WEBVTT - Moving Up The Wealth Ladder w/ Nick Maggiulli #1022 0:00:00.080 --> 0:00:02.960 Welcome to How to Money. I'm Joel and today I'm 0:00:02.960 --> 0:00:26.000 talking moving up the wealth ladder with Nick Majulie. Yes, 0:00:26.040 --> 0:00:27.840 I am glad to have a friend of the show 0:00:27.880 --> 0:00:31.520 and newly married Nick Majulie back on How to Money. 0:00:31.640 --> 0:00:34.440 He's been given the nickname NICKI Numbers because he has 0:00:34.440 --> 0:00:36.960 a special gift, I would say for conveying wonky money 0:00:36.960 --> 0:00:40.000 information in a straightforward and digestible way. It's kind of 0:00:40.040 --> 0:00:42.160 a tough task. I've been a fan of his blog 0:00:42.200 --> 0:00:45.000 of Dollars and Data for years now, and if you 0:00:45.040 --> 0:00:47.960 want to grow your net worth while finding more spending freedom, 0:00:48.159 --> 0:00:51.200 well that's what we're going to discuss today. So listen up. Nick, 0:00:51.360 --> 0:00:52.920 thank you so much for coming back on the show, 0:00:52.960 --> 0:00:54.960 my friend. Thanks for having me back on. Joel appreciate 0:00:55.000 --> 0:00:57.880 it of course. Okay, we asked you this question three 0:00:57.960 --> 0:01:00.240 years ago when you came on the podcast, which is 0:01:00.320 --> 0:01:01.720 what do you like to splurge on? We ask every 0:01:01.760 --> 0:01:04.440 guest that question. Matt and I spend what some would 0:01:04.440 --> 0:01:06.600 call or say too much money on craft beer, and 0:01:06.640 --> 0:01:10.080 we say, poppycock, we should spend lots of money on 0:01:10.120 --> 0:01:12.920 craft beer because it's totally worth it. What, especially as 0:01:12.920 --> 0:01:15.440 you've moved up the wealth out of these past few years, 0:01:15.600 --> 0:01:16.679 what are you splurging on? 0:01:17.080 --> 0:01:20.360 So previously three years ago I said I splurge on restaurants. 0:01:20.400 --> 0:01:22.480 I still do that. That hasn't changed. But if I 0:01:22.480 --> 0:01:24.399 have to pick, like, what are the two things I'm 0:01:24.400 --> 0:01:24.920 spending a. 0:01:24.880 --> 0:01:25.520 Lot more on. 0:01:26.200 --> 0:01:28.959 One is I'm starting We're gonna get into this when 0:01:28.959 --> 0:01:31.520 I talk about the wealth latter. I'm starting to splurge 0:01:31.520 --> 0:01:33.200 a little bit on travel here and there. So I 0:01:33.280 --> 0:01:36.520 might upgrade my seat to like a emergency row seat 0:01:36.880 --> 0:01:38.800 versus like I never I would always just take whatever 0:01:38.880 --> 0:01:41.680 is available. I might get more lagroom. I still haven't 0:01:41.720 --> 0:01:44.440 gotten to the upgrade to first class yet. That's I'm 0:01:45.040 --> 0:01:46.840 give me a few years and maybe I can afford that, 0:01:46.920 --> 0:01:48.920 But right now I'm not in that spot yet. So 0:01:49.120 --> 0:01:51.360 I'm upgrading to like the slightly nicer seat on the 0:01:51.360 --> 0:01:55.080 airplane splurge. The other thing I'm splurging a lot on 0:01:55.240 --> 0:01:57.720 is health. And it's just like it's the one thing. 0:01:57.760 --> 0:02:00.320 I'm in my mid thirties now, and so I know, 0:02:00.560 --> 0:02:02.760 especially for men after forty, you know, unless you take 0:02:02.760 --> 0:02:04.560 care of yourself, it can really start to slow down. 0:02:04.600 --> 0:02:07.320 And so I know biology is working against me eventually, 0:02:07.320 --> 0:02:10.920 But I'm doing everything I can and I'm splurging on whatever. 0:02:10.960 --> 0:02:11.840 Oh that costs how much? 0:02:11.880 --> 0:02:13.920 I don't care Like health for me is like I 0:02:13.919 --> 0:02:15.680 don't even think about the price tag when it comes 0:02:15.760 --> 0:02:17.280 to this stuff because I think it's one of the 0:02:17.320 --> 0:02:19.400 few things where if you don't have it, you would 0:02:19.400 --> 0:02:21.080 give away all your money to have it, and so 0:02:21.240 --> 0:02:24.280 I think it's that important. I think most people underspend, 0:02:24.320 --> 0:02:26.440 criminally underspend on health. Unfortunately. 