6 Different Wealth Levels and How They Affect Your Decisions

INSIDE: Here’s a great analysis by Nick Maggiulli on climbing the wealth ladder & how affluence increases in steps with wealth levels. Which one are you at?

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!

From Nick:

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 wealth levels 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?”)

6 Different Wealth Levels

According to the article, there are 6 different wealth levels. Can you pinpoint which wealth level you’re at?

  • 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 :)

Climbing the Wealth Ladder

Thanks for putting it out there, Nick!

Anyone else relate to some of these levels? Anyone hit the epic 4-6 range?!

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31 Comments

  1. Victoria B. January 21, 2020 at 8:42 AM

    I love the spirit of these levels; however, I will never not be excited to use a BOGO coupon at a local restaurant for dinner, or look forward to super double coupon days at my favorite supermarket. We have plenty of money in the bank, in our retirement accounts, and in our home equity, but we will always ride the bus to the airport for $2.50 per person vs. an Uber. Saving money becomes a novelty when you don’t have to and it’s a way we always want to live our life.

    1. J. Money January 21, 2020 at 2:41 PM

      Preach on sister! Haha…

  2. Debt Free in RVA January 21, 2020 at 8:45 AM

    I tune into our net worth once a year and we are at $ 800,000 now by God’s Grace :-)

    That said, we do not worry about restaurant purchases anymore, BUT we do limit how much we go out. That said, I took DW to Ruth Chris to celebrate our anniversary and dropped over $ 200. I still cringe a little at that price, but it was worth it to celebrate anniversary and did not put a dent in NW.

    Regarding vacation. I think it will take an increase in NW to over $ 1.5 million for us to not carefully plan out vacation expenses. I see so many of our friends dropping thousands and tens of thousands on elaborate vacations, but barely making ends meet. I cringe when I see it!

    We just traveled to Disney recently, but stayed in an off-site cheaper hotel and limited how much we went. Spent 1 day at Disney and 1 at Universal. This cost us $ 4,000 including rental car and airfare. The rest of the time we stayed with my sister. That is a lot of money, but if we stayed on the resort it could have easily been double. An extra $ 4,000 is VERY hard for me to stomach!!

    1. J. Money January 21, 2020 at 2:45 PM

      Same, haha… Or taking all our kids to a place like that! Still not brave enough to try it ourselves yet :)

  3. Francis January 21, 2020 at 9:02 AM

    Effective summary of a good article. It certainly confirms what I have been thinking lately that the step up from a $1.0M/$2.0M to a $10.0M net worth is huge and quite a stretch without owning a business.
    The mindset and practices that I took to get to the $1.0M/$2.0M mark will not work to get to $10.0M.

    Big money philanthropy is out of my league. Helping my kids with a warm hand rather a cold hand is not.

    1. J. Money January 21, 2020 at 2:52 PM

      Yeah, that next level is pretty hardcore…

      perfectly content with “just” a few million ;)

  4. RAnn January 21, 2020 at 9:34 AM

    While I understand the concept the article is pushing, part of financial freedom is the freedom to choose what makes you happy. My 2000 square foot house is plenty of house for me. No, you wouldn’t be particularly impressed if you came over, but it is a nice comfortable paid-for home. Buying more or fancier house would mean cutting back on other things. We do go to restaurants when we want, and order what we want, but we keep those wants under control.

    1. J. Money January 21, 2020 at 2:53 PM

      Keyword there being “paid-for” too :) That alone sets you apart from most everyone else!

  5. Britt January 21, 2020 at 9:46 AM

    Personally, I would move point 6 to point 4 and shifting 4 & 5 to 5 & 6. Prioritized 6 when my kids were in daycare and the were funding a diaper drive. That hit personally with where so many families are so we made a decision to donate at least 10% each year just like maxing our retirement and haven’t looked back. Best feeling ever. Still watch how we travel and where we live but NEVER skimp on charity . Plus relative numbers for travel and housing can be way more than a 10k impact per decision from my experience.

    1. J. Money January 21, 2020 at 2:54 PM

      That’s awesome you’ve committed to that :) I have a few “rules” I’ve started doing myself over the years, but still nowhere near where I want to be yet.

  6. COD January 21, 2020 at 10:02 AM

    I think we are between 3-4. We have restaurant freedom, but luckily our taste in restaurants leans more towards cheap ethnic food than an upscale steak house. I feel like we have travel freedom for weekend getaways, but I’m not booking 2 weeks in Europe on a whim anytime soon.

    True story – dinner on our 25th anniversary was at Bojangles. (We were on the road for a weekend getaway.)

    1. J. Money January 21, 2020 at 2:55 PM

      Frugal Award of The Year right there ;)

  7. Angie January 21, 2020 at 10:44 AM

    Our spending is totally based on current income, not net worth. I can’t imagine when our net worth will factor into out daily decisions. Probably at the point that it becomes our income.

    1. J. Money January 21, 2020 at 2:59 PM

      Oooh good catch! I def. wouldn’t be dining as freely if my cash flow didn’t allow it… Not worth tapping assets unless like you said you were FIRE’d already.

  8. Caroline January 21, 2020 at 11:53 AM

    Restaurant freedom-
    We often joke about how every trip we look into is 5K per person when all said and done. Our biggest pause right now is our child is 15, our time to really be with her is dwindling and wanting to share travel with her. We homeschool so we have the time.

