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[00:00:00.240 --> 00:00:02.800] Welcome back to another episode of Startups for the Rest of Us.
[00:00:02.800 --> 00:00:11.760] I'm your host, Rob Walling, and today I welcome Nick Majuli, the author of a new book called The Wealth Ladder that just came out today, actually.
[00:00:11.760 --> 00:00:15.600] And if you decide you want to pick up a copy of that book, it's of course on Amazon.com.
[00:00:15.600 --> 00:00:18.400] We will link to that in the show notes.
[00:00:18.400 --> 00:00:28.640] But Nick is the COO at Rit Holtz Wealth Management, and he's been blogging at Of Dollars and Data since 2017, so almost nine years.
[00:00:28.640 --> 00:00:37.360] He's an expert in data-driven personal finance, and he's given a lot of thought to the levels of wealth that people achieve.
[00:00:37.360 --> 00:00:43.280] And we're going to dive into the wealth ladder during this call and how level one is being paycheck to paycheck.
[00:00:43.280 --> 00:00:45.200] Level two is having grocery freedom.
[00:00:45.200 --> 00:00:48.800] It's a net worth of $10,000 to $100,000 and on up.
[00:00:48.800 --> 00:00:50.640] It's a really interesting conversation.
[00:00:50.640 --> 00:00:57.600] Nick has given a ton of thought to this topic, and he backs it up with personal experience, but also with data.
[00:00:57.600 --> 00:01:04.480] And, you know, he's followed and read the studies around money, happiness, and all these topics.
[00:01:04.480 --> 00:01:10.960] During our conversation, Nick and I talk about ways to invest and move up the wealth ladder.
[00:01:10.960 --> 00:01:26.800] And if you're an accredited investor and you're interested in indexing across hundreds of early stage, ambitious B2B SaaS companies, you should consider joining me and investing in TinySeed Fund 3.
[00:01:26.800 --> 00:01:30.720] Our investment thesis at TinySeed is starting to prove out.
[00:01:30.720 --> 00:01:38.000] We've had some great exits recently with Jim Desk, who you've heard on this podcast, as well as Scraping Bee.
[00:01:38.000 --> 00:01:47.920] And if you're interested in investing in mostly bootstrap founders who are building something different, head to tinyseed.com slash invest to check out some of our early results.
[00:01:47.920 --> 00:01:54.400] And if you decide to fill in that form, it goes directly to my co-founder, Enar's inbox, and he will reach out to you.
[00:01:54.400 --> 00:01:57.680] TinySeed.com/slash invest if you're interested.
[00:01:57.680 --> 00:02:00.000] And with that, let's dive into my conversation with Nick.
[00:02:08.840 --> 00:02:10.920] Nick Madruli, welcome to the show.
[00:02:10.920 --> 00:02:12.600] Thanks for having me on, Rob.
[00:02:12.600 --> 00:02:14.040] Yeah, it's great to have you here.
[00:02:14.040 --> 00:02:18.520] You are the author of two books, one from 2022 called Just Keep Buying.
[00:02:18.520 --> 00:02:31.160] But the reason you're on the show today is this episode goes live on July 22nd, which is the day that the wealth ladder will be available in Amazon and I'm guessing in all the places that you can buy books.
[00:02:31.160 --> 00:02:33.000] So excited to have you on.
[00:02:33.000 --> 00:02:35.560] Yeah, I'm excited for the book launch.
[00:02:35.560 --> 00:02:36.360] All right.
[00:02:36.360 --> 00:02:39.160] So I'm curious, you know, you've written so much.
[00:02:39.160 --> 00:02:43.000] So you blog at of dollarsanddata.com.
[00:02:43.000 --> 00:02:48.600] You've been a very prolific blogger for the past eight years, nine, eight years, it looks like.
[00:02:48.600 --> 00:02:49.960] It'll be nine at the end of this year.
[00:02:49.960 --> 00:02:50.680] So that's correct.
[00:02:50.680 --> 00:02:51.800] Eight and a half, let's say.
[00:02:51.800 --> 00:02:52.520] Congrats.
[00:02:52.520 --> 00:02:55.720] A lot of people, you know, so I used to, a lot of people used to be a blogger.
[00:02:55.720 --> 00:02:59.480] I blogged from 2005 until like 2011, 12-ish.
[00:02:59.480 --> 00:03:01.880] And then I moved to podcasting and YouTube and all that.
[00:03:01.880 --> 00:03:04.520] But you are like, this is a lost art.
[00:03:04.520 --> 00:03:05.400] Is it working for you?
[00:03:05.400 --> 00:03:08.600] Like blogging continues to be how you express yourself?
[00:03:08.600 --> 00:03:09.400] Yeah, I love it.
[00:03:09.400 --> 00:03:10.600] I just love writing.
[00:03:10.600 --> 00:03:13.640] I think it's more my medium where I can sit and really think through.