0:02:26.480 --> 0:02:27.440 I think you're right entry. 0:02:27.560 --> 0:02:29.519 It's actually when you talk about spending on health, I 0:02:29.560 --> 0:02:32.000 think it's a really smart thing. But also there's a 0:02:32.000 --> 0:02:33.440 lot of things you can do to stay healthy. They 0:02:33.480 --> 0:02:35.440 don't cost that much money, right, And there's just all 0:02:35.440 --> 0:02:37.720 these articles about walking ten thousand steps a day or something, 0:02:37.800 --> 0:02:40.720 and most people can do that and at least hit 0:02:40.760 --> 0:02:43.120 the bare minimum. But yeah, spend money on the health stuff. 0:02:43.120 --> 0:02:45.840 I think that makes sense. And the exit road seats, 0:02:46.240 --> 0:02:48.560 I can sympathize with that. As someone who's six foot six, 0:02:49.080 --> 0:02:53.280 I'm getting to the point where I'm willing to bury 0:02:53.360 --> 0:02:55.040 my frugality just to touch so I can get an 0:02:55.040 --> 0:02:57.480 exit row seat. And you just got married. I mentioned 0:02:57.480 --> 0:03:01.120 that at the top I'm curious how you're thoughts about 0:03:01.160 --> 0:03:03.799 money have changed as you've been in a long term 0:03:03.840 --> 0:03:07.200 relationship and now you're tying the financial not has that 0:03:07.360 --> 0:03:10.840 taught you anything about money that maybe you didn't previously 0:03:10.919 --> 0:03:11.920 know or appreciate. 0:03:12.639 --> 0:03:15.120 Funny enough, I actually wrote about this on the blog 0:03:16.000 --> 0:03:19.040 my wife and I are then girlfriend. We actually started 0:03:19.200 --> 0:03:21.760 officially this year. We started like basically pooling our money. 0:03:21.760 --> 0:03:23.720 Even then we weren't technically married yet, and I knew 0:03:23.720 --> 0:03:25.359 we were going to get married within a few months, 0:03:25.760 --> 0:03:28.360 and so we kind of created this system, which I 0:03:28.400 --> 0:03:31.120 called the separate plus joint method. And the idea is, 0:03:31.639 --> 0:03:35.000 all of your income goes into one joint account, right, 0:03:35.080 --> 0:03:37.560 and then all of your expenses shared expenses go out 0:03:37.640 --> 0:03:40.800 of that account. And then over time, hopefully your income 0:03:40.880 --> 0:03:43.240 is greater than your expenses, so you're saving money, right. 0:03:43.560 --> 0:03:46.360 And then every let's savey quarter, we take an equal 0:03:46.400 --> 0:03:48.440 sized distribution out of the account, and then we invest 0:03:48.440 --> 0:03:51.040 that separately, so we have no joint investment account. The 0:03:51.080 --> 0:03:53.880 only joint property we will ever own is going to 0:03:53.920 --> 0:03:56.800 be a home. Outside of that, if she wants to 0:03:56.800 --> 0:03:59.680 go buy a rental property with her own assets, she 0:03:59.680 --> 0:04:01.680 can do. If I want to go buy something, I'm 0:04:01.680 --> 0:04:03.320 allowed to do that with my own assets. And so 0:04:03.760 --> 0:04:06.240 the thinking here is like, I want to provide full 0:04:06.280 --> 0:04:08.840 autonomy for both partners to invest kind of how they want. 0:04:08.840 --> 0:04:10.400 And of course we talk about it, Oh do you 0:04:10.400 --> 0:04:12.280 think we should be diversified this or that. Like we're 0:04:12.400 --> 0:04:14.400 very level headed about this and we're very open. We 0:04:14.440 --> 0:04:16.640 have discussions and I take her input, she takes mind, 0:04:16.720 --> 0:04:19.760 vice versa. But I think the big change here is 0:04:20.440 --> 0:04:23.640 allowing for autonomy because I know, at least historically, I 0:04:23.680 --> 0:04:25.880 know this was something This is especially for women who 0:04:25.880 --> 0:04:28.880 didn't really have any financial resources. It's controlled by one partner, 0:04:28.880 --> 0:04:31.080 and then they feel like they might be trapped in 