YO U R I NVE STI N G
Where Are You on the Wealth Ladder? From struggling to pay the bills all the way to mega-rich, thinking about the ‘wealth ladder’ can give you a new perspective on your spending, writes Jared Wooff of Zagga. Lotto advertisements are fantastic at selling you the dream of $50 million worth of wealth. Sometimes they talk about quitting work, taking holidays, buying houses. Or it’s something less cliché, like chartering a pirate ship for your kid, or bonding with your colleagues in Antarctica. But what really sells the dream is not the pirate ship or southern borealis … it’s the freedom. That’s the real attraction of being wealthy: freedom. There are lots of ways to think about levels of wealth, and one is by considering the six stages of wealth freedom, as set out in this blog by finance writer Nick Maggiulli. Each one is a considerable jump from the next – in both money and freedom. And the jumps get larger as you move up the ladder. Most of us start out at stage 1 and, with a bit of luck and some good planning, should reach stage 2 or 3; very few people ever make it to stage 5 or 6. Which stage are you at now – and which stages have you left behind?
Stage 3 Restaurant freedom When you are comfortably earning more than you spend every month, you reach the point of being able to go to a restaurant and choose anything off the menu without worrying about the price. Whether it’s a $42 steak or a $200 bottle of wine, you know your meal will not set you back financially.
Stage 1 Nothing to spare – very little wealth freedom You spend as much as you earn, or more, and you have negative or very low net worth. Maybe you’ve just started working, or you’re studying, or perhaps you have high levels of personal debt. As a result, your financial freedom is low and you must watch every dollar you spend.
Stage 2 Supermarket freedom When you no longer spend everything you earn, you gradually reach the stage of supermarket freedom. This is where you can make more choices when you shop. You can pay more for free-range eggs or fairtrade coffee without worrying that it will put a dent in your finances. S P R I N G 2 0 2 2 | I N F O R M E D I NVESTO R 3 4