[00:03:13.640 --> 00:03:17.000] And I'm not a perfectionist, but I'm closer to a perfectionist than not.
[00:03:17.000 --> 00:03:24.520] So I can really get everything perfect for, you know, versus when I'm trying to go off the cuff, you know, I might say something not exactly as I'd want to, right?
[00:03:24.520 --> 00:03:27.800] And so I love writing and it still goes.
[00:03:27.800 --> 00:03:29.320] And, you know, web ads are great.
[00:03:29.320 --> 00:03:34.600] And, you know, people like, if you look at like, you know, per thousand views, what gets paid the most, it's actually bloggers.
[00:03:34.600 --> 00:03:35.480] It's not even close.
[00:03:35.480 --> 00:03:40.200] It's like 4x more than YouTube, it's more, it's much more than TikTok and much more than Twitter.
[00:03:40.200 --> 00:03:44.520] So, Pete, it's a lost art, but if you get people to read your stuff, it works well.
[00:03:44.520 --> 00:03:50.160] So, and you've written a lot and given out so much practical advice about money.
[00:03:50.480 --> 00:03:54.880] What motivated you to write the wealth ladder specifically?
[00:03:54.880 --> 00:03:59.840] As in, was there a gap in the advice you were seeing that brought you to write the book?
[00:04:00.160 --> 00:04:02.880] Yeah, and some of the gap I was creating in a way.
[00:04:02.880 --> 00:04:09.760] And so, I think a lot of the personal finance advice out there is very one-size-fits-all solution, like, hey, just do this.
[00:04:09.760 --> 00:04:11.760] And I even did that with just keep buying.
[00:04:11.760 --> 00:04:17.840] And the point when I wrote that first book, it was like, hey, if I know nothing about you, like, what piece of advice would I give you?
[00:04:17.840 --> 00:04:22.800] And that advice is, you know, the continual purchase of a diverse set of income-producing assets, et cetera, right?
[00:04:22.800 --> 00:04:27.120] And so that's like, I know nothing about you, no priors, you know, just keep buying.
[00:04:27.120 --> 00:04:28.160] But then I said, you know what?
[00:04:28.160 --> 00:04:29.840] What if I could control for something?
[00:04:29.840 --> 00:04:31.280] What if I knew something about you?
[00:04:31.280 --> 00:04:33.440] Like, I knew your starting wealth level.
[00:04:33.440 --> 00:04:40.000] And more importantly, if I knew where you wanted to go, like, oh, I want to get to that wealth level, then I could tailor the advice better.
[00:04:40.000 --> 00:04:44.160] I can kind of, it's more of like a choose your own adventure story instead of like a one-size-fits-all thing.
[00:04:44.160 --> 00:04:51.360] And so it's not that my one-size-fits-all solution was bad, but there are people that are deeply in debt, like just keep buying is not their answer, at least not yet, right?
[00:04:51.360 --> 00:04:56.240] And then people that are like, hey, I want to get to a major exit, I want to go 10 million plus, et cetera.
[00:04:56.560 --> 00:04:58.320] Just keep buying is not going to get them there either.
[00:04:58.320 --> 00:05:00.160] They're going to have to become an entrepreneur, et cetera.
[00:05:00.160 --> 00:05:08.480] And so I kind of zoomed out a little bit from the just keep buying framework and I just created a larger framework that says, hey, depends on where you want to go.
[00:05:08.480 --> 00:05:10.160] That's the thing you have to focus on.
[00:05:10.160 --> 00:05:12.000] So that's why I came up with the wealth ladder.
[00:05:12.240 --> 00:05:17.440] I wanted a more complete view of wealth building and not just a single answer.
[00:05:17.440 --> 00:05:21.120] And there's nothing wrong with the single answers, but a lot of people just say, hey, just do this and that's it.
[00:05:21.120 --> 00:05:24.960] That's all you got to do is just, you know, and I'm like, no, it really depends on where you're starting.
[00:05:24.960 --> 00:05:27.200] It depends on where you want to go, et cetera.
[00:05:27.200 --> 00:05:32.040] That's one reason we wanted to have you on the show is, you know, I'm a kind of a personal finance nerd.
[00:05:32.040 --> 00:05:44.680] I've read a lot of personal finance books, and the one-size-fits-all or fits-most approach isn't bad when 80% or 90% of people, say, in the country, are in the same kind of situation.
[00:05:44.680 --> 00:05:46.760] And I used to be in that situation, right?
[00:05:46.760 --> 00:05:50.920] It's like level one and level two people probably need the same type of advice.
[00:05:50.920 --> 00:05:58.360] But as I progressed in my journey and built a little more wealth, I did find that personal finance books didn't apply or didn't apply as much, and I had to kind of go out on my own.
[00:05:58.360 --> 00:06:03.320] So that's what we, you know, what we really liked about the wealth ladder framework that you have.
