
Three Levels of Wealth - acconrad
http://awealthofcommonsense.com/2018/08/the-3-levels-of-wealth/
======
wjossey
It’s interesting the categories the author chose, as I had a similar tone with
my mother when I finally started making good money.

I grew up in a divorced household. On one side I had a father and step mother
who made large amounts of cash in a relatively inexpensive area. They
vacationed regularly to Hawaii and Las Vegas, and prioritized spending money
on themselves.

My mother and step father combined to earn around $30k, were hyper frugal, and
stressed about every expense. Any expense whatsoever was agony, and they made
sure my sister and I understood their inability to buy things on a whim.

So, as I bounced between houses each week, I yo-yo’d between borderline
poverty (although they made it work) and quite high wealth.

When I hit my mid to late 20s, my wife and I hit a point where we had no debt.
Could go out anytime. Could rent any reasonable home in our area (couldn’t buy
because we didn’t have that kind of down payment money), and traveled a few
times a year throughout the world. When I contrasted this against how I felt
after undergrad, while in grad school, where I was heavy in debt, had no car,
and felt constant financial stress, it’s remarkable.

As I’ve continued to grow older, I’ve now come to realize it wasn’t the
travel, eating out, or the things I could buy that helped me to be less
stressed, it was the lack of burden of worrying about how I would pay for X,
Y, or Z. I make way less money now as I run my own startup, don’t go out that
much as I do all the cooking, don’t travel that much because we can’t afford
it, yet I carry the same lack of stress and worry as I did years back.

Part of why I’d like to see universal, free at the point of delivery, health
care in the United States is for this very reason. I’ve first hand experienced
and witnessed the choice of not going to get needed medical care because of
the financial burden. UBI is still highly experimental, and many other wealth
normalization techniques have severe downsides that potentially outweigh the
benefits; however, universal health care has enough clear data points of
success in the rest of the world, from my vantage point, that maybe that can
be the “level 0” of wealth in the United States.

~~~
tjr225
My wife and I are about 30. We still have ~50k in student loan debt. We make
enough that her entire paycheck goes towards our student loans and we should
have it paid off in a year and a half or so.

However, we want to have children and we don't want our debt to impact their
lives. How sad is it that American workers can't afford to have children
because of how expensive our education is? Imagine if one of us had medical
debt...

College education and healthcare /should/ be free for all in this
country(USA). They are fundamental to the social mobility and freedom that our
founding principles were created for.

~~~
wycs
>College education and healthcare /should/ be free for all in this
country(USA). They are fundamental to the social mobility and freedom that our
founding principles were created for.

We had this. It was called high school. But then standards were lowered so it
was no longer a good filter for intelligence and conscientiousness. Standards
were lowered to increase "social mobility." This did not work. Now college
performs the same function. But the average IQ of college graduates will
continue to decline as the percent of the population that graduates approaches
100, and so masters degrees are becoming increasingly common.

Will this, too, increase social mobility?

Social mobility in a meritocratic society is hard given the heritability of
valuable mental traits. If we keep sacrificing our schools on the alter of
social mobility, we will end up burning the first 30 years of or lives getting
Phds in mopping floors.

~~~
RealityVoid
First of all, your post shows that you think that education or going through a
school is a social signal rather than an educational experience. I disagree
with this.

Secondly, you seem to imply that no improvement in the education level has
happened because of the normalization of high-school education. I disagree
with this also. I have no numbers to back this up, but by looking at the world
around us, at all the inventions and the added complexity and our increasing
ability to handle complex systems, I think we have become smarter.

Thirdly, maybe social mobility was hijacked by some rhetoric or became a
symbol for this or that group. But at its core, social mobility means allowing
people to rise to their potential and not stifling them. How can we be
"sacrificing our schools on the alter of social mobility" when social mobility
is supposed to be _more_ meritocratic, not less?

~~~
bkohlmann
To your first point, you may be interested to read Bryan Caplan’s “The Case
Against Education.” He makes a very strong, quantitative case that education
is primarily a signaling device.

For instance the difference between 3.5 years without graduating and 4 years +
graduation is immense, whereas in a non-signaling model, they should have very
similar outcomes.

~~~
TimPC
There is a huge selection bias in these groups. 3.5 years without graduating
is likely to be students who are doing poorly since if you were a top tier
student you aren't going to quit 0.5 years off from a degree under most
circumstances. People quitting university after 3.5 years most often have a
number of failed courses and aren't 0.5 years from a degree.

