🪜 Moving Up the Wealth Ladder (and Why It Matters)

Most people spend their lives trying to get rich, but they rarely ask a more important question: what level of wealth am I actually at right now—and what’s the smartest move from here?

That’s the idea behind The Wealth Ladder, a new book by Nick Maggiulli (which we dive deep into in Ep #230) that breaks down the six levels of financial wealth and gives you a roadmap for how to move up. Whether you’re living paycheck to paycheck or sitting on millions, the game changes depending on your level—and so should your strategy.

Understanding where you are on the Wealth Ladder can help you:

• Focus on the right financial goal (not someone else’s).
• Avoid costly mistakes that trap people at the same level for years.
• Make smarter decisions about spending, investing, and earning.

Here’s a breakdown of each level—including what it looks like, the risks involved, and most importantly, how to level up. 

🔹 Level 1: <$10K – Atypical Results Require Atypical Actions

This level is defined by financial fragility. A small misfortune—like a car breaking down—can change everything. Most of your problems at this stage are likely money problems, often causing stress and uncertainty.

⬆️ How to level up: The absolute strongest relationship in personal finance is income. Your primary goal here is to focus on growing your income.

• Get any source of legal income—speed matters more than fit at this stage.
• Cut spending where you can (but don’t rely on budgeting alone).
• Avoid taking on new debt unless it directly leads to future income.
• Build a mini emergency fund ($1K–$2K).

⚠️ Big Risk: Getting stuck in a cycle of debt (like credit card debt or student loans without expected higher income) is a major risk. At this level, one financial shock can wipe you out. 

🔹 Level 2: $10K to $100K – Learn Today, Earn Forever

You’ve escaped the paycheck-to-paycheck cycle and now have some financial footing. The focus shifts to earning more and beginning to invest.

🔓 Unlocked Freedom: You achieve "grocery freedom," meaning you can buy what you want at the grocery store without worrying about the cost

⬆️ How to level up: Focus on working smarter, not just harder. This stage is where investing starts to become more important.

• Invest aggressively (mostly stocks, tax-advantaged accounts first).
• Build valuable career or business skills—this is the highest ROI move.
• Avoid lifestyle creep. Don’t start spending like you’re Level 3 yet.

⚠️ Big Risks: Failing to invest in skill-building can keep you stuck. Spending too much relative to your income and trying to “optimize” before you’ve earned it can prevent you from progressing.

🔹 Level 3: $100K to $1M – Just Keep Buying

At this stage, you’ve built a strong base. You’re earning more, saving more, and your capital can finally work with your labor.

🔓 Unlocked Freedom: You gain "restaurant freedom," allowing you to eat what you want at restaurants without significant financial stress.

⬆️ How to level up: Continue to focus on investing in income-producing assets. A strategy like "Just Keep Buying" (which we discuss in Ep #59) becomes highly relevant. 

• Stay invested and keep contributing regularly.
• Explore side hustles or business ideas to boost your income.
• Use Nick’s 0.01% Rule to only pursue earning opportunities likely to increase your net worth by ≥1%.

⚠️ Big Risk: Overspending—especially on big-ticket items like housing. Many people drop back to Level 2 from here.

🔹 Level 4: $1M to $10M – What Got You Here Won’t Get You There

You might be at Coast FIRE or working by choice, not necessity. However, this is also where many get stuck. Another million dollars won’t drastically change your day-to-day life.

🔓 Unlocked Freedom: You’ve unlocked serious optionality, but this stage is often dubbed "travel freedom." You can travel where you want, when you want.

⬆️ How to level up: The strategies that got you to Level 4 (a high-paying job, decent investments, and a good savings rate) are unlikely to get you to Level 5. To break out, you need to do something completely different.

• Focus on preserving and optimizing wealth: taxes, diversification, liquidity.
• Be careful with illiquid or complex investments.
• Start protecting your time and energy more than your money.

⚠️ Big Risks: Lifestyle creep can outpace your wealth growth, and speculative investments can be a trap. Starting a business that simply becomes "another job" without significant upside is also a risk. 

🔹 Level 5: $10M to $100M – Only the Paranoid Survive

At this stage, your problems are far less likely to be money problems. This level requires a business or major equity win and is rarely reached through salary and savings alone.

🔓 Unlocked Freedom: You achieve "house freedom," meaning you can afford your dream home with little impact on your overall finances

⬆️ How to level up: The goal here is to scale an existing business or consider selling successful businesses and starting new ones.

• Lean into scalable ventures, equity ownership, or entrepreneurship.
• Think like a builder, not a saver.

⚠️ Big Risks: You’re playing a bigger game, and the swings are bigger too, where more wealth beyond a certain point can lead to decreased mental health due to overwork and high-risk investments. Sacrifices, like long hours and time away from family, can damage relationships.

🔹 Level 6: $100M+ – Legacy = Action * Wealth

Not a lot of people get to this level. Here, money is no longer the goal—it’s a tool. This level emphasizes considering your legacy, which can be summarized by the formula: Legacy = Action * Wealth.

🔓 Unlocked Freedom: This is "impact freedom," where you have the financial capacity to make a profound impact on the lives of others through philanthropy or acquiring businesses.

⬆️ How to level up: The primary focus shifts from accumulating wealth to protecting what you have. 

• Invest in non-monetary aspects of life, such as relationships, friendships, and health.

⚠️ Big Risks: Includes divorce, lawsuits, changing motivations, and undue risk-taking. There's also the psychological pitfall of "relative deprivation," where encountering even wealthier individuals can make you feel less accomplished.

💡 Remember, Wealth Isn’t Just Financial

While the Wealth Ladder focuses on financial wealth, it's crucial to understand that financial wealth is a multiplier of every other kind of wealth you have. If you have no other forms of wealth (there are 5), more money won't make a difference. As you climb the financial ladder, money solves fewer and fewer of your problems. 

1. Financial Wealth – Your net worth and liquidity.
2. Social Wealth – The quality of your relationships.
3. Mental Wealth – Your peace of mind and emotional well-being.
4. Physical Wealth – Your health and physical capacity.
5. Time Wealth – The ability to control your schedule.

Even if you never reach Level 6 financially, building across all five can lead to a rich, fulfilling life. (For more on this, check out Ep #213 with Sahil Bloom).

🕒 How Long Does It Take to Climb the Ladder?

Despite the stories online, wealth takes time. The median age of someone in Level 4 ($1M–$10M) is 62. Fewer than 25% of millionaire households are under 50. Most people move up the Wealth Ladder gradually—about 30% of those in Level 1 reach Level 2 in a decade, and just 17.5% in Level 3 reach Level 4 over the same time.

It’s not about racing to the top—but improving your life with each step. And knowing what level you're in helps you play the right game, avoid burnout, and stop comparing yourself to people on a different rung. As Nick points out, the best parts of life often have nothing to do with money.

If you enjoyed reading this, I'm sure you'll love Nick's book The Wealth Ladder (or you can listen to Ep #230). You can also find more of Nick's insights and data-driven articles at his blog, Of Dollars And Data.

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