
Climbing the Wealth Ladder - razin
https://ofdollarsanddata.com/climbing-the-wealth-ladder/
======
disintegore
I understand this isn't the point of the article, but it seems like a
roundabout way of saying "don't overspend". This part in particular bothers me
:

> More importantly though, the best way to climb the wealth ladder is to spend
> money according to your level.

As far as I (a non-economist) can personally tell, any notion of climbing up
some abstract wealth ladder is synonym with a salary increase for the vast
majority of people. Other methods, whether they involve quantity of free time
or already-available money, are intrinsically tied to the quality of your job
or, failing that, the quality of your parents' or partner's jobs.

Personal net worth, while definitely an important factor in this equation, is
far less so than income in my opinion. A fiscally irresponsibly professional
worker living from paycheck to paycheck has "grocery freedom" while a person
with 10,000$ of accumulated wealth and no income whatsoever (let's say they
are between jobs) is far more likely to buy the store brand margarine.
Similarly, the former will most likely not achieve "travel freedom" without
decades of hard work, of careful spending, of saving, investing, etc.

Simply put, no amount of "not carelessly booking flights" will turn you into
Jay-Z, let alone into that small business owner across the street with the
McMansion and the gaudy Christmas decorations. The undisputed "best way" to
climb the wealth ladder is to receive large amounts of cash from some external
source.

~~~
CPLX
Yup. I see this kind of logic in personal finance discussions all the time but
it's bullshit. There simply aren't any spending decisions you can make that
will change you from not wealthy to really wealthy. Those things can just move
you from poor to middle class at best, or to a better level of middle class.

Outside of real outlier status where you're paid really, really large amounts
of money for your services (like notable entertainer or cardiac surgeon) the
way to wealth is to own the means of production. Period.

Same as it ever was.

~~~
OnlineGladiator
> like notable entertainer or cardiac surgeon

Google says cardiac surgeons make $400-800k, assuming that's true a very
talented engineer at FAANG can easily match this (staff or senior staff level)
without being mired by an additional 10 years of school. I personally know
engineers making 7 digits in liquid compensation. Obviously these are not your
average engineers, but it's doable if you're the 1% (to be good enough for
FAANG) of the 1% (to be amongst the best at FAANG) of engineering talent - so
this isn't most people.

Just throwing it out there because I imagine most readers here are engineers
and you make it sound like it's an impossibility for any of us. I bet at least
a handful of readers here are engineers making over $500k.

~~~
departure
You also need to consider that the median tenure at these type of companies
are 2-3yrs[0][1][2] (1.1 at google!). In my experience that's not enough to
get the full stock grants.

So even from those that __could __make it very few stay long enough to make
these great riches your imagining.

[0] [https://www.payscale.com/data-packages/employee-
loyalty/full...](https://www.payscale.com/data-packages/employee-loyalty/full-
list) [1] [https://www.businessinsider.com/average-employee-tenure-
rete...](https://www.businessinsider.com/average-employee-tenure-retention-at-
top-tech-companies-2018-4) [2] [https://brobible.com/culture/article/how-long-
employees-stay...](https://brobible.com/culture/article/how-long-employees-
stay-tech-companies/)

~~~
opportune
Google and I believe Facebook have uniform monthly vesting, so these figures
are accurate for any amount of tenure.

TC is not computed using the total value of your grants, it’s based on the
amount that will vest over the course of a year. Yes, that means there are
engineers getting grants of $2m+ over four years (putting TC around $700k+)

------
tibbon
This is similar to how I’ve thought about money for a while. Through high
school, I had dollar problems. As in, things in the $1-9 range were pretty
important. Through college I had $10 problems. Early career it become $100
problems. Now anything under $1000 just doesn’t strike me as an issue. New hot
water heater? Just go buy it. $10k things however are what feel like real
issues now- new roof? I can do it, but’s it’s gonna put some hurt on for a
while if I didn’t see it coming. $100k problems (if I didn’t have insurance
and had a major health problem) would crush me like a $1000 problem would when
I was 18.

~~~
Retric
I agree, what’s useful about this mentality is not about becoming a
multimillionaire, it’s about having your wealth match your income. A doctor
making 250k is often living pay check to pay check while spending crazy money.
Even with a steady paycheck their not accumulating wealth.

Even worse, a football player with a 20million dollar contract is likely to
end up broke if they instantly maximize their spending. However, if their
lifestyle is based on their savings account that’s going to quickly grow to
match that income.