~~~
pitaj
Another example then: college students forget a lot they learn inside of a few
years. The only thing they hold for a significant amount of time is the
prerequisite knowledge they needed to learn everything else they were taught.
This applies especially to subjects largely unrelated to their degree /
interests.

------
daotoad
Level 0 is missing here. They want to know if they can afford rent AND food
this month. They might be able to squeak by if nothing goes wrong. But
something always does. Whether the 12 year old car needs an expensive repair
or someone gets sick and misses work or even a parking ticket can leave them
struggling to get by.

Also missing is level 4: I don't have to work to be at level 3 levels of
comfort.

There's a tiny fraction who own significant wealth that are in a special level
5 or higher. "I don't care what _anything_ costs."

~~~
ryandrake
I don’t know... all these levels are over complicating a simple concept. The
way I look at wealth is binary: “Can I stop working today and maintain a
lifestyle that I am comfortable with indefinitely?” Most people, even those
who consider themselves well-off, cannot say yes to that question. People like
to try to gauge whether they are middle class or upper middle class or upper
lower middle class... whatever. There is no real defining characteristic. At
the end of the day, most of us are N missed paychecks away from insolvency. N
may be large but unless it’s infinite, we are in the same bucket: our labor
pays for our existence, not capital.

There are people who can just sit there collecting checks and their lifestyle
is never in jeopardy, because of investment income. They’re the only ones I’d
consider truly wealthy.

~~~
NeoBasilisk
Yep, people in the "upper-middle class" delude themselves into thinking they
are in some special transition zone between the serfs and the aristocrats. A
grasshopper is much larger than an ant, but neither are worthy of notice next
to a bear.

------
soperj
There's definitely another level of wealth there for the very few. Weird
thought one day while dreaming, if I somehow managed to get a job where I
cleared $1 million a week, it would still take me over 1500 years to attain
the net worth of Warren Buffet. If I managed to up that and clear $1 million a
day, I still wouldn't manage in my lifetime (224 years). That to me put in
perspective the insanity of the wealth of the very rich.

~~~
habitue
If you made $52M a year, with 5% growth per year in some super conservative
investment, you'd have Warren Buffet's wealth in 87 years

If you got 10% it would be 50 years

Warren Buffet is definitely impressive, but compounding capital is a huge
benefit

(Ok ok I ignored taxes, inflation blah blah)

Edit: just because this is fun: at $365M a year, you get WB wealth in 50 years
at 5% and 32 years at 10%

Edit2: if you take Berkshire Hathaway's historical annualized return (20.8%),
compounded quarterly, starting with $52M and no additional capital after that,
you get WB wealth in 36 years.

~~~
neaden
To be fair that would get you WB's present wealth. If Warren Buffet was still
alive and investing just like you did, you would never catch up. This is one
of the reasons social stratification can increase over time.

~~~
graff1994
He's still alive....

~~~
dpiers
The wording is a bit confusing, but I believe they are saying that it would
take that long to catch up to Buffett's current wealth. If you assume his
assets continue to grow at the same pace as yours, you will never catch up.

~~~
neaden
Yeah sorry, I was assuming he will die sometime in the next 50-87 years being
discussed and his money will be donated to charity. So Hypothetically if he
became immortal or decided to give all the money to his children. Since
historically the rate of return on capital is higher than the growth in income
the gap between people who inherit a lot of capital and wage earners tends to
increase over time.

------
Rotdhizon
I think about this very topic sometimes, but my levels are different. Mine are
something like

1\. Paycheck to paycheck. Includes constant worry and frustration about living
expenses and basic necessities. Any unexpected cost will lead to not being
able to pay the bills. Money is on your mind 24/7, life in this category is
hell. Very difficulty to escape this category once you fall into it.

2\. Able to afford living expenses with a little left over. I guess you'd call
this middle class? Or maybe upper lower class. These people have an income
that lets them pay their bills without worry, so they have a cushion of a few
hundred/thousand dollars a month. These people don't experience stress over
standard bills anymore, they are free to enjoy living life a bit fancy. Can go
out to eat at good restaurants, can afford to do miscellaneous activities.

3\. Anything above #2 really. This is the bracket and beyond that has plenty
of income in that expenses don't matter anymore. Stress about affording living
expenses is non-existent.