[00:06:03.320 --> 00:06:06.440] Now that we've gotten this far in the episode, let's define what that is.
[00:06:06.440 --> 00:06:08.280] I'd love to hear so folks can understand.
[00:06:08.280 --> 00:06:14.760] I've just used terms like a level one and level two, but talk us through what those six levels of wealth are.
[00:06:14.760 --> 00:06:18.360] Yeah, so the six levels of wealth are dependent on your net worth.
[00:06:18.360 --> 00:06:22.840] So as your listeners probably know, that's all of your assets minus all of your liabilities.
[00:06:22.840 --> 00:06:27.240] So that's, you know, assets, it's, you know, your car, your home, if you have a business, right?
[00:06:27.240 --> 00:06:31.000] Whatever the fair value is, your stocks, cash in your bank account, et cetera.
[00:06:31.000 --> 00:06:35.720] Subtract out any mortgage debt, business loan, credit card, et cetera.
[00:06:35.720 --> 00:06:36.760] And that gives you a number.
[00:06:36.760 --> 00:06:38.760] Let's hope that is a positive number, right?
[00:06:38.760 --> 00:06:42.040] And then depending on your net worth, you'll fall in one of the six levels.
[00:06:42.040 --> 00:06:45.240] The first level is less than $10,000 in net worth.
[00:06:45.240 --> 00:06:46.360] That's level one.
[00:06:46.360 --> 00:06:50.440] Level two is $10,000 to $100,000 in net worth.
[00:06:50.440 --> 00:06:53.960] Level three is $100,000 to $1 million in net worth.
[00:06:53.960 --> 00:06:56.840] Level four is $1 to $10 million in net worth.
[00:06:56.840 --> 00:06:59.720] Level five is $10 million to $100 million in net worth.
[00:06:59.720 --> 00:07:02.600] And level six is over $100 million in net worth.
[00:07:02.600 --> 00:07:07.400] And the nice thing about this is if you just memorize one of the levels, you can back out the rest.
[00:07:07.400 --> 00:07:09.320] You just divide by 10 or multiply by 10.
[00:07:09.320 --> 00:07:12.600] So I just say, like, hey, remember, level three is 100K to a million.
[00:07:12.600 --> 00:07:17.120] That also happens to be like where the middle class of the United States is in terms of wealth.
[00:07:17.120 --> 00:07:18.720] Around 40% of U.S.
[00:07:14.840 --> 00:07:20.000] households are in level three.
[00:07:20.560 --> 00:07:24.560] So that's according to the Survey of Consumer Finances data from the Federal Reserve.
[00:07:24.560 --> 00:07:26.240] So 40% are in level three.
[00:07:26.240 --> 00:07:27.920] You have 20% in level one.
[00:07:27.920 --> 00:07:29.120] That's less than 10,000.
[00:07:29.120 --> 00:07:31.840] 20% in level 2, that's 10 to 100,000.
[00:07:31.840 --> 00:07:34.880] So you have 80% of households in levels 1, 2, and 3.
[00:07:34.880 --> 00:07:37.200] 18% are in level 4 approximately.
[00:07:37.200 --> 00:07:38.160] That's 1% to 10 million.
[00:07:38.160 --> 00:07:39.440] That's like your upper middle class.
[00:07:39.440 --> 00:07:41.520] I mean, depending where you live, et cetera.
[00:07:41.520 --> 00:07:44.480] And then the last 2% is level 5 and up.
[00:07:44.480 --> 00:07:49.760] And level 6 in particular only has like 10,000, 11,000 households in there of over 100 million.
[00:07:49.760 --> 00:07:51.840] Very, very rare, long tail of wealth.
[00:07:51.840 --> 00:07:53.040] But that's the framework.
[00:07:53.040 --> 00:08:08.480] And the whole idea behind the wealth ladder is like, depending on which wealth level you're in, the strategy might need to change to get up to the next level, what to avoid changes, like all sorts of things are going to change how you spend money, how you can think about spending money, kind of having more spending freedom as you go up the ladder.
[00:08:08.480 --> 00:08:14.000] And so we can talk about income, spending investments within that and touch on any one of those things.
[00:08:14.000 --> 00:08:19.680] What I like to add on to that is like level one, you call paycheck to paycheck, which makes sense, less than $10,000 in net worth.
[00:08:19.680 --> 00:08:20.720] Yeah, that makes sense.
[00:08:20.720 --> 00:08:22.640] Level two is grocery freedom.
[00:08:22.640 --> 00:08:24.240] You can buy what you want at the grocery store.
[00:08:24.240 --> 00:08:25.680] Level three is restaurant freedom.
[00:08:25.680 --> 00:08:30.240] And I remember hitting that actually, like distinctly being like, wow, I don't look at the prices on menus anymore.
