A friend passed me this article thinking I’d enjoy it, and she was dead right so I now pass it onto you!
Climbing the Wealth Ladder by Nick Maggiulli
If you’re wondering why you treat money differently now than you did back in the day, this is the article for you :) Especially those who have gone UP the ladder over the years!
If I gave you $100, would that change your life? What about $100,000? How about $100 million? Your answer will depend on many things including age, family situation, and your current net worth. More importantly though, how you change your behavior after receiving such money can tell you a lot about your current financial standing.
He breaks down 6 different levels of wealth and how your habits might have changed going up them, while referencing some classic Jay-Z lyrics for good measure (“What’s fifty grand to a mother****er like me? Can you please remind me?”)
Can you pinpoint where you stand?
- Level 1: Paycheck-to-paycheck — where you’re conscious of every dollar you spend, especially when holding crippling debt
This was me up until my mid-20s when I found personal finance blogs and started getting my act together. Was never in crippling debt, thankfully, but def. living paycheck to paycheck while trying to live The Good Life ;)
- Level 2: Grocery freedom — when specific grocery item costs don’t impact your finances as much anymore
Reached this level around the $300k-$400k net worth mark (2013), when I started feeling more secure and not paying attention to every last penny anymore… Even though ironically that was what GOT US to this point to begin with, haha… (gotta live a little though, right? :))
- Level 3: Restaurant freedom — when you can eat what you want at restaurants without caring about the costs!
A few years later we hit this level (right around the $500k mark), and it’s exactly where we still are today :) I don’t know if we’ll ever make it to Levels 4-6, but then again I never imagined being at this point either so who knows?! All I can say is that ordering what you want based on your tummy vs your bank account is one of the best perks money can buy you… And if that’s the last one I ever get I am perfectly fine with that!!
- Level 4: Travel freedom — when you can travel how, when, and where you want
I’m not sure what your net worth would have to be to get to this point, but it sure would take a lot to beat out the frugalness in most of us ;) The most damage you can do at a restaurant is a couple of hundred, but for travel we’re talking thousands depending on how large your family is! Seems like a big jump from Level 4 that I don’t anticipate hitting anytime soon… (or ever)
- Level 5: House freedom — when you can afford your dream home
Another nicety if you can manage to pull it off! I wouldn’t need too much in this department as my dream home is based more on *location* than *size* ($1 MIL would prob do the trick), but similar to the travel level I don’t know if I’d be able to stomach it even if I tried… Though I don’t mind finding out one day ;)
- Level 6: Philanthropic freedom — when you can give away money that has a profound impact on others
The ultimate level! Where people like Bill Gates and Warren Buffett lie! Of course, even a few dollars can make a difference in some people’s lives (which is why I challenge myself to still give as often as I can!), but to affect large swaths of people like that it really takes some serious dough… (and smarts). If one of you ever make it this far I hope you’ll tell me so I can quote you for a testimonial on this blog ;)
What does this all mean at the end of the day, though?! Nothing much, grand scheme-wise, but it does help you make more sense of things when you catch yourself spending differently than you did back in the day…
Nick goes on to pinpoint the marginal impact (and price points) of decisions based on the level you’re at, and it’s an interesting thing to consider as you move along the chain here…
- Level 1. Paycheck-to-paycheck: $0-$0.99 per decision
- Level 2. Grocery freedom: $1-$9 per decision
- Level 3. Restaurant freedom: $10-$99 per decision
- Level 4. Travel freedom: $100-$999 per decision
- Level 5. House freedom: $1,000-$9,999 per decision
- Level 6. Philanthropic freedom: $10,000+ per decision.
Here’s the article again that goes into it all much more eloquently than I do :)
Thanks for putting it out there, Nick!
Anyone else relate to some of these levels? Anyone hit the epic 4-6 range?!
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!