~~~
naturalgradient
I would disagree with 3 because there are many in 2 and 3 which can go to 1
just by losing their job and e.g. having one high medical bill (in the states
at least).

So surely there must be differentiation on whether any given job or emergency
can affect your standard of living significantly.

~~~
ck425
Medical bills aside (the US system is batshit!!) good financial planning
should make going from 2 and 3 to 1 far less likely. Unfortunately many people
don't bother to save significant backup funds while things are going well.

~~~
dsnuh
There's also divorce. Trust me, it can drop you down to 1 in a heartbeat.

------
dev_dull
The problem I have when discussing "wealth" is that it's almost always done in
comparison to others at this time. For example, I'm "rich" or "poor" compared
to the richest and poorest people around me today.

If we compared it with other people internationally, or even historically,
we're _filthy_ rich at almost any level of the ladder.

~~~
themodelplumber
That's a good point. I also don't like that these discussions of wealth are
always accompanied by a discussion of income and then they end. Especially in
an article where debt is featured so prominently. Significantly raising one's
income and seeing it as the sole dividing factor between oneself and others
becomes part of a false system of hope for many.

A saving habit _and_ reasonable living on one's income, no matter the level,
will _often_ quickly result in the kind of savings that will pay for those big
restaurant meals, if needed, or those vacations, if needed. My friends who are
good savers tend to take vacations to really nice places without needing to
spend a lot when they get there. So they have more money for the next
vacation, etc.

There are people who are unfairly saddled with debt, to whom this doesn't
really apply as readily, but it'd be nice if messages like "wow, sad, income
levels make life so hard" could be accompanied by "but here's what many of you
who are reading this can do at any level to feel on top of things." We are
short-changing our children by not bundling that more realistic discussion
with discussions of income.

~~~
ansgri
That's an interesting comment. It made me think about having two different
kinds of wealth: wealth enabling things and wealth freeing from problems. If
you can do fancy things with careful planning, that's one thing. Doing fancy
things without burdening yourself with complicated cost-benefit analysis is
the other, and it's probably the latter that gives more freedom and the one
the article talks about.

------
robbintt
Income is not wealth.

If prolonged inactivity will force a radical restriction in what you consume,
you are not wealthy.

Many people with high incomes think they are wealthy because of their income.
You are wealthy only if you have stored wealth.

See Picketty's "Capital in the 21st Century" for more about income
distribution and wealth distribution.

~~~
rch
Exactly. I think it's easier describe wealth in terms of time (yours and that
of others'), not income.

------
tptacek
This is pretty weird. I don't care how much flights and lodging costs, not
because I can afford to do whatever I want, but because I simply don't take
travel vacations very often. I can spend somewhat outlandishly on travel and
not ruin my annual budget. On the other hand, there are things I do routinely
that I have to be price sensitive about; for instance: I am price sensitive
about parking fees. For that matter, despite its status as "wealth level 2", I
am more price sensitive about restaurant meals than about travel.

~~~
ghshephard
Travel is highly variable and can get really expensive if you aren't super
careful, even if you aren't really going all out. A two-week vacation for two
to Europe, staying in the (not over the top) Four seasons, and going to
reasonably nice-restaurants could easily cost $20k airfare +8K accomodation +
$5K daily incidental. You have to be at different level of wealth to take a
$33K vacation without worrying about how to pay for it. I don't have any
friends at that level.

On the flip side, going out to dinner with friends, and discovering that you
may be on the hook for $100, and not stressing about how you are going to pay
for it, is withing reach of a lot more people. I have several friends who have
reached that level.

I think the levels are pretty good. Though I would also add two levels of
wealth that materially change people's happiness - L0 (Can I pay my bus fare,
rent, groceries without stressing. L0 is very, very real). And also, L4 -
which is no longer flying commercial. Being able to go where you want on your
schedule, without ever having to walk through an Airport/TSA is, I have heard,
a material change to personal happiness.

~~~
sternocleidom
Absurd

You can just as easily spend $1500 a person for a two week vacation in Europe
and enjoy essentially all the same things as if you're paying 10x as much.

$5K daily incidental, are you kidding me?

Don't fly business class unless your business is paying or you're on a
honeymoon or something.