[00:08:30.240 --> 00:08:31.760] Level four is travel freedom.
[00:08:31.760 --> 00:08:33.200] You travel when and where you want.
[00:08:33.200 --> 00:08:34.560] Level five is house freedom.
[00:08:34.560 --> 00:08:36.400] You can likely afford your dream house with a little impact.
[00:08:36.400 --> 00:08:38.720] And then level six is impact freedom.
[00:08:38.720 --> 00:08:42.880] You can use money to have a profound impact on others.
[00:08:42.880 --> 00:08:46.720] The focus of this podcast is entrepreneurship.
[00:08:46.720 --> 00:08:52.240] And there's a lot of indie hackers, SaaS founders, and it's folks that are trying to change their station in life.
[00:08:52.240 --> 00:08:56.560] Like, that's often the number one goal is like, freedom, purpose, and relationships.
[00:08:56.560 --> 00:09:02.280] And freedom, of course, you know, you use the word freedom at every level, impact freedom, house freedom, travel freedom.
[00:08:59.920 --> 00:09:06.280] And so, the majority of our listeners are probably in levels one through three.
[00:09:06.520 --> 00:09:10.040] There's certainly a chunk in four and five as well.
[00:09:10.040 --> 00:09:19.880] What are the most important levers or the mindset shifts from moving up between levels, especially maybe from three to four?
[00:09:20.200 --> 00:09:26.040] Yeah, I think the biggest shift when going from three to four, and so like the big difference there is income, really.
[00:09:26.040 --> 00:09:29.400] I mean, income is true, it's across the wealth ladder.
[00:09:29.400 --> 00:09:35.240] But as you go from level three to four, I think, and that's once again, I'm defining that as the middle class to the upper middle class.
[00:09:35.240 --> 00:09:37.160] A lot of their life is very similar.
[00:09:37.160 --> 00:09:40.200] Like, they're probably on the same plane, but maybe they're sitting in different seats.
[00:09:40.200 --> 00:09:42.760] Like, they're probably, you know, living in adjacent neighborhoods.
[00:09:42.760 --> 00:09:45.400] They probably both own a home, but one's like a slightly nicer house, right?
[00:09:45.400 --> 00:09:50.600] And you, you go down, you know, one owns a Toyota, one owns a Lexus, maybe like they have very similar lifestyles.
[00:09:50.600 --> 00:09:53.160] One's just like slightly upgraded, and that's kind of what the upper middle class is.
[00:09:53.160 --> 00:09:58.040] It's not like you're flying private, you're not, you don't have a bunch of people on staff that are working for you necessarily.
[00:09:58.040 --> 00:10:00.680] You might have a company you own, but that's a that's a different type of thing.
[00:10:00.680 --> 00:10:04.280] I don't mean like personal, like chefs or drivers or things like that.
[00:10:04.280 --> 00:10:06.680] That's where you start to get into level five wealth.
[00:10:06.680 --> 00:10:26.280] But I think some of the mindset shifts as you, because at least how I framed it in the book, and when you're talking to business owners, a little bit different because how I frame it, most people that are in like level three, I'm like, Yeah, you just got to get a decent job, save money, put it, you know, buy income-producing assets, you know, buy a diversified basket of equities, stocks, bonds, et cetera, and just give it time and you will eventually get to level four.
[00:10:26.280 --> 00:10:27.400] And that's generally true.
[00:10:27.400 --> 00:10:29.720] You look at the data, it's it's pretty clear there.
[00:10:29.720 --> 00:10:38.120] But if you're a business owner, it's a little bit different because I think as a business owner, you need to create a business that you can eventually sell that doesn't just require your input.
[00:10:38.120 --> 00:10:39.400] And this is not even my idea.
[00:10:39.400 --> 00:10:51.120] This is like E-Myth Revisited, a very old book, which is like, Do you have a business or do you just have a glorified job where like you're like, yeah, you're making good money, you control your time, but like you are, without you, the business would fail completely.
[00:10:51.120 --> 00:11:00.320] And so I think the step you need to make as like an entrepreneur is like, how do you go from creating a business that relies on you to creating a business that you can actually sell to someone else?
[00:11:00.320 --> 00:11:05.280] And that is how you're going to get that jump into level four or even level five, obviously, if it gets big enough.
[00:11:05.280 --> 00:11:06.720] Now, once again, I'm not the expert on this.
[00:11:06.720 --> 00:11:10.240] I would defer to you on business stuff and you know, SaaS startups, et cetera.
[00:11:10.240 --> 00:11:23.520] But I think just mentally when I'm thinking about it, like the businesses that are sold that get people into level four are probably where the owner is not as necessary for the functioning of the business as I guess the businesses for those in level three are.
[00:11:23.840 --> 00:11:25.920] That's my guess just off the top of my head.
[00:11:25.920 --> 00:11:29.200] I haven't seen a ton of data on that, but that's just how I'm thinking about it.
