point,

00:43:21.000 like the math doesn't make sense, you know? So that's another piece of it. But I think just,

00:43:25.360 if we're talking about lower wealth levels, like I think succeeding generations can find it difficult

00:43:29.240 to stay in the same wealth levels, their parents, because like economic conditions change,

00:43:34.320 they may not want to work as hard. Like, oh, I don't want to work like my parents did to get to that

00:43:37.720 level. I may just realize, you know, I don't need to work as hard because I know I'm gonna get

00:43:40.740 an inheritance so I can just, you know, chill a little bit more. They may have different feelings

00:43:44.180 about money. Like, all these are very case-specific, but just a few reasons that make sense to me.

00:43:48.660 Okay. So we've talked about the different rungs of the wealth ladder. They all have their

00:43:53.240 opportunities and their risks. How do you figure out, like, where you're fine at? What other things

00:43:59.300 should you consider besides your net worth in deciding, you know, I'm okay where I am at

00:44:05.320 financially? What are things should you consider in order to figure out if you have a rich life or

00:44:09.560 not? I think it really depends what you want out of life. I mean, this is the most difficult part

00:44:14.660 of, you know, being a human in modern civilization is like, we've been debating this idea since the

00:44:19.980 time of the ancient Greeks. You know, it's like why, you know, know thyself is such an important

00:44:24.120 concept. And it's because you need to know what you really want. And so once you can solve for that,

00:44:29.740 then it's much easier to figure out, okay, well, how much wealth do I need to support that? Oh,

00:44:34.600 I want to, you know, I can imagine your dream life or whatever it is, like how much wealth do

00:44:38.380 you need to support that? Because once you know what you want, then you can figure out all those

00:44:42.700 things. And for most people, I think it's lower than they think. I mean, it's always easy to justify

00:44:47.480 needing more, but yeah, you have to kind of get past that or figure out what's the things that

00:44:51.460 really matter. So it's like your time, how much free time do you have or time you can use time

00:44:55.440 wealth is what we call it. You can think of mental wealth. You can think of physical wealth. You can

00:44:59.960 think of, you know, social wealth, all these different things, right? Sahil Bloom has a book

00:45:04.180 called the five types of wealth where he talks about all these. And I use that as a framework

00:45:07.120 in the wealth ladder to think about these types of, you know, a rich life and what does that mean?

00:45:11.780 And it also depends where you live too. Like I said, you know, 1 million to 10 million is upper

00:45:16.060 middle class. Well, it kind of depends where you live. You know, if you've got 8 million bucks and

00:45:19.540 you're in a low cost of living area, you're upper class, you're actually very upper class. But if

00:45:23.260 you're in New York city, maybe not, you know? So it really depends where you live, the type of

00:45:27.720 lifestyle you want, et cetera. So that's the, those are the things I would say to,

00:45:30.300 to take into account. Yeah. Whenever I go to San Francisco, like, man,

00:45:35.140 this place is beautiful. I could see myself living here. And then you look at the cost of

00:45:38.940 housing and you're like, no, I can see why housing is so expensive because it's so beautiful,

00:45:42.980 but I'll stay in Tulsa next to the Arkansas river and take the sunsets, I guess, in Oklahoma.

00:45:48.200 Well, Nick, this has been a great conversation. Where can people go to learn more about the book

00:45:52.000 and your work? Oh yeah. So you can find the book everywhere books are sold, Amazon,

00:45:55.980 Barnes and Noble bookshop.org, et cetera. And you can find out more about me. I write every week at

00:46:01.460 of dollarsanddata.com. You can also find me on Twitter slash X at, at dollarsanddata. I'm on

00:46:07.380 Instagram at Nick Majuli, and then I'm on LinkedIn at Nick Majuli. I answer every DM. So if you have any

00:46:12.220 questions or anything, feel free to DM me. Yeah. And of dollars and data plug for that. It's one of my

00:46:16.040 favorite financial blogs out there. It's a lot of fun to read. Well, Nick, thanks so much time.

00:46:22.540 It's been a pleasure. Thanks for having me on again. Appreciate it, Brett.

00:46:26.460 My guest here is Nick Majuli. He's the author of the book, The Wealth Ladder. It's available on

00:46:29.920 amazon.com and bookstores everywhere. You can find more information about his work at his website

00:46:33.700 of dollarsanddata.com. Also check out our show notes at aom.is slash wealth ladder. We find links

00:46:38.860 to resources and we delve deeper into this topic. Well, that wraps up another edition of the AOM

00:46:50.680 podcast. Make sure to check out our website at artofmanage.com. We find our podcast archives.

00:46:54.580 And while you're there, sign up for our newsletter. We got a free newsletter on

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00:47:14.900 it's Brett McKay. Remind you how to listen to the AOM podcast, but put what you've heard into

00:47:18.600 action.

The Art of Manliness - July 22, 2025

The 6 Levels of Wealth and How to Reach Them

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