~~~
bronco21016
It bothers me when people use the phrase living paycheck to paycheck to
describe both someone who literally doesn’t make enough money to cover the
essential bills of living as well as someone making $200k+. These people are
not in the same boat whatsoever.

The doctor, or any professional making that much, simply needs to turn in the
lease on the luxury car, or downsize their house, or cancel their vacation to
materially change their financial circumstance.

A person truly living paycheck to paycheck has to choose between eating or
paying rent and there’s no luxury car to sell or turn in to free up cash flow
to make that decision easier. They are very much resource constrained.

This isn’t to say I don’t believe there are professionals in this boat. I just
believe we need a different term for it as it’s not fair to lump these two
very separate groups into the same definition. Perhaps describing them as
living beyond their means.

~~~
Retric
That’s your own assumption and has nothing to do with the phrase. A doctor who
loses their license is generally financially fucked.

What’s being described is a massive dependence on continued employment, and
someone with 200k of student debts and zero net assets easily qualifies.

~~~
bronco21016
It just seems really odd to me to use a phrase in a way that combines people
who are very literally resource constrained with few options of climbing out
of that hole with people who have the resources available to climb out and
above their situation. Both are dependent on their paycheck but one has the
ability to break away from that over time with wise choices vs the other
likely never being able to break that cycle.

Almost all of the world is living paycheck to paycheck by your definition. The
majority of US households would be ‘financially fucked’ if their wage income
was taken away for a significant period of time.

~~~
leetcrew
what's wrong with using "paycheck to paycheck" this way? we already have the
word "poor".

"paycheck to paycheck" means something like no liquid savings and no positive
cash flow. there are certainly a lot of people living this way (especially in
less wealthy countries), but it's not "almost everyone".

------
Pfhreak
I'm really not a fan of this breakdown because it seems to put each order of
magnitude increase in liquid net worth as equal space on the graph. What
percentage of people fall into each level. Maybe 50-60% of American adults
fall into level 1?

Surely, most folks will never reach Level 3 on this chart. While this is an
interesting way for someone who has made significant increases in their income
over the years, I don't think the thesis holds that the best way to increase
your ladder is to just save money.

We're all (or mostly all) wage earners here. Whether you are making $15/hour
at a fast food gig, or $200+/hour as an engineer, you aren't going to save
yourself into a new level. Saving might take some pressure off, and make you a
little more comfortable within your level, sure, but for most people, it isn't
reasonable for them to save 10 times the money they already have liquid
without changing their income.

The idea that we're all just a few 'steps' away from being independently
wealthy is one of the worst parts of American culture in my experience. The
individualism that follows from "if I can just outcompete someone else" seems
to me to be the root cause of things like a general anti-labor sentiment,
minimum wages as low as $2.13/hour, etc.

~~~
lazyguy2
It's entirely possible for a wage earner to become a millionaire in the USA.
Anybody with a middle class income can do it. It's not even complicated or
hard to figure out. The problem is that it requires discipline and living
under your means.

The first step is to eliminate debt and don't make stupid purchases. Debt
includes credit card, personal loans, car loans, and mortgages. Stupid
purchases are things like expensive vacations, eating from restaurants all the
time, or buying new cars, or buying boats. That sort of thing.

Pretty much: if you buy a brand new car you are a moron if your goal is to
increase wealth. You want to do things include living in inexpensive
neighborhoods, having secondary sources of income, having no adult 'children'
and so on and so forth. Woe is to parents that are still paying for their
20-somethings.

If you go drive around your city and you want to see were "middle-class
millionaires" live you need to avoid the 'wealthy' neighborhoods. Look for the
50-something living in a older neighborhood driving older economy cars around.
These people are going to have very low credit scores, as well. The best of
them are going to have a credit score of 0, which means no credit history for
several years.

Do you calculate the cost of purchases by how many payments can afford in a
month? If so you are doing it wrong. Instead you should only ever pay cash. If
you don't have money in the bank to pay for it you can't afford it.

The S&P 500 has, historically, provided a 12% return over average 20 year
period. If you start off at age 30 and invest 500 dollars a month at that rate
it would take you about 26 years to make your first million dollars.

6 years after that would be your 2 million dollar mark. 3 years later would be
your 3 million dollar mark. By retirement you would have just under 4 million
dollars.

If you make $50k dollars a year then that amounts to about 12% of your income.

You think that is too hard?

The average car payment in the USA is at $550. The average credit card debt is
$4,717. At 15% interest and doing minimum payments at $189 that card is going
to take 10 years to pay off and $22,869 in total. That means that for every 1
dollar you spend the bank makes 4.

