Climbing the wealth ladder

[pjigar]

I seem to be at wealth level 4.

I could afford a dream house, but then I would worry about the other spending.

I'll keep the "good enough" house and live large on the rest of the stuff -

Funny you say this. The exact same thought came to my mind. I can care less about how much we spend on dream house but do care about vacation and other big ticket item prices!

 

[karen1972]

Its definitely interesting way to look at wealth and using just the price ranges as outlined I think its fairly accurate, though his examples for me don't work. Clearly they have never tried the $36/lb cheese or done charity dinners at $150/pp, so for me grocery and restaurant choices need to move up 1 level.

 

[Rianne]

Spending psychology is more complicated than 5 or 6 levels of NW. DH will spend $30 on a bottle of wine but will balk over grapes in the grocery story if they're $2.29 as opposed to $1.99/lb. I think it depends on what's important to you. I drive by houses that are cracker box sizes, old roofs, yards full of leaves and gravel driveways and a Lexus parked there. Just as a grocery store cashier will have $50 nails.
CC debt might be $10K and no thought to a 2 week Cancun vacation.

 

[Another Reader]

How I got to the current wealth level was by paying attention to ALL the decisions at every level. Today I don't pay as much attention to the Level 1 decisions, but I do pay attention to the Level 2 decisions, as my gripe about the B of A ACH fee demonstrates.

I completely disagree with the statement that "the best way to climb the wealth ladder is to spend money according to your level." No, the best way to climb the wealth ladder is to pay attention to most of the decisions described and make more expensive choices only when they bring real value to your life. Your wealth will grow faster and you won't feel deprived.

 

[Andre1969]

Like some of the earlier posters, I'm a bit conflicted on these levels. I'm not worried about the house, so much. I could pay it off if I really wanted to. But, I'm still mindful about spending needlessly, blowing too much money on food, fancy trips, etc. I guess I just need to see the value in it, no matter how much, or little, it costs.

 

[Sojourner]

According to the article, I'm at Level 4 (between $1MM and $10MM net worth), but it also says that at this level I should have "travel freedom".

Level 4. Travel freedom: You travel when you want, how you want, and stay where you want.

I certainly don't feel (or operate) like I have unfettered freedom to travel how I want and stay where I want. If I did, I would always fly first class and always stay in the finest, most luxurious hotels and resorts. If I were to start doing that, I'm pretty sure the incremental level of spending required on a per-trip basis would be more than .01% of my net worth. Heck, just upgrading from a transatlantic basic economy airfare (say, $1000) to first class (say, $3500) would be more than six times the .01% referenced in the article, and that's just for one part of the travel budget for a big overseas trip.

If I were at the very upper end of the Level 4 range, with a NW of around $10MM, then I could see myself not worrying too much about routinely upgrading to first class flights and 5-star hotels, but I think it's quite a stretch to say that someone with a $1-2MM net worth would (or should) operate in this manner.

 

[GravitySucks]

Silly article.
As said above, $50k to someone with $1M doesn't fit the same as the step to $10m.
Do like the use of the Jay-Z scale as a jump off point though.
I find my spending habits silly. I'm fairly frugal at the grocery store- watching every penny, but not as much at resturaunts. I travel on the cheap, but do so quite often.
Here's a fun one:
Went to the local pub for trivia night and got there 10 minutes early before happy hour ended. So I order the $4 draft because it was discounted to $3.25. But the rest of the evening drank my favorite $6 pint IPAs because happy hour was over. Being Christmas I left the bartenders $30 on top of the regular tip. Having the discounted beer that's not my favorite - why would I do that? But I do it every time I'm early!

 

[davebarnes]

Back to original level 4.
https://www.wsj.com/articles/for-american-homebuyers-paris-has-a-certain-je-ne-sais-quoi-11577285774
"For American Homebuyers, Paris Has a Certain Je Ne Sais Quoi
U.S. buyers are flocking to France’s capital city and fueling its real-estate market
...
For most of that time, Mr. Taylor, 65, and his wife, 64, stayed at the Hôtel Plaza Athénée. But in May 2017, they bought a three-bedroom, two-bathroom apartment for €3.6 million (now $4 million) and now go to Paris at least four times a year. “There is nothing like having your own place,” he says."

 

[NW-Bound]

I don't know how high I am on the wealth ladder, but I am comfortable where I am.

I do not mind climbing one more rung if that is possible.

But I certainly do not want to fall off the ladder, and will invest and spend accordingly.

It's a good thing I do not have expensive habits or tastes.