0:04:31.080 --> 0:04:33.720 a relationship or something. And so I'm always like, hey, 0:04:33.800 --> 0:04:36.359 we should be splitting our assets over time, and like 0:04:36.440 --> 0:04:38.760 we each have our own assets, but obviously, you know, 0:04:38.800 --> 0:04:41.040 everything comes into the joint account, and so it's basically 0:04:41.040 --> 0:04:42.960 a pro ratus. So if I'm making seventy percent of 0:04:42.960 --> 0:04:45.599 the income, I end up paying seventy percent of the expenses, 0:04:45.839 --> 0:04:47.599 and vice versa. If we're making fifty to fifty, it 0:04:47.640 --> 0:04:50.400 goes both ways. And so this is true of regardless 0:04:50.440 --> 0:04:53.080 of who makes money. So that's it's a very simple system. 0:04:53.120 --> 0:04:54.880 And if you want more details, it's on my blog. 0:04:54.920 --> 0:04:57.440 You can search like probably joint method and you'll find 0:04:57.440 --> 0:04:58.479 the separate and joint method. 0:04:58.640 --> 0:05:01.479 Not to pry too much, did you guys sign a prenup? 0:05:01.520 --> 0:05:05.799 Because I had like pre existing conceptions of a prenup 0:05:05.800 --> 0:05:08.240 and it seemed at least from like my religious upbringing and. 0:05:08.240 --> 0:05:09.760 Stuff like why would you why would you do that? 0:05:09.800 --> 0:05:13.560 You're gonna stay married for life and so that talking 0:05:13.560 --> 0:05:16.160 to people about that and then realizing that, well, they're 0:05:16.200 --> 0:05:19.599 already like there's a prenup in place thanks to the 0:05:19.640 --> 0:05:23.479 state that you basically signed up for, and it varies 0:05:23.520 --> 0:05:25.440 state by state. I don't know, maybe you should be 0:05:25.480 --> 0:05:28.200 able to create your own. I'm curious what route you took. 0:05:28.440 --> 0:05:30.800 Yeah, so we did sign a prenup, and because I 0:05:30.839 --> 0:05:33.400 had a significant amount of assets coming and so did she. 0:05:33.680 --> 0:05:35.880 But she also there was another kind of twist here. 0:05:36.240 --> 0:05:39.240 So her father's a famous sculptor in Europe, and so 0:05:39.880 --> 0:05:43.240 technically all that inheritance, all that stuff, like if we're 0:05:43.279 --> 0:05:45.120 married and she gets that, that's like, you know, that 0:05:45.120 --> 0:05:47.520 would technically fall under marital property. I'm like, I don't 0:05:47.760 --> 0:05:50.520 want any claim on that stuff that's from your family, right, 0:05:50.560 --> 0:05:51.919 just like I don't want you to have any claim 0:05:51.960 --> 0:05:54.320 on anything from my parents' side, et cetera. And so 0:05:54.920 --> 0:05:57.800 everything's joint, it's being pulled and everything. So all that money, 0:05:57.839 --> 0:05:59.560 any money we make from the day we're married, and 0:05:59.600 --> 0:06:02.280 technically we even backdated it to January first of twenty 0:06:02.320 --> 0:06:06.120 twenty five, all that is equally split, right and until 0:06:06.160 --> 0:06:08.279 we ever get if we ever, god forbid, get a divorce, 0:06:08.320 --> 0:06:10.240 at that point, you know, then things would go back 0:06:10.240 --> 0:06:12.599 to separate. But the nice thing is, like over time, 0:06:12.640 --> 0:06:16.480 we're actually already splitting assets like over time. So in theory, 0:06:16.480 --> 0:06:19.240 if we ever were to get a divorce, financially, the 0:06:19.279 --> 0:06:20.800 only thing we'd have to really worry about is any 0:06:20.839 --> 0:06:23.200 sort of alimony. And then if we have a home, 0:06:23.279 --> 0:06:25.040 how do we deal with that? Those are the only 0:06:25.200 --> 0:06:27.880 real two big questions left. Everything else is going to 0:06:27.920 --> 0:06:30.240 be split over time. And I just thought it was 0:06:30.279 --> 0:06:32.320 a better method where she can feel like she has 0:06:32.320 --> 0:06:34.599 her assets, I have mine, and everyone feels comfortable with that, 0:06:34.640 --> 0:06:35.960 and she loves it. And I've had