If you can afford to make banks rich you can afford to make yourself rich.
Just can't do both at the same time.

~~~
thatfrenchguy
> Anybody with a middle class income can do it

Median income in the US per person in 2018 is 35000$. 500$ a month is 6000 a
month, or 17% of that before tax. At that income level you probably don't have
any income to spare after housing + food + car + health care.

~~~
shantly
If you (have to) have a car and you've got more than one person in the
household I'd say any margin over expenses (savings) under $1000 is just
rainy-day money, not retirement savings. It _will_ be eaten by copays,
deductibles, new tires, and so on. Just a matter of time. Might go a few
months "saving" then bam, kid breaks an arm and you're in it for whatever your
annual out-of-pocket max is (may be really high, but bad news, if anything
more than the sniffles happens, you're hitting it)

------
ben7799
I think this kind of article is helpful.

The thing I notice most is a lot of people buy cars (and replace them
frequently) that are way above their "level" and represent hugely
irresponsible decisions.

E.x. you should be way into 7 figures of wealth accumulation before you start
leasing/buying $50-70k luxury cars.

You never know what someone's stock portfolio/401k/IRA whatever looks like but
it's always an eyebrow-raiser for me to see someone drive up in an expensive
car and then they later tell you they pay rent and have never bought property
and the longer you talk to them the more you realize they're probably living
paycheck to paycheck.. just with a relatively large paycheck that disappears
nearly completely.

Especially when the trendy area to rent gets you a small studio or 1BR
apartment for $2.5-3.5k/month and that's enough to pay the mortgage on a $1M
property within 10 miles of said apartment.

~~~
greedo
A mortgage for a $1M property is roughly $4-$5k depending on credit etc etc.

~~~
jdashg
$5100 for $1M borrowed (a low) 3%, excluding down payment, property taxes, and
likely PMI, given how onerous saving 20% of seven figures is.

~~~
hultner
Is the interest rate that high in the US?

If you negotiate with a couple of banks in Sweden you can easily get sub 1%
(0.79% is what I seem to be able to get). Heck I just checked my bank and I
can even get a line of credit up to 1M SEK at 1.74% for up to 50% of my
portfolio without any property as security.

~~~
shantly
Checking, I'm seeing rates approaching 4% for 30-year mortgages here (the US),
down to 3.5% for a 15-year, which squares with what's been more-or-less the
norm for a while, so is probably about right. 1% on a mortgage would... not be
normal here.

~~~
hultner
Oh but that's with a locked rate, I always go fully moving rate.

------
clktmr
The article completely ignores the last and most important level of wealth,
which is being financial independent. Being able to pay for rent, food,
healthcare etc. for the rest of your life without the need of a day job will
probably have the biggest impact on your life.

~~~
Kirby64
That's completely tangential to this article though. It depends on what your
definition of that is, and some people handle it better than others. You see
those people retiring on 500k (for a couple) and living in a van or something
at one extreme. Then there's folks making 500k+/yr and somehow manage to spend
most of it without saving any of it. Independence is a state of mind, not a
dollar amount.

~~~
clktmr
> Independence is a state of mind, not a dollar amount.

This is only true if you have no debt. Even in your low-end example you need a
net worth of 250k, which is a non trivial amount of money for most people. And
I would still call it naive, it's just not enough.

Financial independence to me is, having other assets than your time which will
pay for your most basic needs. Living in a van probably means doing a lot of
stuff by yourself, which requires a lot of time.

~~~
Kirby64
Sure, there's a dollar amount where you literally could not live. There's even
more nutso people who talk about living on $100k by retiring to some foreign
country where cost of living is absurdly low, though. I don't think those
people (or the 250k van people) are realistic, since obviously there's longer
term problems (i.e. vans aren't going to be great for someone who is old).

I would disagree with your financial independence definition though. Basic
needs threshold is much lower than 'comfortable' living. The traditional
definition of financial independence is not having to work if you don't want
to. What that looks like (the sacrifices you make) depends on the person.
Maybe to be financially independent you are cool with a $500/mo apartment and
Ramen... or maybe that means a mansion and a bunch of supercars. Either way,
if you're dependent on a job or someone else, you aren't financially
independent.

------
nimbius
im presently reading Paul Fussells "Class" and this is a fascinating take on
the idea in the age of wage stagnation.

>the best way to climb the wealth ladder is to spend money according to your
level.