 

[NW-Bound]

Back to original level 4.
https://www.wsj.com/articles/for-american-homebuyers-paris-has-a-certain-je-ne-sais-quoi-11577285774
"For American Homebuyers, Paris Has a Certain Je Ne Sais Quoi
U.S. buyers are flocking to France’s capital city and fueling its real-estate market
...
For most of that time, Mr. Taylor, 65, and his wife, 64, stayed at the Hôtel Plaza Athénée. But in May 2017, they bought a three-bedroom, two-bathroom apartment for €3.6 million (now $4 million) and now go to Paris at least four times a year. “There is nothing like having your own place,” he says."

It's too bad the Concorde is no longer flying for them to make it there and back quickly, in case they want to go there just for a weekend.

 

[RobbieB]

I don't know how high I am on the wealth ladder, but I am comfortable where I am.

It's a good thing I do not have expensive habits or tastes.

It's good to be comfy. But you do have expensive tastes, you have 2 houses. Consider the amount of first class airfare, deluxe hotels, caviar, lobster and Jamon Iberico you can buy with a house.

 

[moneymaker]

Spending psychology is more complicated than 5 or 6 levels of NW. DH will spend $30 on a bottle of wine but will balk over grapes in the grocery story if they're $2.29 as opposed to $1.99/lb. I think it depends on what's important to you. I drive by houses that are cracker box sizes, old roofs, yards full of leaves and gravel driveways and a Lexus parked there. Just as a grocery store cashier will have $50 nails.
CC debt might be $10K and no thought to a 2 week Cancun vacation.

Exactly! It’s what is important to you. I can spend $10.99 on a 6 pack of beer all day long or $8.99 for a pint of good beer at a restaurant, but a fruit tray for $10.99 is ridiculous and so is chips and salsa appetizer for $8.99! LOL. Point though, I’ll cut up my own fruit but I can’t brew a good beer.

The levels are a good generality though.

 

[street]

It's good to be comfy. But you do have expensive tastes, you have 2 houses. Consider the amount of first class airfare, deluxe hotels, caviar, lobster and Jamon Iberico you can buy with a house.

Hey, RobbieB don't let NW-Bound fool ya brother, he's got it! LOL

 

[RobbieB]

Yup. Everyone spends according to their own priorities. Splurge or scrimp according to taste.

 

[NW-Bound]

I can only eat and drink so much. And while traveling, I prefer Airbnb or agriturismo in rural villages or the surburbs rather than deluxe hotels, and eat in the joints that the locals frequent.

What I do not mind having is a waterfront home on Bainbridge Island, but that would take a big bite out of my stash.

PS. Speaking of eating/drinking, I step on the scale daily. Have not exceeded a BMI of 24 in several years.

 

[bigcmagor]

Speaking of eating/drinking, I step on the scale daily. Have not exceeded a BMI of 24 in several years.

Seems I've been climbing the BMI ladder! I don't expect to be at 24 again until partially through the cremation process.

 

[audreyh1]

Level 3 for sure.

Levels 4 - not fully as we spend quite a bit on travel, don’t sweat the hotels paying up happily for nice accommodations, and fly first class when we find a good deal, but I can’t say we travel as much as we want whenever we want. We certainly could spend way way more on hotels and airfare but choose not to blow the budget. We have other constraints/obligations limiting our travel not mention that we don’t want to wear ourselves out. So we are still value conscious on our travel, even though we have upgraded luxury level significantly over the years.

 

[NW-Bound]

The levels of wealth defined in the OP article are ambiguous.

Level 4. Travel freedom: You travel when you want, how you want, and stay where you want.

What if I want to travel in a yacht? Forget about owning one. The operating costs of a yacht run more than $1M a year, and that is not even for the super yacht. Even chartering one may run $100K/week.

Consider even the lower level.

Level 3. Restaurant freedom: You eat what you want at restaurants regardless of the cost.

There are many nice restaurants with a prix fixe menu of $500-1000/person. Splurging there is not outside the budget of many people here for special occasions. But would you mind paying $9000 for a special pizza at a restaurant in Salerno? That will not bankrupt you, but do you want to pay that money to see what goes into that pizza to make it cost so much?

 

[timemoveson]

The article is too relative to be useful for me, e.g. does the ability to “spend frivolously on vacations” include a full year at the Four Seasons? If so, I’m not “Level Four.” I prefer Radical Personal Finance podcaster Joshua Sheets’ levels:


Stage 1 – Financial Solvency. You can support yourself, without help or handouts from others, and you’re current on your bills.

(Many people think that financial management stops at Stage 1.)

Stage 2 – Financial Stability. You can support yourself, your bills are current, and you hold some savings.

Stage 3 – Debt Freedom. You’re debt-free, in addition to the points above. It’s your choice whether or not you want to include your mortgage within this definition.

Stage 4 – Financial Security. You have enough investment income to cover basic, bare-bones living costs.

Stage 5 – Financial Independence. You have enough investment income to cover your current lifestyle.

Stage 6 – Financial Freedom. – You have enough investment income to cover BIG dreams and upgrade your lifestyle.