a lot of 0:06:36.000 --> 0:06:38.000 people reach out and said this is a great way 0:06:38.000 --> 0:06:39.560 of doing it. Not everyone does it some people love 0:06:39.600 --> 0:06:42.040 pulling everything. Some like having everything separate where they don't 0:06:42.080 --> 0:06:45.000 pay for anything. They everyone's but it's up, you know, 0:06:45.240 --> 0:06:45.839 tease their own. 0:06:46.120 --> 0:06:48.560 Last question on this, because some of the data does 0:06:48.640 --> 0:06:50.880 seem to point to the fact that couples who combine 0:06:50.920 --> 0:06:53.680 everything seem to be happier, or at least that's what 0:06:53.680 --> 0:06:56.080 they admit to in surveys. So does any part of 0:06:56.120 --> 0:07:00.400 you think that the siphoning off of finances from each 0:07:00.440 --> 0:07:02.880 other at least like kind of creating some barriers could 0:07:03.120 --> 0:07:05.320 lead to less intimacy. 0:07:06.400 --> 0:07:08.599 I don't know, ask me in ten years. 0:07:08.800 --> 0:07:11.840 But the thing though, is we track everything as a group, 0:07:11.920 --> 0:07:13.960 Like I have a Google sheet that has all of 0:07:14.000 --> 0:07:17.240 our assets basically flowing into it, like a rough approximation 0:07:17.280 --> 0:07:19.560 based on the number of shares we own of different 0:07:19.680 --> 0:07:22.120 you know, tickers and all this stuff. So I'm tracking 0:07:22.200 --> 0:07:24.640 and we review it basically, you know, once a month 0:07:24.680 --> 0:07:26.760 or once a quarter at least. We're looking through it together, 0:07:26.880 --> 0:07:28.840 so like we're very on the same page. We know 0:07:28.880 --> 0:07:31.320 about each other's assets. There's nothing that's hidden because when 0:07:31.360 --> 0:07:32.920 we did the prenup, we had to be very open 0:07:32.960 --> 0:07:36.000 about everything, so there's no real issue there. I'm not like, 0:07:36.040 --> 0:07:38.720 oh I wish everything was coming like we're working as 0:07:38.760 --> 0:07:41.360 a unit. This is just like, hey, like, those are 0:07:41.400 --> 0:07:42.960 your assets, and I want you to know that. So 0:07:43.160 --> 0:07:45.560 if God forbid, something happens to your mother, you don't 0:07:45.560 --> 0:07:48.360 have to come ask me for permission to go spend 0:07:48.360 --> 0:07:50.440 ten thousand dollars on your mother. And you never should 0:07:50.520 --> 0:07:52.120 have to do anything of that sort. If you want 0:07:52.160 --> 0:07:54.320 to use your separate assets, you can use them however 0:07:54.360 --> 0:07:54.680 you want. 0:07:54.720 --> 0:07:58.640 Basically, I think that working as a unit is key. 0:07:58.760 --> 0:08:02.680 I think like outlining that and pointing in the same direction. 0:08:02.800 --> 0:08:05.280 Even if you do keep something separate, that's what's going 0:08:05.360 --> 0:08:08.280 to make the difference, I think in your ability to 0:08:08.840 --> 0:08:11.800 care for each other over time, including your finances. All right, 0:08:12.080 --> 0:08:15.560 let's get to some talk about your book. You begin 0:08:15.640 --> 0:08:18.160 the book, you state that we've assumed that more wealth 0:08:18.240 --> 0:08:20.560 is better and then it can solve all our problems. 0:08:21.480 --> 0:08:24.080 And I do think that there is that assumption, maybe 0:08:24.120 --> 0:08:27.920 particularly in America more so than other countries, But is 0:08:28.280 --> 0:08:29.880 more wealth and not the answer for a lot of 0:08:29.880 --> 0:08:31.080 people to a better life. 0:08:31.480 --> 0:08:34.240 So more wealth helps when you don't have a lot 0:08:34.240 --> 0:08:36.520 of wealth, and we can talk about where that is. 0:08:36.559 --> 0:08:38.199 I have these different levels I come up with when 0:08:38.160 --> 0:08:39.520 we can go into that in a moment here, But 0:08:40.320 --> 0:08:42.520 the main idea is as you move up the wealth 0:08:42.600 --> 0:08:44.840 ladder and get into these different net worth tiers or 