This is directly contradictory to, and detrimental to, how the US Economy
expects its consumers to act. Credit has largely filled the gap of wages and
productivity such that consumers now have no real sense of their level of real
wealth, only that which is projected by their ostensible plastic card based
opulence. The authors capstone to the article declares paradoxically at the
end, "there is a lot more to life than saving money." so I suppose the siren
call of conspicuous consumption remains a cornerstone of their life as well.

id also cynically argue that level 6, philanthropy, has less to do with having
a profound impact on the world around you and more to do with dynasticism and
displacement of the state as an agent of change or agency in society. people
at this level of wealth have a need to extend their name to objects of gravity
an institutions of permanence and prestige. They are so far removed from the
society as a whole that any perceived generosity in the pursuit of a just and
verdant society is merely a facade for tax evasion and self grandeur. They
realize no meaningful other symbiosis or benefit from the society as a whole
in which they are mistaken to be a part of.

~~~
sixdimensional
I think the hidden danger in this model, which I think about a lot, is that
doing philanthropy is shown as an activity you can’t afford to do until you
are very wealthy.

The trick is to do good for the world long, long before then. You shouldn’t
need to be wealthy to volunteer a few hours a month..

Before anyone judges me negatively, I say this as someone who has spent the
vast majority of my lifetime trying to “climb a ladder” only to want to get to
a point where I can give my resources away for free to help others. But I have
never figured out how, and then one day it just struck me, why can’t I jump to
level 6 now without the money, and maybe that might just be what’s wrong with
the money driven world somehow, or at least my understanding of it.

I feel like if I could understand how to not care/worry about the money then I
could free up the mind and energy to do something better for the world, and I
want to.

And then I realize the counterpoint that we have to work within the rules of
the system, too, and the system is much more cruel and demanding than I wish
it was.

~~~
hirako2000
I think you got it!

The is a paradox in 'climbing the ladder' and giving away financial resources.
Simply because, in the competitive market, you aggregate resources by taking
it from others. Either competitors or random individuals. Philanthropy should
start giving away those resources to the actors most in need, and they may be
very close to your activities, but then you can't aggregate and climb up. The
market doesn't have sympathy, and lack of resources can be devastating during
tough times.

Don't climb the ladder. Who cares.

------
baking
I have a problem tying wealth to consumption. I always look at menu prices but
I'm a lot better off financially than many people who don't seem to care how
much they spend. Maybe because I do look at menu prices.

Other than that, this is basically a base 10 view of wealth. Each zero matters
as much to you as the last one. Under that theory, Bloomberg is to me as I am
to someone living paycheck to paycheck, but I feel much closer to the person
living paycheck to paycheck.

~~~
TravHatesMe
I agree. This article does not mention that your life and upbringing play a
major role on how you think about money. I know many folks that are well off
but they are still frugal. They care about the cost of groceries, the cost of
restaurants, etc. They don't need to but they choose to. They lived the
majority of their lives without this kind of comfort -- some behavior cannot
be changed when it is learned and repeated over time. The value of money has
become a part of their values. I admire it to a certain extent. Even if they
win the lotto they would probably donate most to a good cause and continue to
nickel and dime.

------
slumdev
Not a good article.

There are three steps on the wealth ladder:

1\. Wage slave - Most people will never leave this step, no matter how many
ugly Merc SUVs they own or first-class flights they've taken.

2\. FU Money - This person has enough money set aside to walk if they don't
like a job or a customer.

3\. F-Everyone Money - This person doesn't need to work at all.

~~~
lioeters
There's also an implicit rule of the game: as you climb up each step (or are
born into it), join your cohorts in making sure to kick the ladder from under
you.

------
wonderwonder
People without a safety net who start out poor are generally going to end up
poor. In another post I mentioned how its possible to save and due to the
power of compound interest retire with millions on a 60k salary but that is a
best case scenario. Most people don't make 60k. Also life has a funny way of
stepping in. Just after you saved your first 3k, your alternator goes out or
you get in a wreck. Or suddenly find out you are having a kid. Emergencies and
unexpected expenses are very likely a major reason why so many people don't
make it. If I have a low end salary it likely takes a year to save that 1 - 2k
that is wiped out via major car repairs cost or the trip to the ER with a
broken arm.

Most people are on a treadmill just trying to make it and life always sends
them back to the beginning.

~~~
tonyedgecombe
_Just after you saved your first 3k, your alternator goes out or you get in a
wreck._

Some people seem to have these sort of problems more often than others. I
guess poverty is about a lot more than lack of money.