~~~
ansgri
Offtopic, but: why would business actually pay for business class?

~~~
gok
So that employees don’t try to avoid critical business travel.

When Apple started flying engineers in business class to China, suddenly they
got dramatically more likely to go to work out production issues rather than
trying to convince management that the issues would work themselves out. A few
million dollars in employee travel was immaterial to the increase in
production reliability.

------
paulsutter
These seem more like levels of income than wealth (hint, the three levels are
not worrying about debt/dinner bills/vacation costs).

Wealth is the ability to generate such income levels passively (having control
over your time).

~~~
italicbold
Agreed, I spend about 95% of my earnings every month and dont worry about any
of these. I live a privileged life yet I have only accumulated $80,000 in
assets over the years which puts me in the lowest 40 to 59th percentile and
below the average americans net worth of 100k.

~~~
jonknee
> I spend about 95% of my earnings every month

> I live a privileged life yet I have only accumulated $80,000 in assets

Maybe you should save more? Even just spending 90% would make a huge
difference and then you can continue to live a privileged life forever.

------
kowdermeister
Here's another interesting breakdown based on net-worth:

[https://www.reddit.com/r/AskReddit/comments/2s9u0s/what_do_i...](https://www.reddit.com/r/AskReddit/comments/2s9u0s/what_do_insanely_wealthy_people_buy_that_ordinary/cnnmca8)

~~~
munificent
Ah, I'm glad someone else tracked this comment down. One of the most
fascinating things I've ever read on reddit.

------
aerovistae
I strongly disagree with the proposition that the final level is "you don't
care how much your vacations cost"\-- in fact I think it's downright
ridiculous and a person would only stop there for lack of imagination or for
modesty.

Because beyond those 3 levels is the world of "I can spend money to improve
the lives of people around me, or to improve the world in general" e.g.
starting foundations, making donations, seeing things created like hospitals
or homes or new companies....all of these are things some people would like to
do, and which require a level of wealth far beyond "I don't care what my
vacation costs."

~~~
throwawaymath
Sure, but in the context of lifestyle changes those are really the three major
leaps. This is a paradigm that looks at what categories of stress are removed
as your wealth increases, not how your raw capability to drive the means of
production changes.

The distinctions laid out across these three tiers are both practical and
relatable. Each step is another dimension of stress which subsumes the ones
below it, which implies that eliminating one level also eliminates the level
below it.

Level 1 means you have no debt. That already puts you well ahead of e.g. most
Americans. It means you don't have to worry about your purchases in the past.
Level 2 is a step beyond that, because it means you need not care about the
cost of small luxuries in the present. And at level 3, you need not care about
the size of large luxuries in the present.

The floor and utility of money increases categorically at each stage. Without
debt, you can focus on "things" unencumbered. If you don't need to worry about
the cost of restaurant bills, you can focus on "luxurious things". Vacations
realistically cost thousands of dollars. If you don't need to worry about the
cost of those, you can happily spend four or five figures on an "experience"
that lasts perhaps a week to a month. And if you're not truly not caring for
the cost of these things, at each step you can partake of the benefit many
times in one year.

I concur with another commenter that you can formulate a step 4, which is "I
don't need to work to enjoy step 3", but beyond that I think you're really
splitting hairs when it comes to lifestyle changes.

------
mfringel
I typically thought of "wealthy" as discernible through a single question:

"Is the vast majority of the money you spend on a daily basis from capital, or
wages?"

If capital, you're wealthy. If wages, you're not.

~~~
dcre
This used to work better than it does today due to the rise of very high
salaries in the past 30 years. It used to be that very rich people didn't
work. Now there are quite a few people who just get paid a ton. Though the
question of whether that's properly understood as wages or capital gets
blurry.

(Of course, if you work at a salary of $500,000 for a few years you start to
accumulate capital pretty quickly, but it would take a lot of saving for
investment income to get bigger than your salary.)

~~~
svachalek
I'd argue that until you have that accumulated capital, you are not wealthy
even if you may be living large.

~~~
mfringel
Precisely. "Living paycheck-to-paycheck, but with bigger numbers." is not
wealth.