0:08:44.880 --> 0:08:48.800 wealth levels as I call them, money becomes less and 0:08:48.880 --> 0:08:51.400 less effective for solving your problems. Right, So, if you're 0:08:51.400 --> 0:08:53.040 in level one, which I say is that's less than 0:08:53.080 --> 0:08:55.960 ten thousand dollars in net worth, most of your problems 0:08:56.000 --> 0:08:59.000 are likely money problems. Money would literally solve most of 0:08:59.040 --> 0:09:01.240 your life problems. But by the time you get into 0:09:01.320 --> 0:09:03.320 let's say level five, which is ten million to one 0:09:03.400 --> 0:09:06.320 hundred million, or level six one hundred million plus, money 0:09:06.360 --> 0:09:09.400 is very likely not going to solve most of your problems. 0:09:09.400 --> 0:09:12.800 Your problems are like with relationships with people, business partners, 0:09:12.800 --> 0:09:14.679 et cetera. It's going to be with your health. Maybe 0:09:14.720 --> 0:09:17.160 you weren't taking care of your health, something we discussed earlier. Right, 0:09:17.520 --> 0:09:19.960 you can think start thinking through this. And the reason 0:09:20.040 --> 0:09:22.840 why is because you can't buy those things. You can't 0:09:22.840 --> 0:09:25.440 write your spouse a check and make her love you. Look, okay, 0:09:25.480 --> 0:09:27.760 here's the ten thousand dollars love me forever. It doesn't 0:09:27.760 --> 0:09:30.360 work that way, right, And the same thing's true with 0:09:30.400 --> 0:09:32.760 your health. You can't buy a new cardiovascular system, right. 0:09:32.760 --> 0:09:35.600 So when you start going through the motions of thinking 0:09:35.640 --> 0:09:39.040 through this, you realize money is very useful until you 0:09:39.080 --> 0:09:40.880 have a lot of it, and then it stops becoming 0:09:40.920 --> 0:09:43.440 as useful. It works very well to a point, and 0:09:43.480 --> 0:09:45.320 then everything else you've got to kind of have to 0:09:45.360 --> 0:09:48.120 work for you. There's no shortcut to a great marriage, 0:09:48.120 --> 0:09:50.480 there's no shortcut to being healthy, and you. 0:09:50.480 --> 0:09:51.280 Know, at least not yet. 0:09:51.280 --> 0:09:53.520 Maybe one day AI will solve all this stuff, but 0:09:53.600 --> 0:09:56.920 I just don't believe we can, you know, out engineer 0:09:57.040 --> 0:09:59.439 biology at this point. We're not at that point. We're 0:09:59.440 --> 0:10:01.080 getting better with a lot of the stuff, but you 0:10:01.120 --> 0:10:04.080 can't prevent you know, decay and all the type of 0:10:04.080 --> 0:10:05.160 stuff over time. 0:10:05.320 --> 0:10:08.200 A good example of that, I think is like celebrities 0:10:08.240 --> 0:10:11.920 have the same cell phone that I have essentially, right, Like, yeah, 0:10:11.920 --> 0:10:14.560 maybe mine's a few generations older because I've I haven't 0:10:14.640 --> 0:10:18.040 upgraded recently, but we essentially have the same device in 0:10:18.040 --> 0:10:20.960 our hands that we use fairly regularly. And yeah, maybe 0:10:20.960 --> 0:10:22.559 they've got a private jet, but I still get to 0:10:22.559 --> 0:10:23.800 go where I want to go. And so I think 0:10:23.920 --> 0:10:27.600 here you're talking about gradations of wealth and how how 0:10:27.640 --> 0:10:30.400 that can improve your life, partly in the wealth Ladder. 0:10:30.440 --> 0:10:33.320 And I'm curious too, like, why did you construct the 0:10:33.320 --> 0:10:36.040 wealth ladder the way you did? What made you think that? 0:10:36.120 --> 0:10:37.959 You don't call them wrungs, you call them levels. What 0:10:38.000 --> 0:10:40.840 made you? What made you say these are where I 0:10:40.880 --> 0:10:45.240 think the lines are that separate someone from being level one, 0:10:45.360 --> 0:10:47.400 level two, level three, and level four all the way 0:10:47.480 --> 0:10:48.320 up to level six. 0:10:48.559 --> 0:10:50.760 So I created these levels, and I'll walk through them 0:10:50.760 --> 0:10:55.520 in a second here because they were very easy to memorize. 