In the world, there are thousands of different ways to make money, and having wealth is the dream of many people. So, how can one acquire and accumulate wealth? Among the various factors that enable people to become richer, having a clear understanding of one’s own financial situation and the current position on the “wealth pyramid” is also a key aspect.
Recently, the famous financial blogger “Vincent Chan” proposed seven levels of wealth classification on his social media channel and connected it with the concept of “time wealth”. He emphasized that the measure of wealth is not how much money you make in concrete terms, but how long your wealth can support your life.
Moreover, he also put forward some suggestions on how to break through the level of wealth one is currently at. So, what are these seven levels of wealth, and how can one upgrade their wealth? Let’s take a look.
Typical Characteristics: Bank balance can only support a maximum of 30 days of living; survival mainly relies on monthly salary income.
At this stage, financial situation is extremely fragile, and every expense could potentially impact the next month’s life. Most people find themselves trapped in the “living paycheck to paycheck” status, where income barely covers daily expenses with no savings or emergency funds.
How to break through this level?
– Control expenses: Abandon the idea of self-numbing, have a clear understanding of your current financial situation; allocate every cent reasonably, reduce all unnecessary expenses, such as planning meals, avoiding impulse purchases, etc.
– Increase income: Whether you aim to reach the highest wealth level or not, you should find ways to increase your income.
Typical Characteristics: Having savings for two to three months of living expenses, but still anxious about financial situation, especially when spending money.
You no longer have to rely on next month’s salary to live, but still need to manage expenses carefully to avoid financial crises. Many college students and young professionals are in this stage, where they need to live frugally and minimize expenses as much as possible.
How to break through this level?
– Build emergency savings: Save an amount equivalent to six months of living expenses (about $33,000), ensuring enough financial cushion and deposit it into a high-yield savings account.
– Reasonable entertainment expenses planning: Avoid excessive spending, such as eating at home instead of dining out, drinking at a friend’s place instead of going to a bar, and carrying cash instead of credit cards when going out at night to avoid mindless spending, and more.
Typical Characteristics: Having savings for three to six months of living expenses, daily spending becomes relatively free.
The hallmark of this stage is that you start to feel some “breathing room” economically. For example, you can go out for a meal without repeatedly checking your bank account, occasionally treat yourself to something without worrying about next month’s rent. However, this stage also makes it easy for people to be content with the status quo and stagnate.
How to break through this level?
– Stay alert in comfort: Staying in the comfort zone is very tempting, so this stage can be a gentle trap that keeps you firmly in place and prevents you from advancing. Always stay alert and strive for more!
– Increase income: Consider further education, developing side businesses, or trying entrepreneurship to increase sources of income.
Typical Characteristics: Having savings for six months to a year of living expenses, no longer worried about sudden financial difficulties.
At this stage, your financial situation is stable enough that you don’t need to worry about every expense, and you can even start planning long-term goals like buying a house or investing.
How to break through this level?
– Prioritize asset investment: Purchase appreciating assets (such as stocks, real estate) and avoid depreciating purchases (like luxury goods).
– Allocate windfall income: Whenever you receive additional income (such as bonuses or gifts), invest all of it or at least put 50% into stable investments.
Typical Characteristics: Having savings for one to two years of living expenses, beginning to enjoy financial freedom.
You are no longer merely pursuing financial security but can freely choose how to live happily. At this stage, many people consider changing jobs, starting businesses, or even embarking on long-term travels because they have enough funds to support them.
How to break through this level?
– Tax optimization: Make full use of tax-advantaged accounts like 401(k), Roth IRA to reduce tax burden.
– Expand investments: Research and implement smarter, more successful investments to ensure continuous growth of funds.
Typical Characteristics: Assets are sufficient to support 30-60 years of living, passive income can fully cover daily expenses.
At this stage, your investment returns are enough to cover living costs, and work becomes a choice rather than a necessity. You can focus on interests, charity, personal growth, without worrying about money anymore.
How to break through this level?
– Expand income sources: Invest in real estate, start a business, build passive income systems.
– Learn to use debts: Like the wealthy, purchase appreciating assets through low-interest loans rather than solely relying on cash flow income. In the United States, the wealthiest individuals rarely buy properties directly but invest in commercial real estate, office buildings, apartments, or hotels through loans to create more wealth.
Typical Characteristics: Wealth can support not only your own life but also benefit future generations.
At this stage, your wealth no longer serves only yourself but can be used to establish funds, pass on to descendants, and even have an impact on society.
How to break through this level?
– Inherit wealth: Establish trust funds, estate planning to ensure the wealth is passed on from generation to generation.
– Influence the world: Invest in charity, social enterprises to create wealth with deeper and lasting values.
Which level of wealth are you currently at?
Observe yourself objectively from the side and evaluate rationally at which level of wealth you currently stand. Regardless of which level you are at, continuously optimizing financial management methods, making wealth growth a habit, are crucial action guidelines.
From cutting expenses to smart investments, each choice can help you gradually move towards higher levels of wealth. But ultimately, the question is, how much effort are you willing to put into your wealth future?