------
jeffreyrogers
I wish there were data that distinguished between top 1% by income and top 1%
by wealth. Income inequality may be worth targeting in itself, but if the
turnover of top-1% income earners is high it doesn't matter as much as if it's
fixed. Similarly, if wealth is not being maintained generation after
generation then concentration is not as important either.

~~~
robbintt
Check out "Capital in the 21st Century" by Thomas Picketty. The picture is
bleak, and it describes how the truly wealthy (top 1% of stored wealth) must
self regulate or risk passing a tipping point.

And how they are failing to do so between 1980-2010, as modern conditions
globally approach those of the French Revolution.

------
vfc1
Other than focusing on caring about the price of restaurants or vacations,
what about adding financial independence to the equation?

Somehow that is something that does not seem to be valued enough when it comes
to this type of discussions.

Financial independence does not mean necessarily being rich, as much as it
means not needing to work for someone else and still be able to make a
comfortable living.

~~~
azag0
The independence can only ever be relative. No one is truly independent. As a
self-sufficient farmer, you depend on weather. As a millionaire, you depend on
the continuing functioning of the financial system.

------
jl2718
The fed’s net worth quantiles are all positive. It’s depressing to learn that
I came from the bottom of the bottom tier. Income was median, but my dad
bought (mortgaged) an ‘unbuildable’ foreclosed lot and we built a house as a
family activity in a rich town. I never knew the difference, didn’t even
notice the fancy clothes and expensive cars. I still don’t know what wealth is
supposed to feel like, nor do I care. I have zero interest in restaurants and
luxury travel. The more free I am with purchases, the more bullshit
accumulates in my life that I never use. If I had to choose objectively based
on experience, I’d probably stick with being poor. The best was zero money and
possessions as a vagabond because I was forced to be social to survive. But
I’m not throwing it away just yet, because that next level of wealth is
supposed to be oh so much better. Can’t wait for the disappointment on that
one.

------
beat
Along a similar vein, I define "rich" as "Could live comfortably for the rest
of one's life without ever 'working' again". No need for a wage-paying job, or
owning a business that requires day-to-day attention.

------
neap24
It's interesting that the charts everyone uses for share of household wealth
are from the 1970s until today. If you take it back a bit further, to the
30s/40s (or even further to 1916) the share of the lowest and middle classes
is significantly improved and the top 1% has lost wealth. It IS true that that
trend has been reversing since the 70s, but it's still not close to pre 30s
levels of inequality. I agree we need to figure out what's been going on since
the 70s, but I also kind feel like we need to include all the charts for the
best perspective.

------
thatthatis
I break it down into 5 levels of wealth/freedom:

Class 1: you can afford your current lifestyle without concern for daily
expenses, and could withstand 1 or more major emergencies (job loss, car
destroyed, $30,000 bill) without reducing your lifestyle.

Class 2: your assets are sufficient that with a reduction in lifestyle you
never have to work again.

Class 3: your assets are sufficient that with no reduction in lifestyle you
never have to work again.

Class 4: no amount of incremental wealth will increase the amount you’d spend
on a primary home, and you never have to work.

Class 5: no amount of incremental wealth will affect your spending on vacation
homes, yachts, or planes and you never have to work.

There are obviously levels of subsistence below these. But these are, to my
mind, the levels of wealth/freedom. Below these I wouldn’t call someone
financially secure or say have “financial freedom.”

I think when creating these tiers it’s important to acknowledge that lifestyle
is a variable and some people’s preferences make it easier to achieve
different levels. If you have caviar tastes, you need more money to make it
into class 1. If you are extremely frugal and well paid, it doesn’t take much
actual money to make it into class 5. Lifestyle vs freedom is a choice and
there’s a trade off - do you use extra money to buy lifestyle or to buy
freedom?

------
okmokmz
The self-identification chart is pretty interesting. It looks like within the
past few years ~10% of people who would have identified as lower/working class
are now identifying as middle/upper-middle despite the middle class continuing
to decline while the lower and middle-upper classes have slowly increased

------
coldtea
The levels seem arbitrary.

I'd make it (and like the ones in TFA, those all start above normal middle
class status and end below < 5 million dollars -- beyond that it's mostly
extravagance and political power and influence rather than actual quality of
life changes).

1) Level 1. I’m not stressed out about debt: People who no longer have to
worry about their credit card debt or student loans.

2) Level 2. I can buy for anything I fancy within reason (e.g. I could get buy
a new high-end laptop every year, lots of clothes, eat out regularly at fancy
restaurants, have a $5K watch and so on), but not extravagant stuff (e.g. no
Ferrari collection or yacht).

