5 Levels of Wealth and How to Achieve Each

September 18, 2019
sabine peters Ge4iiScPJzQ unsplash

Your financial life is a journey. Each stage of wealth building comes with its own set of celebrations and challenges. Here’s a chance to measure your progress. Which level of wealth describes your financial situation and what will it take to move to the next level? Let’s unpack the 5 stages of wealth. We’ll help you understand the signs of success and potential traps you’ll find at each level.

If you want to go deeper into each stage, we talk through all of them in the corresponding Money Guy Show episode, The 5 Levels of Wealth: Which Stage of Wealth Are You At?

1. Financial Stability

This is the stage where you can pay your bills! 40% of Americans struggle to pay for basic needs, so being able to comfortably cover expenses is a great first step.

Traps to Avoid: At this stage, don’t fall into the trap of tunnel vision and only focusing on monthly payments. Now is the time to start building your emergency fund and making sure your deductibles are covered.

Indicators of Success: Developing the habit of saving money and eradicating any credit card debt are huge signs of success.

Even if you start small, these habits are exactly what will take you to the next level and give you peace of mind. Don’t be afraid to cut back, consolidate your expenses, and be savvy about how you spend your money. It will be well worth it!

2. Financial Strategy

At this stage, your army of dollar bills has a plan beyond simple cash reserves. Now is the time to make sure your money is working for you through investment tools like Roth IRAs and 401(K)s.

Traps to Avoid: Only 16% of Americans are saving more than 15% of their income each year. We believe people who are not saving at least 15% are missing a huge opportunity. Retirement saving falls on you, and The Financial Strategy stage is the time to think seriously about where your money is housed and taking advantage of compounding interest.

Indicators of Success: You know you’re on the right track at this stage when you’re saving 20-25% toward your future goals, you’re automating your financial life as much as possible, and you’re tracking your net worth each year.

3. Financial Security

At this stage, you don’t sweat the small stuff. You have confidence that your financial strategy and life are in a good place.

Traps to Avoid: Watch out for lifestyle creep. Splurging on your daily Starbucks or a nice family vacation is fantastic, but pay attention and make sure you are living within your means. Not only can overindulging cause you to slip into financial problems, it also takes the novelty out of those special purchases.

Indicators of Success: At this stage, you can spend money on small, unnecessary expenses without worrying about it. You can drink your Starbucks most mornings without question. This might be the time in life when you buy a luxury vehicle (cash or paying it off within twelve months), put that swimming pool in the backyard, or start creating memories through travel. Looking at your finances and realizing you have margin for some of your bucket list items is the beauty of this stage!

4. Financial Freedom

This is the level of wealth most people aspire to reach. At this stage, you can do what you want, when you want, how you want.

Traps to Avoid: Make sure your math is right. Don’t just assume your retirement savings are enough to support the kind of lifestyle you envision for yourself. Be honest about finding the “why” behind your work and know what you’re retiring to instead of just what you’re retiring from.

Indicators of Success: You know your army of dollar bills has worked hard enough to cover your cash flow needs. You can live the American dream of being your own boss and live with more flexibility. Try using The Millionaire Next Door formula (age x income / 10) to see how your net worth measures up (if you are under 40 check-out our formula modification in the video below). To qualify for this level of wealth, you should have a net worth double the number produced by the formula.

Reaching this milestone earns you The Millionaire Next Door title of Prodigious Accumulator of Wealth (PAW). This distinction is the point that you are considered Balance Sheet Affluent (as opposed to Income Statement Affluent, meaning high earners with low assets.) It means you have accomplished the goal of building an Army of Dollar Bills that can work as hard for you as you have over your working career. Take a deep breath and enjoy the accomplishment!

5. Financial Abundance

Money doesn’t restrict you anymore. You have additional freedom to vision plan and decide what kind of purpose and legacy you want to leave.

Traps to Avoid: At this stage, you don’t have to worry about travel expenses anymore, but don’t wait until this level to build experiences and memories. You’ll miss the journey along the way!

Indicators of Success: You’re concerned about the quality of the experience over the cost. And more importantly, you can look past yourself and focus on how to make the world a better place. How will you use your Financial Abundance for good?


No matter your stage of wealth, you can create strategies that will set you up for financial success and help you achieve the next level. We hope this breakdown inspires you and helps you find the right path to follow along your financial journey.

Unpack more details on each level of wealth in the corresponding Money Guy Show episode.

If you feel inspired and want to know more, watch The Money Guy Show on YouTube or listen wherever you get your podcasts.


Most Recent Episodes

Dave Ramsey vs. The Money Guy: Which Strategy is The Best?

Dave Ramsey has an incredible legacy of helping folks get out of debt and take control of their financial lives. We agree on a lot of things, but there are a few points of contrast. In this episode, we’ll discuss differences between The Money Guy Show and Dave Ramsey...

Top 4 Financial Mistakes We Saw This Year! (2022)

We saw some wild financial mistakes this year during the bear market. From making extreme changes to portfolio allocation, chasing the hot dot, and using too much leverage, we’ll talk about some of the biggest financial mistakes we saw in 2022 in this episode.   In...

How Millionaires Build Wealth! (With Dave Ramsey)

Join us for a very special episode as we welcome personal finance radio host and influencer Dave Ramsey to The Money Guy Show! There’s so much misinformation out there about building wealth. We had the pleasure of having a great conversation about how millionaires...

Do These 4 Things with Your Finances BEFORE 2023!

There are unique financial opportunities available at the end of the year - especially this year with the market down. In this episode, we’ll talk about what you need to do with your money BEFORE 2023! In this episode, you'll learn: What you need to do with your money...

How to Win When the Financial World is Burning!

Lately it’s felt like the financial world is in chaos, with rising interest rates, a falling stock market, and high inflation. Let’s talk about how to focus on what you can control and how to minimize the time spent worrying about what you can’t control. In this...

Financial Advisors React to RIDICULOUS Money Advice on TikTok!

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and TikTok is the new frontier. Is there good...

Loss Harvesting: Why Wealthy People Love It (And You Should Too!)

Tax-loss harvesting: what is it and should you be doing it? In this episode, we’ll cover everything you need to know about tax-loss harvesting, including whether it makes sense for you, how much it could save you in taxes, and how to eliminate the downside of loss...

The Market is Crashing! (Where Should You Put Your Money?)

The stock market has not had a great year so far. You might be asking yourself, “Since the market is crashing, where should I put my money now?” In this episode, we’ll discuss how to invest when the market is dropping and how to make the most of your money. In this...

Will Rising Interest Rates Tank the Economy?!

The Federal Reserve is raising interest rates to combat inflation, and many are concerned about how it will affect the economy. In this episode, we’ll discuss what rising interest rates means for your wallet and how to make the best of it. In this episode, you'll...

How to Be Wealthy By Age! (Can You Catch Up?)

How much does it take for you to meet your retirement goals by age, and what are some common traps your peers fall into? Learn more about how to be wealthy, mistakes to avoid, and exactly what a little extra saving can do for your retirement income. In this episode,...