0:10:55.559 --> 0:10:58.640 But more importantly, the data fit them very well. And 0:10:58.760 --> 0:11:01.599 I had thought of this idea years ago, but the 0:11:01.720 --> 0:11:03.800 data didn't fit them as well, and now they fit 0:11:03.880 --> 0:11:07.000 a lot better. And so that's what makes it useful. 0:11:07.000 --> 0:11:09.160 But even if we move the numbers, we can debate, 0:11:09.200 --> 0:11:11.360 oh maybe level four stops at eight million and not 0:11:11.400 --> 0:11:13.520 ten million in level five. We can sit here and 0:11:13.640 --> 0:11:16.760 if you want to go and hyper analyze it, you can, 0:11:17.120 --> 0:11:19.720 But at the end of the day, like it's about 0:11:19.760 --> 0:11:23.240 the general framework and the general direction of the idea 0:11:23.360 --> 0:11:26.000 and not the preciseness of the level. And that's the 0:11:26.000 --> 0:11:27.800 thing I try and get people to think about. When 0:11:27.840 --> 0:11:29.520 you're in level four, you're going to think a little 0:11:29.520 --> 0:11:31.600 differently than when you're in level three, even if the 0:11:31.720 --> 0:11:33.800 exact number is not there. So let me walk through 0:11:33.800 --> 0:11:36.000 the levels, and I'll also tell you how what percentage 0:11:36.040 --> 0:11:38.320 of US households are in each level. So, by the way, 0:11:38.320 --> 0:11:40.640 this is net worth. So take all your assets minus 0:11:40.640 --> 0:11:44.240 all your liabilities, right, and now that's gonna be everything 0:11:44.280 --> 0:11:47.240 you own. You know, so your car, your house, your cash, 0:11:47.400 --> 0:11:50.120 your stocks, et cetera, your four one K. Subtract out 0:11:50.120 --> 0:11:52.000 everything you owe to others. So any sort of mortgage 0:11:52.040 --> 0:11:54.280 at student loans, credit card, debt, et cetera. That's your 0:11:54.320 --> 0:11:57.120 net worth. Okay, And we're doing households, so that includes 0:11:57.160 --> 0:11:59.200 if you have a spouse whatever. That's called household net worth. 0:11:59.520 --> 0:12:02.240 Level one is less than ten thousand dollars. That is 0:12:02.240 --> 0:12:05.120 about twenty percent of US households. Level two is ten 0:12:05.240 --> 0:12:08.160 thousand to one hundred thousand dollars. That's also about twenty 0:12:08.200 --> 0:12:11.520 percent of US households. Level three is one hundred thousand 0:12:11.559 --> 0:12:14.800 to a million dollars. That's about forty percent of US households. 0:12:14.800 --> 0:12:16.439 That's what I would call the middle class in the 0:12:16.520 --> 0:12:20.440 United States. Level four is one million to ten million dollars. 0:12:20.480 --> 0:12:22.240 That's what I call the upper middle class in the 0:12:22.360 --> 0:12:25.599 United States, and that's about eighteen percent of households. And 0:12:25.600 --> 0:12:27.199 when I say upper middle class, that's supposed to be 0:12:27.280 --> 0:12:29.520 location agnostic. If you've got like five million bucks and 0:12:29.559 --> 0:12:32.400 you're in rural Alabama, you're definitely upper class. Oh, we 0:12:32.440 --> 0:12:34.520 can get into that a little bit too. Lastly, is 0:12:34.600 --> 0:12:37.040 level five and level six. Level five is ten million 0:12:37.080 --> 0:12:38.800 to one hundred million, and level six is one hundred 0:12:38.800 --> 0:12:41.920 million plus. Those two represent just the top two percent 0:12:41.920 --> 0:12:44.280 of households, and in level six there's only about eleven 0:12:44.320 --> 0:12:46.800 thousand of these households, and so they're very there's a 0:12:46.920 --> 0:12:51.120 very long tail, very small number of individuals in that bucket, right, 0:12:51.400 --> 0:12:54.560 And so from this, you know, just memorize level three. 0:12:54.720 --> 0:12:56.480 That's like one hundred thousand to a million. That's like 0:12:56.480 --> 0:12:58.679 the middle class. And also once you know level three, 0:12:58.679 --> 0:13:01.120 you can multiple multiply. I tend to go up a level, 0:13:01.160 --> 0:13:03.200 or divide by ten to go down a level. 