3) Level 3. I might work, but I don't have to work. I can take a vacation
anytime I want for as long as I want, and stay in a 5-star hotel for as long I
like.

------
paulpauper
I'm kinda amazed by how many wealth ppl there are in America, especially given
all the negative headlines about debt, student loans, ppl not having enough
for retirement, etc. It's actually easier to be a multi-millionaire
(statistically speaking) than a member of Mensa.

------
gwbas1c
There's always a $150 plate of macaroni and cheese, or a $25,000 heli-skiing
trip.

Don't define wealth by saying "you don't care what a meal or vacation costs."
You always care, it's more that most meals and vacations are easily
affordable.

~~~
sokoloff
I would expect there's a level of wealth (well, well above mine) where you
only ration time and attention and completely stop rationing money on meals
and vacations.

------
rsync
I think there are much more interesting ways to view hierarchies of wealth.

Level one is living on the fruits of ones labors. Your wealth is based on what
you do.

Level two is living on your assets, or capital. Your wealth is based on what
you have.

Level three (rare in 20th/21st century) is living on your conquest and
subjugation of others. Your wealth is based on who you are.[1]

[1] I speak not so much of colonial conquest, or subjugation of native peoples
by outsiders, but rather of local conquest - you may not have killed all the
other claimants to the local throne, but your grandfather did and nobody is
challenging you.

~~~
TeMPOraL
Is this a useful view, though? It seems like level 1 is 99% of people, level 2
is 1% of people, and level 3 doesn't happen in the western world.

~~~
carapace
> level 3 doesn't happen in the western world.

What? Crimea? Iraq?

[https://en.wikipedia.org/wiki/Annexation_of_Crimea_by_the_Ru...](https://en.wikipedia.org/wiki/Annexation_of_Crimea_by_the_Russian_Federation)

[https://en.wikipedia.org/wiki/Iraq_conflict_(2003%E2%80%93pr...](https://en.wikipedia.org/wiki/Iraq_conflict_\(2003%E2%80%93present\))

------
sulam
I think once you hit his final wealth level you realize there’s another one
that isn’t obvious to people lower down the wealth ladder. At some point your
assets are making a substantial portion of your annual income for you
passively. If you’ve hit that point, congrats. If not, you definitely know it
and are probably working toward it. And I wouldn’t be surprised if there isn’t
another break point above that, probably to do with how much you think about
the cost of large purchases like a home (or homes).

------
dredmorbius
I find Yonatan Zunger's "financial shock wealth" far more useful:

 _This number is probably the truest measure of a person’s real wealth: What
is the largest unexpected financial shock you could sustain without the cost
of that to you suddenly becoming ten times the original cost or more?_

[https://shift.newco.co/your-financial-shock-
wealth-4845e6dc1...](https://shift.newco.co/your-financial-shock-
wealth-4845e6dc1d2f)

------
GreenPlastic
I think there's a 4th level of wealth that wasn't mentioned which is financial
independence. This is independent of how you think about expenses - it's more
the freedom and stress removed of knowing you don't care if you're RIF'd and
you don't need to impress someone or depend on someone for income or a job.

------
JimTheMan
It's strange that he would classify how wealthy you are to be how discriminate
you are with prices in level 2 and 3. Spending as much as possible without
considering the value isn't something I would associate with wealth.

I think there are better, more tightly specified definitions in this thread.

------
ant6n
How about defining levels of wealth based on how you optimize your food/meals:

level 1: Optimize for most calories per $$$. My budget on food is money.

level 2: calories have become cheap, so I have to worry about getting fat. The
budget for food is calories.

level 3: I only ever optimize for time. The budget for food is how much time
meals take.

------
lisper
Level 4: I don't care how much I have to pay someone to work for me full time.

Level 5: Legal limits are the limiting factor in my political contributions.

Level 6: I don't care how risky an investment is because I won't even notice
if I lose the money.

Level 7: If I told you about this level, my life would be in danger.

------
cuillevel3
If you stop working today, how many months/years can you maintain your
standard of living?

~~~
icedchai
At least 20 years...

------
paulpauper
I think many can agree that there is another level: where money is as abundant
as air and dropping $50k is like taking a deep breath.

------
ww520
I think the author missed a level - stop working tomorrow and have no worry to
carry on with life.