    1. J. Money January 21, 2020 at 3:01 PM

      ahhhh I hope you guys pull the trigger on it!! I DREAD the day they leave the nest and never want to come back!! at least you get to see her ALL day w/ the homeschooling though which is way more than most people do :)

  9. Brooke January 21, 2020 at 12:17 PM

    This was a really fun article to read and try to figure out what level I am. I’m definitely at least a level 4 (really a level 5) but am so frugal that I make myself live at a lower level. I guess that’s probably how a lot of us got on our FI journey to begin with so not surprising. It’s hard to spend money once you get so used to saving. Great read!

    1. J. Money January 21, 2020 at 3:03 PM

      Haha, yup…

      Something we’re all gonna have to get used to later when we’re retired too! :) Can’t be saving forever – at some point it’s time to spend our hustle money!

  10. Nita January 21, 2020 at 3:28 PM

    I like it. I find level 5 a bit odd, because unlike dining out, traveling or giving, buying houses is not a recurring expense – at some point you’re supposed to be done. I can’t reach level 4 or any other if my house isn’t paid off.
    I’m guess I’m level 2… 3 is within reach, but I’d rather not.

    1. J. Money January 24, 2020 at 3:04 PM

      You’d rather not reach level 3 or not care about restaurant prices? :)

  11. Chickenwizard's DivBlog January 21, 2020 at 8:58 PM

    I’m wondering if Level 4 and Level 5 could be switched…?
    I’m surely at Level 3, but I also have my home. With a great yard and hot tub. And since I am in Seattle, it’s a million. $300K when I bought it in 2005, but a million now. (yeah, a 233% gain. )
    That kind of makes me a Level 3/5.
    But travel freedom is a tough one. I would much rather have a nice home and have it all paid off over a week in France. Weekend road trips are doable. But a Disneyland or Mexico trip is maybe once a year.
    Those trips can really break the bank. That’s exactly why I claim a 0 at my job and get a fat return. It covers a 2 week vacation somewhere. Otherwise, I would be spending all year paying off and trying to save for another trip.
    Cheers!

    1. J. Money January 24, 2020 at 3:05 PM

      Well done staying in one place like that!!! That’s hard to do for most of us!

      I agree w/ the nice refunds too, so long as you’re consciously doing it like you are and you don’t end up just blowign it on stuff you don’t really care about.

  12. Angela Jean January 21, 2020 at 9:45 PM

    I disagree that you need to be a Bill Gates or a Walter Buffett to make a significant change philanthropically. Heidi Baker purchased a 1 way ticket to Mozambique around 30 yrs ago. No one knew who she was. Today (thru her organization Iris Ministries) thousands upon thousands of children have been adopted, thousands of churches have been built, schools/wells built…a nation completely transformed…because of one little woman’s Yes. An interesting fact about Heidi is she grew up on a private beach with wealthy parents in Laguna Beach. However, she left it all behind to serve the poor. True wealth doesnt equate to money. We can all be philanthropic now. I’ve been known to give away 20% of my income when I made less than $40,000 yr. If a person isn’t philanthropic now when they have “little”, they are not gonna be philanthropic later when they are making millions.

    1. J. Money January 24, 2020 at 3:07 PM

      Hmm… don’t agree all the way w/ that last line, but yes – you are correct you can always make a difference with whatever you’ve got :)

  13. Lee S January 22, 2020 at 3:27 PM

    I’m not above a good vacation now, but I still put a lot of consideration in it. So, one good vacation a year isn’t out of the question but planning and budgeting must be done to make sure it doesn’t hinder everything else for the year. Have to maintain investing, and make sure quality of life though frugal is maintained and not wrecked by a vacation. So maybe the vacation no problem is more around the 3-8 million mark.

    1. J. Money January 24, 2020 at 3:08 PM

      Haha… maybe! I doubt I’d be much concerned about it with that many millions in the bank :)

  14. Connie February 7, 2020 at 11:44 AM

    We are of retirement age, but not “retired”, as we want to continue to contribute, through either paid or unpaid work.
    We are at but not interested in # 4 as we help out with grandchildren and are home bodies. We are at but not interested in #5 because we are perfectly content with how well the house we have now functions for us. We are at and thoroughly enjoying #6…. we have an account for that and receive much pleasure from giving from it.

    1. J. Money February 7, 2020 at 12:00 PM

      Congratulations :) Great position to be in! And the best part: you’ve set yourself up to have the *freedom to choose!*.

  15. Connie February 7, 2020 at 4:01 PM

    Exactly!! True freedom

  16. Stephanie February 11, 2020 at 2:40 PM

    I would guess some of this depends on tastes and circumstances. We don’t go out to fancy dinners often because we have a kid and no reliable childcare, so when we do its a no brainer to live it up and order what we want. We dropped over $100 on dinner this past Saturday but the last time we went to a fancy restaurant before that was… October? Otherwise we go to cheap, family-friendly places and no matter what we order, we come in under our $50 budget.
    Same with travel, we prioritize visiting family so don’t typically have big hotel, rental car, or food costs, just plane tickets. But when we do travel for pleasure, we’ll splurge on the nicer hotel, entertainment etc

    1. J. Money February 12, 2020 at 7:00 AM

      Haha yeah – the childcare alone already makes it a splurge! :) But awesome you guys still treat yourselves like that… Sometimes I dream of just getting a babysitter and then staying in my room for hours and just reading in peace and quiet, lol…