0:13:03.440 --> 0:13:04.800 And so it's a. 0:13:04.800 --> 0:13:08.560 Very simple logarithmic scale. And I came up with it 0:13:08.559 --> 0:13:10.640 because I was like, hey, this actually fits the data 0:13:10.760 --> 0:13:13.520 very well and it's easy to memorize, and like, there's 0:13:13.559 --> 0:13:16.120 so many people that have done these wealth level ideas before, 0:13:16.200 --> 0:13:18.480 and none of them are You can't memorize them because 0:13:18.480 --> 0:13:20.480 they're so arbitrary. And oh and this is actually it's 0:13:21.120 --> 0:13:22.960 nine hundred thousand to eight million, and then this one's 0:13:22.960 --> 0:13:25.880 eight million to fourteen million. It's like, great, that's very 0:13:25.880 --> 0:13:28.440 precise and nice, but you're splitting hair so much that 0:13:28.480 --> 0:13:31.440 it's not as spreadable as an idea. Yeah, and so 0:13:31.600 --> 0:13:33.520 this is not I'm gonna admit, this is not perfect. 0:13:33.520 --> 0:13:35.760 There's no way that it's exactly ten million. There's no 0:13:35.800 --> 0:13:38.480 way it's exactly one to ten, right, everyone knows that. 0:13:38.679 --> 0:13:41.000 But as a framework, it's a much better way of 0:13:41.080 --> 0:13:43.640 thinking about the idea and then thinking about, Okay, what 0:13:43.679 --> 0:13:45.160 do I do in level four, and how is that 0:13:45.200 --> 0:13:46.800 different from what I would do if I were in 0:13:46.880 --> 0:13:49.240 level three or level five? And that's kind of the 0:13:49.559 --> 0:13:50.360 idea here. 0:13:50.280 --> 0:13:53.240 Which to your point there, I and I think this 0:13:53.280 --> 0:13:54.520 is one of the things that you're hitting on in 0:13:54.520 --> 0:13:57.840 your book is that maybe personal finance education is too 0:13:57.920 --> 0:13:59.960 one size fits all, and the advice that you might 0:14:00.120 --> 0:14:02.720 give to someone in level on level one of the 0:14:02.720 --> 0:14:06.480 wealth Ladder, you probably wouldn't give that same advice to 0:14:06.480 --> 0:14:10.240 somebody on level five, like, hey, cut your Netflix subscription back. 0:14:10.520 --> 0:14:13.640 That could be impactful at level one, right level five, Sorry, 0:14:13.679 --> 0:14:15.800 it's not even a drop in the bucket. It doesn't 0:14:15.960 --> 0:14:18.240 it doesn't register. So do you see a problem there 0:14:18.280 --> 0:14:20.200 with the advice that people get? And that maybe it 0:14:20.280 --> 0:14:22.600 is kind of like hammer and nail and it's the 0:14:22.640 --> 0:14:24.760 same thing over and over. Like I like to think 0:14:24.800 --> 0:14:28.600 of our audience as probably being either close to level three, 0:14:28.680 --> 0:14:31.120 in level three or aiming for level four. Those are 0:14:31.120 --> 0:14:34.000 the kind of people I'm speaking to, so I kind 0:14:34.000 --> 0:14:36.560 of have an idea of what advice to dish out. 0:14:36.800 --> 0:14:39.000 Whereas if I knew that most of my audience was 0:14:39.040 --> 0:14:41.680 level five and level six, I well, I probably wouldn't 0:14:41.840 --> 0:14:43.800 accrue that audience because that's how the kind of person 0:14:43.800 --> 0:14:44.440 I can speak to. 0:14:44.520 --> 0:14:47.000 You know, no exactly, And that's exactly the point. 