~~~
shantly
Poor people with shitty, cheap, old cars have these problems more than others.
Because they're poor.

~~~
knopkop_
See the Sam Vimes "Boots" Theory of Economic Injustice

~~~
wonderwonder
That's pretty much it in a nutshell, very well done.

------
tempsy
On the "travel freedom" category - just want to say we live in _extremely_
unusual times when it comes to travel and there's little reason to pay out of
your savings to fund travel at the present moment.

In the US we've been living in the Golden Age of travel and credit card
rewards for the last decade. I started churning cards in 2012 and have not
paid in full for personal travel since. It's become slightly harder to churn
than it used to but the sign up bonuses and earnings on cards is still at
highs nonetheless.

It's great because I'm not a materialistic person and don't spend much on
physical goods anyway, and to get my travel mostly paid for means I haven't
had to spend my own money despite being in the "travel freedom" step of the
equation.

~~~
shantly
Something I've wondered about this: doesn't opening & closing tons of lines of
credit fuck with your credit rating? Or do you just leave them open
until/unless the issuer decides to close the (unused) account, leaving you
more crap to have to watch for fraud & such?

~~~
tempsy
It does a tiny bit but it's not a huge weight in the credit scoring equation
and has very little long term effect. I've maintained a ~750+ score for a long
time despite opening 5-6 cards/year on average.

I wouldn't do it if I were in the market to buy a new house in the next ~12
months but otherwise a small temporary dip in your credit score has literally
zero impact on your life.

------
eppp
I'm not sure exactly what the article is trying to accomplish but it does feel
in about the right ballpark for the levels. I don't think I'll ever get to the
vacation one but simply paying last debt off really took a lot of weight off.
Sure borrowing at low interest makes math sense but having a paid off house
just feels good.

~~~
esotericn
I'm not so sure, personally.

The six levels:

    
    
        Level 1.  Paycheck-to-paycheck:  You are conscious of every dollar you spend.  This includes people with crippling debt.
        Level 2.  Grocery freedom:  How much specific grocery items cost don’t impact your finances.
        Level 3.  Restaurant freedom:  You eat what you want at restaurants regardless of the cost.
        Level 4.  Travel freedom:  You travel when you want, how you want, and stay where you want.
        Level 5.  House freedom:  You can afford your dream home.
        Level 6.  Philanthropic freedom:  You can give away money that has a profound impact on others.
    
    

I personally would say 4, 5, and 6 are in the wrong order entirely.

I give away money that has a profound impact on others (so I'm at #6).

But I can't afford my 'dream home' (#5) (I'm within an order of magnitude, I
suppose).

And #4 doesn't even interest me (I actively don't _want_ to have a private jet
or whatever).

I can take a holiday pretty much whenever I want, if that's what it's getting
at? I think very few people actually travel "how they want".

I think this is based on a very narrow, 'hollywood star' style of lifestyle.
You don't need to be stupidly rich to give 10% of your income or to take a
sabbatical from work.

~~~
Kirby64
I think you're overthinking this. The article examples maybe aren't
descriptive enough.

#4 would mean I don't price shop Airbnb, hotels, and plane tickets so much. Or
maybe I just take first class everywhere. Either way, you're talking spending
amounts in the $10k+ range.

#5 means you can buy whatever size house you want within limits. That's more a
$1M+ decision (although, amortized out long term)

#6 means Bill Gates level philanthropy. Not saying whatever donations you're
giving away aren't meaningful, but I doubt you're getting wings in hospitals
named after you.

~~~
esotericn
No, they're dependent on preferences in what you want. Your preferences differ
from mine here.

Either that, or you're assuming that the reasonable benchmark for comparison
is close to the absolute most expensive example within a specific sector,
which doesn't really match how I spend money.

Thinking about it more, I'd probably say I even hit #4 before #3. Why?

a) I don't really care that much about eating out, so despite being able to
theoretically afford "Super Fancy Meals" I still think about it because I
could just give someone else that money instead.

b) First class flights and fancy hotels I find ridiculous, they don't factor
into my purchasing decisions. I far prefer a cabin in the woods or going
hiking or something like that to some constructed notion of luxury.

I'd sooner give $10k to charity before I take a first class flight - in fact
I'm on track to do that this year, and hope to increase it. If you don't count
anything below $millions as being philanthropic then of course you've defined
level 6 as being the top, that doesn't make sense to me.

~~~
ThaJay
You have completely missed the point. The fact that you could does not mean
you shoud or even would.

Wanting a cabin in the woods and being able to afford it does not make you
"House freedom level". That level is being able to buy any house you could
want without second thought.