[00:11:29.200 --> 00:11:31.040] And I don't know if you would agree or not.
[00:11:31.040 --> 00:11:33.120] Yeah, I would say very likely.
[00:11:33.120 --> 00:11:38.880] Most of the wealth that I see built in entrepreneurship is not actually from taking profit out of an operating business.
[00:11:38.880 --> 00:11:41.040] Most of it is from exits, is from selling it.
[00:11:41.040 --> 00:11:44.000] And that's something that a lot of folks I don't think are familiar with.
[00:11:44.000 --> 00:11:52.880] In your research or experience, and it doesn't need to be with entrepreneurs, but just in general, what does it take to move from level four to level five?
[00:11:52.880 --> 00:11:57.280] So to remind the listeners, level four is one to 10 million of net worth.
[00:11:57.280 --> 00:12:00.960] And so if someone's worth, I know a lot of folks actually who are worth two million bucks, three million bucks.
[00:12:00.960 --> 00:12:07.280] They either had some stock options at a, you know, at a big company or they've just saved over time or maybe they got a little bit of an inheritance from relatives.
[00:12:07.280 --> 00:12:08.880] So they're two and three million bucks.
[00:12:08.880 --> 00:12:14.880] But to get up to 10, 15, 20, 30, like you don't, I don't think you save your way to that, right?
[00:12:14.880 --> 00:12:20.160] So is there a common, what are the ways that you've seen or have heard of to make that jump?
[00:12:20.160 --> 00:12:29.600] So, excluding celebrities, athletes, entertainers who have these very huge contracts that will get them into that level five or above, for the most part, it's going to be entrepreneurship.
[00:12:29.600 --> 00:12:31.640] And you're taught what you already brought up, exits.
[00:12:31.640 --> 00:12:34.920] And I can just do the math for you that makes it very simple, right?
[00:12:34.920 --> 00:12:37.560] Let's say today you just got to a million dollars.
[00:12:37.560 --> 00:12:38.760] Let's just say you have a portfolio.
[00:12:38.760 --> 00:12:40.600] Let's ignore like home equity and all.
[00:12:40.600 --> 00:12:43.160] Let's just say you have a million dollars in a portfolio, right?
[00:12:43.160 --> 00:12:44.280] You got there today.
[00:12:44.280 --> 00:12:45.880] Remember, already that's already an accomplishment.
[00:12:45.880 --> 00:12:47.080] It's not easy to get to a million.
[00:12:47.080 --> 00:12:47.800] You got there today.
[00:12:47.800 --> 00:12:51.800] It's earning 5% a year and you're adding 100K to it every year.
[00:12:51.800 --> 00:12:55.160] So you're saving $100,000 after tax, a considerable amount of money.
[00:12:55.160 --> 00:12:57.320] Do you know how long it would take you to get to 10 million?
[00:12:57.320 --> 00:12:59.320] The answer is 28 years.
[00:12:59.320 --> 00:13:00.680] It's a long time.
[00:13:00.680 --> 00:13:05.640] That's 28 years of grinding, saving 100K after tax, like probably having to cut back in areas, right?
[00:13:05.640 --> 00:13:06.440] Like think about it.
[00:13:06.440 --> 00:13:08.360] Even if you're like, you know what, Nick, I can save even more.
[00:13:08.360 --> 00:13:09.400] I have an even higher income.
[00:13:09.400 --> 00:13:11.160] I'm going to save 300K a year.
[00:13:11.160 --> 00:13:13.160] You do the math there, guess how long it takes?
[00:13:13.160 --> 00:13:16.200] Start with a million, 5% a year, $300,000 a year.
[00:13:16.200 --> 00:13:17.400] It still takes 17 years.
[00:13:17.400 --> 00:13:19.640] It still takes almost two decades saving.
[00:13:19.960 --> 00:13:24.280] You have to be making almost a million dollars after tax and costs and everything to save 300K, right?
[00:13:24.280 --> 00:13:28.280] So it's like, it's an absurd amount of money and it's an absurd amount of time to get there.
[00:13:28.280 --> 00:13:40.680] So as you can see, like your traditional job is just not going to, you know, a nine to five or any of that, or even a business that's, you know, hey, I make 100K a year in profit, that's great, but that, if that's all your savings, that's not going to get you there, unfortunately.
[00:13:40.680 --> 00:13:42.440] And, you know, you can just do the math as well.
[00:13:42.440 --> 00:13:48.200] Like if you're saving 100K a year on a million dollars, that's 10% and you're increasing your wealth by 10% a year.
[00:13:48.200 --> 00:13:50.280] By the time you get to 5 million, it's 2%.
[00:13:50.280 --> 00:13:54.440] So your job or your income source is not moving the needle that much anymore.
[00:13:54.440 --> 00:13:56.920] So really, who are the people that get into level five and above?