0:14:47.080 --> 0:14:50.640 It's people get very good, especially personal finance content creators 0:14:50.720 --> 0:14:53.560 myself included. I fell victim to this as well. My 0:14:53.600 --> 0:14:56.080 first book, Just Keep Buying, is a great book for 0:14:56.120 --> 0:14:58.480 people in level three going to level four or level 0:14:58.520 --> 0:15:00.920 two going to level three. It doesn't work for people 0:15:00.920 --> 0:15:03.160 on level one because me telling them, oh, hey, all 0:15:03.160 --> 0:15:05.360 you need to do is just buy income producing assets 0:15:05.400 --> 0:15:07.280 like they don't have the income to do that. I 0:15:07.320 --> 0:15:10.040 do talk about raising your income. But if you know 0:15:10.360 --> 0:15:12.200 most of the books about investing right, so it's like, 0:15:12.400 --> 0:15:14.160 when you think about it in this way, you realize 0:15:14.160 --> 0:15:16.160 that like just keep buying wasn't great for people in 0:15:16.240 --> 0:15:18.840 level one, it wasn't the right solution for people trying 0:15:18.840 --> 0:15:19.200 to get to. 0:15:19.160 --> 0:15:20.280 Level five or level six. 0:15:20.320 --> 0:15:22.480 So I needed to zoom out and kind of come 0:15:22.560 --> 0:15:25.360 up with the higher level framework to view this through. 0:15:25.360 --> 0:15:28.440 And so you're exactly right in the advice needs to change. 0:15:28.480 --> 0:15:30.640 You need to think about it differently depending on where 0:15:30.640 --> 0:15:33.080 you are in your life, where your wealth is, et cetera. 0:15:33.120 --> 0:15:35.400 And that's that's the main idea here, is your financial 0:15:35.400 --> 0:15:37.840 strategy should change over time. And I think a lot 0:15:37.880 --> 0:15:39.960 of people just get caught in these habits and they 0:15:40.000 --> 0:15:41.800 just keep doing the same thing for a long time 0:15:42.120 --> 0:15:43.440 without reevaluating. 0:15:43.480 --> 0:15:44.520 Does this still make sense? 0:15:44.680 --> 0:15:46.640 So when you say your financial habits need to change, 0:15:46.760 --> 0:15:49.360 do you mean that you need to invest differently? 0:15:50.000 --> 0:15:50.320 Do you? 0:15:50.360 --> 0:15:52.000 And also it seems like one of the things that 0:15:52.040 --> 0:15:54.200 you're highlighting is that you need to at least think 0:15:54.240 --> 0:15:58.160 about spending differently, like as your wealth grows. It's okay, 0:15:58.280 --> 0:16:01.520 Like that term lifestyle create think gets beaten to pulp, 0:16:01.760 --> 0:16:04.400 you know in most personal finance circles. It's okay, Like 0:16:04.480 --> 0:16:06.760 the whole part of growing your net worth is that 0:16:06.800 --> 0:16:08.760 you can enjoy some of the some of the fruits 0:16:08.760 --> 0:16:10.960 of your labor. So how do you think then about 0:16:11.000 --> 0:16:14.080 what needs to change as you are moving up the ladder? 0:16:14.160 --> 0:16:16.360 Right, yeah, exactly, And so on the spending front, I 0:16:16.400 --> 0:16:19.160 can talk about that in particular. So in chapter one, 0:16:19.200 --> 0:16:21.120 which is about spending, right, the intro just tells you 0:16:21.120 --> 0:16:23.280 what the wealth latter is, and then chapter one's on spending, 0:16:23.400 --> 0:16:26.120 chapter two's on income, chapter three's on investment. So kind 0:16:26.160 --> 0:16:28.840 of these three big buckets understanding how the wealth latter 0:16:28.880 --> 0:16:32.680 fits with this, and on spending, the thing I really 0:16:32.720 --> 0:16:34.520 tried to come up with was a rule that allowed 0:16:34.560 --> 0:16:38.160 people to spend more over time without jeopardizing their long 0:16:38.240 --> 0:16:38.760 term wealth. 0:16:38.840 --> 0:16:38.960 Right. 0:16:39.040 --> 0:16:41.200 So that's basically like, how do you solve the problem 0:16:41.200 --> 0:16:43.080 of lifestyle creep? And so what I did for this 0:16:43.560 --> 0:16:46.040 I create something called the point zero one percent rule. 0:16:46.360 --> 0:16:48.320 And the idea is, if you take your net worth 0:16:48.360 --> 0:16:51.280 and multiply by point zero one percent, so that is 0:16:51.280 --> 0:16:53.920 you know, point zero zero zero one, or divide by 0:16:53.960 --> 0:16:56.120 ten thousand, that could be easier. So if you take 0:16:56.120 --> 0:16:58.160 your net worth and divide by ten thousand, that is 0:16:58.200 --> 0:17:01.560 approximately how much your net worth is throwing off daily, 0:17:01.600 --> 0:17:03.480 Like your wealth is just creating this daily. And if 0:17:03.480 --> 0:17:05.680