The fact that you would not choose such a house is completely irrelevant to
this train of thought. Some things you have to plan out and some things are
just not worth to consider for even a second.

~~~
esotericn
The cabin was referring to the travel level, not housing.

I don't think "any X I could want" is meaningful.

You're taking it presumably to mean the most expensive offering that exists in
the world, but I _could_ want something akin to Buckingham Palace and no
amount of money would get me that, or I could want some generic massive palace
that would cost $50bn which obviously is above the philanthropy level by any
metric, or maybe I genuinely do just want a bog standard terrace because I'd
rather give my money away than 'elevate' myself into a weird Hollywood
lifestyle.

It makes far more sense to think about what I actually _do_ want, and in that
view the levels can be ordered differently depending on the person.

The point I am making is that to some extent these levels are individual
choice, they're not cast in stone.

~~~
Kirby64
To some extent they are, but really there's strong limits on this and they
can't be broken. At the end of the day, vacations cost more than food and
housing costs more than vacations. Full stop.

Your example of saying you don't care about fancy meals... well, sure, but
that doesn't change the fact that your price sensitivity to a restaurant is
going to be much lower than a vacation. If your end goal is to give a bunch to
charity, then scrimping on a vacation too would be a better decision
ultimately.

It's really hard to spend more than say, $1k on a meal. Even 3 star Michelin
restaurants don't charge that much unless you include alcohol.

Comparatively, it's EASY to spend $1k on a vacation. Incredibly easy.

~~~
esotericn
I disagree with most of this; but let's just say we inhabit different worlds,
and leave it at that. I figure we just take different vacations and go to
different restaurants. :)

------
yboris
I highly encourage people in developed nations to become philanthropic as soon
as they cross their country's poverty line. Giving to cost-effective charities
can do tremendously more good for others, way more than you can do for
yourself.

I currently give at least 10% of my income but my aim is to get back to giving
50% again.

Join others who give at least 10%
[https://www.givingwhatwecan.org/](https://www.givingwhatwecan.org/)

~~~
hk__2
> Join others who give at least 10%
> [https://www.givingwhatwecan.org/](https://www.givingwhatwecan.org/)

You should disclose your affiliation with this website.

~~~
yboris
Sorry -- was thought it would be obvious that I've taken the pledge Giving
What We Can recommends.

I'm not quite sure why it matters whether I've taken the pledge or not though.
Could you elaborate why I should disclose this explicitly?

Also disclosing affiliation seems sensible if I'm promoting a product and I'm
going to benefit from others purchasing it. Here I'd be thrilled for more
people to join in, but this is akin to telling others about an opportunity to
volunteer. Are you thinking there's some conflict of interest?

I'm really curious -- thank you for your time.

~~~
hk__2
> Sorry -- was thought it would be obvious that I've taken the pledge Giving
> What We Can recommends.

The way you wrote the sentence really looked like a product promotion,
especially to someone (most of us?) who doesn’t know GWWC. Based on your
response I don’t think there’s a conflict of interest, but I needed your
clarification in order to think that.

------
howeyc
The part at the end about his new millionaire friend not having a much
different life is what I think about quite a bit. Until you reach "buy my own
plane without worrying too much about cost" levels of wealth your life is
pretty much like everyone else...

You likely: * commute to work every day * work 8+ hours per day * spend
weekend hours doing choirs (laundry, grocery shopping, etc)

Sure the size and comfort (of house, car, food, etc) may vary, but you have a
similar day-to-day life as a waiter, just the job and numbers are different.

~~~
mLuby
Generally agreed. The major difference is whether someone has a regular work
schedule or not. You don't have to be a millionaire to not work, nor are most
millionaires on perpetual vacation.

Nit-pick: There are plenty of cultures where barely middle-class families hire
others to do their chores.

------
hk__2
I feel like education has an important role in this perception, too. I grew up
in an environment with $10-$100 problems, and now I still compare the prices
of what I buy in the $1-5 range, even if spending $400 on a gift once a month
wouldn’t significantly alter my finances. This is some sort of conditioning
where you _feel_ like being at some level while in fact being above it.

------
bumbledraven
The article's focus on viewing payments as a fraction of your net worth is
related to the Kelly criterion [1], which suggests making only investments
that increase the expected logarithm of your net worth.

For example, say you have the chance to bet on a single flip of a biased coin
that comes up heads 51% of the time. If the coin comes up heads, you win
$10,000; otherwise, you lose $10,000. According to the Kelly criterion, this
bet only starts to make sense once your net worth is at least $250,000 [2].

[1]
[https://en.wikipedia.org/wiki/Kelly_criterion](https://en.wikipedia.org/wiki/Kelly_criterion)

[2]
[https://www.wolframalpha.com/input/?i=solve+0.51*ln%5Bx+%2B+...](https://www.wolframalpha.com/input/?i=solve+0.51*ln%5Bx+%2B+1e4%5D+%2B+0.49*ln%5Bx-1e4%5D+%3E+ln+x)

------
maire
So the funny thing is this article is the exact opposite of the two most
influential financial books in my life: "The Millionaire Next Door" and "Rich
Dad Poor Dad". The true wealthy don't ever think of spending money as if it
isn't important. Instead they distinguish between spending on income
generation vs spending on luxury. They only spend on luxury intentionally but
will spend on income generation freely.

In other words, if someone is frivolously spending their money on luxuries
they are very definitely not wealthy. They only want to appear wealthy. The
true wealthy really don't look wealthy. They never really leave level 1 on the
chart.