[00:13:56.920 --> 00:13:59.240] It's basically always going to be entrepreneurs.
[00:13:59.240 --> 00:14:01.240] I mean, I don't know another way of getting there.
[00:14:01.240 --> 00:14:04.520] Obviously, ignoring trust fund, inheritance, marriage, all those types of things.
[00:14:04.520 --> 00:14:08.840] Like, in terms of actual career paths, it's going to be people that get into exits of some sort.
[00:14:08.840 --> 00:14:10.040] And there's two types, obviously.
[00:14:10.040 --> 00:14:22.160] There's like, hey, you own the full business and you sell for a decent amount of money, or you start early at a company at a startup, you get equity, and then that becomes a really big company, like an early Uber, or you got into NVIDIA before AI went on.
[00:14:22.240 --> 00:14:27.120] You know, all those people are worth in level five now just because they were early enough and they got enough stock options.
[00:14:27.120 --> 00:14:30.560] And then NVIDIA just went through the roof and became the most valuable company in the world.
[00:14:30.560 --> 00:14:32.480] So that's kind of what the data shows.
[00:14:32.480 --> 00:14:36.240] Like, not saying there's no other path, or you could wait a long time too.
[00:14:36.240 --> 00:14:40.480] You could have $2 million today and just wait, you know, another 40 years, you know, and you'll get to 10.
[00:14:40.480 --> 00:14:43.280] But that's who wants to have $10 million when they're 90, right?
[00:14:43.280 --> 00:14:44.480] That's not the purpose, right?
[00:14:44.480 --> 00:14:48.720] So when I'm thinking about these types of things, it really is entrepreneurship, business ownership.
[00:14:48.720 --> 00:14:50.640] And you see that in the investment data as well.
[00:14:50.640 --> 00:14:55.520] Like people in level five and six, the vast majority of their wealth is in private business ownership.
[00:14:55.520 --> 00:14:57.040] And I don't just mean like stocks, retirement.
[00:14:57.040 --> 00:15:00.000] I mean like actually owning some sort of a business.
[00:15:00.000 --> 00:15:01.600] Yeah, that makes a lot of sense.
[00:15:01.600 --> 00:15:10.800] Something I was really intrigued by is you emphasize spending based on wealth, not income, right?
[00:15:10.800 --> 00:15:13.920] And like income can be lumpy for entrepreneurs, right?
[00:15:13.920 --> 00:15:15.360] Or unpredictable.
[00:15:15.360 --> 00:15:20.240] So I guess how do you think about spending based on wealth versus income?
[00:15:20.240 --> 00:15:26.640] And I guess that relates pretty well to the feast or famine cycles, you know, that some entrepreneurs might experience.
[00:15:26.640 --> 00:15:29.440] Yeah, I think this is especially true for entrepreneurs who don't have that.
[00:15:29.440 --> 00:15:33.520] You know, every two weeks they're getting that same paycheck of the same amount.
[00:15:33.520 --> 00:15:36.560] And when I say this, of course you have to spend based on your income.
[00:15:36.560 --> 00:15:41.840] Like if you have zero income, like you know, your wealth's not going to throw off enough to live on unless you just have a lot of wealth already.
[00:15:41.840 --> 00:15:44.000] And then why are we even having the conversation?
[00:15:44.000 --> 00:15:48.480] But let's say, okay, you have your rent, you have whatever your mortgage, you have your fixed costs.
[00:15:48.480 --> 00:15:52.400] My question is: on that marginal spend, can I buy that extra thing?
[00:15:52.400 --> 00:15:55.120] Can I go and get that nicer meal at the restaurant?
[00:15:55.120 --> 00:15:57.120] Can I stay at that nicer hotel?
[00:15:57.120 --> 00:16:01.880] I came up with a rule for this, which is based on the wealth flatter, and it's called the 0.01% rule.
[00:16:01.880 --> 00:16:05.880] And so, all you do is you take your net worth and you multiply by 0.01%.
[00:15:59.600 --> 00:16:09.560] So, that's 0.0001, or more simply, divide by 10,000.
[00:16:09.560 --> 00:16:10.520] That's probably easier for people.
[00:16:10.520 --> 00:16:17.240] So, take your net worth, divide by 10,000, and that is how much your wealth is conservatively generating each day.
[00:16:17.240 --> 00:16:22.040] 0.01%, you do that over 365 days, that's about 3.7% a year.
[00:16:22.040 --> 00:16:23.880] I think it's a very conservative return.
[00:16:23.880 --> 00:16:29.640] If we assume that's happening every day, that's like kind of like your, it's trivial, it's a trivial amount of money.
[00:16:29.640 --> 00:16:35.240] So, when you're at the grocery store and you're like, hey, do I want to get the normal eggs or the cage-free eggs for $2 more?