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cryoshon
i get what the author was trying to say, but i'd put it differently (as others
in the thread have already indicated). i envision a few different modes of
life. these modes or levels are strongly entrenched. downward mobility is more
likely than upward mobility by a huge margin, but it still takes a large
negative shock to generate downward mobility.

level 0: primitive accumulation of non-liquid assets. the image here is a
homeless person trucking around all of their possessions in a shopping cart or
perhaps someone living in a shantytown. there is no ability to pay for any
kind of costs, except by the generosity of others. severe mental illness is
guaranteed.

level 1: destructive equilibrium. wealth remains constant (and low) despite
consistent or inconsistent income. this is where many of the working poor are
-- no getting ahead, but a large potential for falling behind. a small number
of fixed costs may be sustainable, but stability is very low and anxiety is
very high. there is no purchase which can be made without budgeting. mental
illness is highly probable.

level 2: unstable accumulation. wealth is low, but there is a slow rate of
accumulation of wealth. the wealth is often dipped into during times of
crisis, so on the long run, there isn't much compounding going on even if the
wealth does accumulate. many purchases require budgeting, but the smallest of
purchases (like a pack of gum) can escape deliberation. the rest of the
working poor and most of the "middle" class fall into this category. mental
illness is probable, because there is never true stability -- the amount of
wealth in the bank is never enough to protect against more than one problem at
a time.

level 3: stable accumulation. wealth accumulates reliably, and compounding
interest makes the long-term view rather rosy. less-trivial purchases like TVs
or nice dinners don't require deliberation. the real defining feature of this
level is that for the first time, the means for having nice things increases
over time. someone might be only able to afford one vacation a year at the
start of their career, but if they stay within this level they could afford
four by the end. mental illness is less likely because there are enough
resources to protect against more than one shock at a time. note that major
purchases like houses or cars are never beyond at least some deliberation for
this level, even if other things are. this is the "upper" middle class.

level 4: accelerating accumulation. these are the upper classes. shocks are
irrelevant to this level because a shock of sufficient size to threaten their
well-being would probably be the end of the world or at least major chaos. at
this level, budgeting does not really exist. the economic deliberations of the
lower levels are replaced by a consumption deliberation. the question is no
longer "can we afford this" but rather a purely hedonic "would i like to
have/do this". the wealth base at this level is so large that even excessive
consumption will not slow its accumulation by an amount which would require
cutting down on future excessive consumption. the people at this level hold
most of the world's financial resources.

is this view of things reductive? yep. the takeaway lesson is that the vast
majority of the people with a positive net worth do not have genuine
stability.

~~~
jandrese
I think you're overstating the effect of money on mental health. While I don't
disagree that homeless people suffer mentally and the working poor's high
stress levels are bad for health, it's not a guarantee that you'll go nuts.
People are more resilient than that. They had to be or we would have never
survived as hunter-gatherers.

I would like to reinforce your point about the super rich. They have so much
money now that it's basically impossible to spend it faster than its growing.
They will continue to accelerate away from the general populace for the
foreseeable future. This represents a tremendous failure of policy on the part
of our government. It's locking up more and more of the wealth of the country
at the top where it does nothing useful while the majority of the people who
drive the economy get squeezed harder and harder. It is the government's
responsibility in a capitalist system to prevent the capital feedback loop
from destroying the system--nobody else has the power or will to do it.

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oxymoron
These are to a large extent the same observations as the ones made by Thomas
Piketty in _Capital in the 21st Century_. I’m a classic liberal in the
Smith/Mill sense, but nevertheless found it to be a thoughtful criticism of
the capitalistic system. Besides a thorough look at the dynamics of wealth and
income inequality, Piketty’s main thesis is that the higher rate of return
that you typically see on capital, as compared to the equalizing effects of
economic, will lead to an ever increasing concentration of wealth unless
checked. I didn’t find his position to be anti-entrepeneurial, rather he seems
bothered by the fact that collecting rent tends to pay better than value-
creation through labour, including entrepeneurial efforts.

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timoth3y
Level 4; You don't know what your vacation cost.

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arisAlexis
the most important one is missing. when you don't need to work anymore. fuck
restaurants

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noelwelsh
The title is a bit misleading. This is mostly about inequality, using the
"three levels of wealth" are a jumping off point to explore how income
inequality has changed over time. The conclusion is nothing new: inequality is
rising.