Stage 7 – Financial Abundance. – You have enough investment income that you cannot possibly spend this money. Vast amounts of your money will outlive you, and your focus is wise stewardship of this wealth so that you can leave a beautiful legacy.

Thanks for the above list. It's quite good.

I'm approaching level 7 and hoping to nail it as my kids come fully of age over the next few years.

My favourite similar thing is by the very astute Morgan Housel:

https://www.collaborativefund.com/blog/the-spectrum-of-financial-dependence-and-independence/

 

[Mdlerth]

I am the black sheep in the FIRE meadow

My priorities must be screwed up. To me, the Dream House is far more important and attainable (since we already have it) than a vacation.

Level 4. Travel freedom: You travel when you want, how you want, and stay where you want.

I will never reach Level 4 no matter how much money I have. I only travel when I don't want to, i.e., if it were up to me I'd stay home.

OTOH, DW loves to travel. Once she hands in her notice, we are certain to visit lots of exotic places...

...places I'd be perfectly happy to learn about by watching the Travel Channel, after which I'd go to sleep in my own bed every night.

 

[Markola]

Thanks for the above list. It's quite good.



I'm approaching level 7 and hoping to nail it as my kids come fully of age over the next few years.



My favourite similar thing is by the very astute Morgan Housel:



https://www.collaborativefund.com/blog/the-spectrum-of-financial-dependence-and-independence/

I really like that list, too. Thanks for sharing. #9 makes me think. #10 will be a bit controversial, as all my models show that keeping the low interest mortgage is better financially long term. I think I’m either at #8 or possibly at #11. Good luck!

 

[traineeinvestor]

The article is too relative to be useful for me, e.g. does the ability to “spend frivolously on vacations” include a full year at the Four Seasons? If so, I’m not “Level Four.” I prefer Radical Personal Finance podcaster Joshua Sheets’ levels:


Stage 1 – Financial Solvency. You can support yourself, without help or handouts from others, and you’re current on your bills.

(Many people think that financial management stops at Stage 1.)

Stage 2 – Financial Stability. You can support yourself, your bills are current, and you hold some savings.

Stage 3 – Debt Freedom. You’re debt-free, in addition to the points above. It’s your choice whether or not you want to include your mortgage within this definition.

Stage 4 – Financial Security. You have enough investment income to cover basic, bare-bones living costs.

Stage 5 – Financial Independence. You have enough investment income to cover your current lifestyle.

Stage 6 – Financial Freedom. – You have enough investment income to cover BIG dreams and upgrade your lifestyle.

Stage 7 – Financial Abundance. – You have enough investment income that you cannot possibly spend this money. Vast amounts of your money will outlive you, and your focus is wise stewardship of this wealth so that you can leave a beautiful legacy.

Another up vote for a good list but ...

... I have to respectfully disagree with Stage 3 - Debt Freedom. Personally I like using modest amounts of debt for investment purposes and as an inflation hedge and have no plans to change that strategy. For us being debt free is not a goal and is not relevant to our financial position.

 

[audreyh1]

Level 3. Restaurant freedom: You eat what you want at restaurants regardless of the cost.

There are many nice restaurants with a prix fixe menu of $500-1000/person. Splurging there is not outside the budget of many people here for special occasions. But would you mind paying $9000 for a special pizza at a restaurant in Salerno? That will not bankrupt you, but do you want to pay that money to see what goes into that pizza to make it cost so much?

Well as it turns out that’s not what I want.

I remember reading reviews of a few French Michelin starred restaurants in places we were visiting and they usually had these super fancy tasting menus that were quite expensive. Well, I really didn’t want that kind of eating, even though we could have easily paid for it. The ones I saw didn’t exceed €300 per person and were often under €200. Also reservation requirements were weeks or more in advance....

The travel level is different for me. I’ve seen several places that I’d love to stay but haven’t been willing to splurge on yet. As we get older that may well change......

 

[audreyh1]

Stage 7 I would amend to you have a high enough liquid net worth that you can’t possibly spend it in your lifetime. Whether it generates even more income is immaterial. I knew some folks in the $80M+ category a >couple of decades ago, and to me they fell into this category. These folks must spend a lot of effort on estate planning. I know some of them were very generous donating to causes they believed in. Gosh, I remember visiting a nice brand new visitor’s center somewhere and realizing as we exited that one of these folks had contributed the funds - wow!

Another simply chartered jets whenever he wanted to travel thus resolving any airport hassle issues.

Definitely a different universe than mine.

 

[ncbill]

Level 3, Stage 4.

But the most expensive restaurant we've visited in the last several years was the local Brazilian Steakhouse (Churrascaria).

IIRC, $35/person inclusive (except for alcohol)...but I had a Groupon for $57 for dinner for 2 that included a decent bottle of wine.