[00:16:35.240 --> 00:16:38.920] If your net worth's over $20,000, that $2 is meaningless to you.
[00:16:38.920 --> 00:16:40.360] You can spend that $2, right?
[00:16:40.360 --> 00:16:45.720] And so, that's just a simple example, but it really maps onto the spending freedoms we talked about earlier.
[00:16:45.720 --> 00:16:54.120] So, someone in level two, which is $10,000 to $100,000 in net worth, by the time they get to $100,000, they can do kind of what they want at the grocery store.
[00:16:54.120 --> 00:17:05.160] And then, you know, in level three, I call that restaurant freedom because by the time you're at the end of level three, by the time you have a million, your wealth's throwing off a hundred bucks a day, you can kind of buy what you want at a restaurant, besides like the super expensive wine, basically.
[00:17:05.160 --> 00:17:07.320] So, and that just maps upward from there.
[00:17:07.320 --> 00:17:12.680] So, when you're thinking about spending, I like to use this rule because it allows your lifestyle to creep.
[00:17:13.080 --> 00:17:18.040] I think the personal finance industry has a problem because it's either, oh, you can't lifestyle creep at all, right?
[00:17:18.040 --> 00:17:20.120] And that's usually most of the advice out there.
[00:17:20.120 --> 00:17:26.600] And I'm saying you can, but only after you've built wealth, after you've shown some financial discipline, then you can start to spend more.
[00:17:26.600 --> 00:17:28.120] And the data actually shows that as well.
[00:17:28.120 --> 00:17:35.960] In general, people with higher incomes, higher wealth do spend more than those with lower incomes and lower wealth, but it rises more slowly than income, right?
[00:17:35.960 --> 00:17:40.040] So, like, the wedge between income and spending is just on average goes up over time.
[00:17:40.040 --> 00:17:41.800] So, the people with higher income save more, right?
[00:17:41.880 --> 00:17:43.480] Savings rate goes up basically.
[00:17:43.480 --> 00:17:45.280] So, that's just, you know, it's shown in the data.
[00:17:45.440 --> 00:17:58.240] People are already naturally kind of doing this, but this is a rule that makes it very easy to be like, hey, hey, you know, maybe I've, if you're like deep in level three, let's say you have $800,000 of your net worth, you're like, okay, I can go and buy what I want in a restaurant, but I still got a flight coach, you know?
[00:17:58.240 --> 00:17:59.600] And so that's how I think about it.
[00:17:59.840 --> 00:18:01.360] Or you just got into level four.
[00:18:01.360 --> 00:18:04.800] Okay, maybe you can get to a slightly nicer seat on the airplane, right?
[00:18:04.800 --> 00:18:09.120] Or you can stay at a slightly nicer hotel depending on, you know, where you are in level four, et cetera.
[00:18:09.120 --> 00:18:11.680] So these are just different ways I like thinking about this.
[00:18:11.680 --> 00:18:17.680] And it's not perfect, but it's, I'm just trying to get new frameworks out there to get people to rethink how they're spending money.
[00:18:17.680 --> 00:18:25.040] I heard you mention that on another podcast I was listening to, and I was really intrigued by it because I had never heard anyone talk about that divided by 10,000.
[00:18:25.040 --> 00:18:33.760] And I appreciate the specificity of each of these levels because I remember hitting each of them because I grew up at level one.
[00:18:33.760 --> 00:18:39.040] And I think by the time I was in high school, late high school, like I think my parents got to level two.
[00:18:39.040 --> 00:18:42.400] And then that was it, you know, and then I came out and then I was at level one, right?
[00:18:42.400 --> 00:18:44.160] You graduate, you become a construction worker.
[00:18:44.160 --> 00:18:46.480] And then I remember getting level two and it was entrepreneurship.
[00:18:46.480 --> 00:18:51.760] Like, well, I saved my, I had a good job as a developer and I saved my way into level two.
[00:18:51.760 --> 00:19:04.960] And I think maybe, because what level two is to 100K of net worth, I probably crept a little higher than that, you know, but then it was entrepreneurship side hustles, started putting money in the bank account at a rate that we weren't consuming it, right?
[00:19:04.960 --> 00:19:08.320] Because you kind of spend your salary, or at least that's the way we did mostly.
[00:19:08.320 --> 00:19:16.800] But once I started side hustling and making a couple grand a month and we just socked that away, that became like a, I felt like that was a bit of a cheat code at the time.
[00:19:16.800 --> 00:19:25.760] And I do remember suddenly being like, whoa, I don't really look at the grocery prices anymore versus when I was in college, if it was buy one, get one free, I just, I was like, I'm eating that.
[00:19:25.760 --> 00:19:27.840] I don't even know what that is, but it's cheap.
[00:19:27.840 --> 00:19:29.760] So I'm going to, you know, I'm going to buy that.