~~~
namdnay
I would steer clear of the bullshit peddled by Kiyosaki...
[https://www.johntreed.com/blogs/john-t-reed-s-real-estate-
in...](https://www.johntreed.com/blogs/john-t-reed-s-real-estate-investment-
blog/61651011-john-t-reeds-analysis-of-robert-t-kiyosakis-book-rich-dad-poor-
dad-part-1)

It's exactly this kind of get-rich-quick crap (that always seems to revolve
around heavily leveraged real estate) that was one of the causes of 2008

~~~
maire
In general I agree with you. I hesitated to bring Kiyosaki up because of his
later activities. I never highly leveraged anything. The first book never
mentioned this. But it did get me to invest in income real estate. I have been
glad of that. I never read his later books because they didn't pass the smell
test.

I also liked the Rat Race game. I used to play it with the kids. One thing he
had you do is pick a goal of what you wanted to do when you retired. I always
picked saving a forest and my daughter always picked a small farm. We compared
notes recently and realized that we have both reached our goals.

------
vd84
The game changer is:

Move to a country where US dollar goes a long long way. Like Tim Ferris said:
What would you do if you had a million dollars right now? Most people don't
know. The tragedy is most people don't have any passion. All they do is keep
calculating their net worth day in and day out. Happiness is not eating some
expensive meal. It is continually growing and having some fun. Most things
that are enjoyable aren't that expensive.

You can go snowboarding at whistler even if you don't have a lot of money. You
don't need to own a house there, just get an airbnb

------
markvdb
The 0.01% of liquid net worth concept is useful.

The rest of the article is not very useful. The higher one's liquid net worth,
the more differences in priorities and consumption patterns.

------
lordnacho
Problem is that while there's a limit to how much you can spend on (I guess
student, not mortgage) debt, groceries, and restaurants, the amount you can
spend on holidays, houses and philanthropy vary on a much larger scales.

You can go on a holiday flight to another country for a few hundred dollars.
Or you can rent a private jet to tour the world, staying at a 5-star hotel
each place. That could easily be the difference between a 3 figure price and a
6 figure price.

Houses, you can get them for a few annual average salaries, or a few hundred.
Depends on where you want to live.

And donations can vary as much as you like, a dollar or 100M.

For software devs, I would think the real ladder is not whether you can buy
the groceries you want. My guess is most of us in the West can buy the
truffles every week if we really felt like it, and likewise with restaurants.

What you perhaps want to consider is whether you have the resources to not
work for a while, whether to educate yourself, travel, or do your own startup.
This comes down to the opportunity cost of lost income being worthwhile to do
those things.

------
BrandoElFollito
Nice, I used to say that I feel comfortable when I choose my yogurt and do not
look at the price.

I realize that I am objectively much higher on the wealth axis today, but this
is what I tell my children. Live without needing much and do not worry if what
you _really_ want is 500€ more expensive.

I like this chart because it also tells that some people can be happy by
buying the 15€ fast lane at the airport (this is what we did with my wife, the
kids queued up). Or getting the 500€ more expensive version of vacation to
have more space.

------
npip99
I mean if you have $100k in wealth you absolutely have travel freedom.
Backpacking in Europe is a common experience so it's pretty cheap and the rest
of the countries have crazy USD conversion rates. $100k could be a lifetime's
worth of money in a non-western country. You can still find lodging in Ukraine
for like $4/day.

------
jackcosgrove
Another positive aspect of gradually ramping up spending is that you slowly
and safely learn how to use money. Your behaviors have to be calibrated to
your income and wealth to avoid wasting money.

Although the person overspending is probably using credit or living paycheck
to paycheck, there is the rarer but more acute problem of _windfalls_. If you
receive a windfall without previously having experience with money, there's a
good chance you will fritter the windfall away.

A common way this happens is when professional athletes overpay for a mansion
after signing a contract. Five or so years later the mansion is sold for a
huge loss or sits on the market for years with an unrealistic selling price.

------
anirudhrx
> Lastly, you might argue that you shouldn’t increase your consumption with
> your net worth, but I would counter that some lifestyle creep can be highly
> rewarding in terms of maximizing your leisure time and long-term life
> satisfaction.

I don't agree with this. I think life satisfaction is a function of what you
think you need rather than what you really need. Changing that perspective can
create as much contentment with existing resources as increasing consumption.
For example - no one misses what they never knew they could have. Very few
people come up with a _necessity_ for a private jet from first principles.

------
nathan_compton
No one should be allowed to reach "what are prices?" People who are there
already should be taxed back down into the "I care about prices again" range
within a few generations.

------
supernova87a
I think you can pretty easily guess this article isn't written by anyone whose
family is recently immigrants. Kids from those families don't need to be
instructed on how to spend at the right level (at least in the first few
stages) -- _everything_ is about saving money! This story is probably for
people whose parents have forgotten what it's like to be poor and skipped the
step of instructing the kids (inadvertently, or deliberately) on what that's
like.

------
beamatronic
So...a couple of these posts are about climbing the _income_ ladder. If you
want to climb the _wealth_ ladder here’s my advice. Buy a single-family home,
in an area with good schools, that you can afford with a 30 year fixed
mortgage. You will need 20% down, so you won’t be able to reach the “food
freedom” or “travel freedom” levels as described here until your home purchase
is completed. This is almost foolproof over the long term.

~~~
yboris
Or consider buying a mobile home in a good community. My house was $50,000 and
my rent is $600/month (I live in NJ and don't pay land taxes). The savings
from _not_ paying a mortgage or buying an expensive house means there's _that_
much more you can put into investing for retirement (and in my case give more
to cost effective charities).

------
issa
In these conversations it is important to remember that the median US income
is somewhere around $40k per year. Conversations like this should serve to
remind us that the US system is deeply broken. There is no reason we couldn't
have a system where everyone could live comfortably. People making an easy six
figures talking about how poor people should scrimp and save is ridiculous.

------
sbochins
I think the rules he’s using for measuring wealth are way off. It only makes
sense if your goals are to work a full time job for the rest of your life.
Something more meaningful would be financial independence. How long can I live
comfortably without working? Do my investments still lead to net personal
wealth increases without working? If so, how much?

------
moralestapia
I hate being negative but this article, despite its good intent, just tries to
force some very shallow abstractions to the point where it's ridiculous ...

On the first example of levels, it's funny that 'guys that can eat where they
want' are on the same level (3) as 'billionaries'.

Then goes on with the very old (and wrong) belief that for a high net worth
individual 50K is chump change and equivalent to a normal guy throwing away a
dollar ...

Then the "improved" levels do not really make sense as levels: travel freedom
can be much more than expensive than house freedom, for sure!; also, one could
engage in a philantrophic cause without belonging at the absolute peak of
wealth.

Another one is how at the highest level in his chart, he uses the expression
"What are prices?", implying that people at the highest bracket just do not
look at price tags anymore. Honestly, plenty of rich people live fairly frugal
lives, while on the other end plenty of people at the bottom spend in a lot of
things without thinking twice about the cost and its impact on their lives.

And then there is no advice on how to actually climb such arbitrarily defined
ladder ...

------
seibelj
I don't care how much money I make - I shop at the cheap grocery store, pay
attention to restaurant prices, look for deals, don't waste money. This is a
good lifestyle no matter how much you make. It's called being frugal.

------
timwaagh
"Consider carefully whether the extra step is worth it". This is what I'm
wondering about everyday /s

------
thatfrenchguy
> Level 6. Philanthropic freedom: You can give away money that has a profound
> impact on others.

Letting the rich decide how society is organised, what a great plan.

------
nathanbarry
If you're interested in more of a discussion on _how_ to increase wealth I
wrote a 5,000+ word post on it a few weeks ago called "The Ladders of Wealth
Creation".

[https://nathanbarry.com/wealth-creation/](https://nathanbarry.com/wealth-
creation/)