[00:19:30.200 --> 00:19:37.400] I want to switch it up and kind of double click on what I just said, which is side hustles, because I saw in the book, you do talk about entrepreneurship.
[00:19:37.400 --> 00:19:41.080] You talk about focus versus distractions.
[00:19:41.080 --> 00:19:46.600] And, you know, we do see a lot of founders and indie hackers that have a lot of side hustles going all at once.
[00:19:46.600 --> 00:19:52.920] And I'm curious, like in your research and experience, how do side hustles help at level three?
[00:19:52.920 --> 00:19:57.640] And when do they become maybe a barrier to building real wealth?
[00:19:57.640 --> 00:20:02.200] I guess that's a very difficult question because you don't know what something's going to become, right?
[00:20:02.200 --> 00:20:06.040] Like if I, if I had started like my blog of dollars and data, that was a side hustle.
[00:20:06.040 --> 00:20:09.240] For three years, I didn't make any money, but I also wasn't trying to make money.
[00:20:09.240 --> 00:20:10.440] I still had my full income.
[00:20:10.760 --> 00:20:12.280] I still to this day have a full-time job.
[00:20:12.280 --> 00:20:15.080] So I'm technically all this stuff I do is a side hustle.
[00:20:15.080 --> 00:20:19.480] But once you're, I was in level three, I was like, hey, I'm doing well, but like I want to do this other thing.
[00:20:19.480 --> 00:20:20.520] Who knows what it could lead to?
[00:20:20.520 --> 00:20:22.520] I didn't know anything about monetization of my content.
[00:20:22.520 --> 00:20:23.400] I didn't know about books.
[00:20:23.400 --> 00:20:25.000] I didn't had no plan to write a book.
[00:20:25.000 --> 00:20:25.640] Now I have two.
[00:20:25.640 --> 00:20:27.480] It's like all these things kind of happen.
[00:20:27.480 --> 00:20:29.480] And so I just happened into it.
[00:20:29.480 --> 00:20:33.160] In terms of your question of like, okay, so how do you know when it's helping or when it's not?
[00:20:33.160 --> 00:20:34.920] It's like, is it bringing an income?
[00:20:34.920 --> 00:20:36.760] Look at how much time you're spending too.
[00:20:36.760 --> 00:20:47.240] I know initially when you start a lot of these things, when I did my, I did my hourly wage for dollars and data back in like 2020, for every hour I worked, I'd earned like $12 an hour by the time I turned monetization on, right?
[00:20:47.240 --> 00:20:48.120] So it wasn't a lot.
[00:20:48.120 --> 00:20:51.320] But now if I redo that calculation, it's over $100 an hour.
[00:20:51.320 --> 00:20:52.760] And I'm using the same total hours.
[00:20:52.760 --> 00:20:55.560] It's just like my average hourly earning is now shooting up.
[00:20:55.560 --> 00:21:02.040] So I think that's the thing I would look at is like, is your average hourly earnings going up over time in that side hustle?
[00:21:02.040 --> 00:21:03.080] And you have to put in some time.
[00:21:03.080 --> 00:21:05.960] You can't be like, oh, I spent 10 hours one week encoding this and I didn't make any money.
[00:21:05.960 --> 00:21:07.800] Like, I've been at this for eight and a half years.
[00:21:07.800 --> 00:21:13.640] Like, you got to spend at least a year on some of these things and really try at them and say like, okay, that's not working or it is.
[00:21:13.640 --> 00:21:16.560] And then start looking, is your average hourly going up?
[00:21:16.560 --> 00:21:21.600] And if so, like, focus on the things that are working and you're going to have to abandon projects that aren't working.
[00:21:21.600 --> 00:21:25.280] And it's unfortunate, but like, I've tried a bunch of different stuff that hasn't worked, right?
[00:21:25.280 --> 00:21:26.640] And I just said, hey, you know what?
[00:21:26.640 --> 00:21:28.000] The thing that does work is writing.
[00:21:28.000 --> 00:21:30.080] And I just want to get as good as I can at writing.
[00:21:30.080 --> 00:21:30.960] And that's it.
[00:21:30.960 --> 00:21:32.960] It's still a side hustle and it's doing quite well.
[00:21:32.960 --> 00:21:39.120] I mean, I could in theory go all in on it, but I don't want to because it only requires, you know, five to 10 hours a week.
[00:21:39.120 --> 00:21:40.880] I put in that, I just write a blog post.
[00:21:40.880 --> 00:21:43.760] I have to write one blog post a week and that maintains everything I do.
[00:21:43.760 --> 00:21:45.440] I don't do all this other side stuff.
[00:21:45.440 --> 00:21:46.480] I don't get distracted.
[00:21:46.480 --> 00:21:51.120] I think when you're talking about distractions, like if you do start finding something to work, just keep doing that.
[00:21:51.120 --> 00:21:54.640] I've had so many people, oh, you should start a TikTok, you should start a YouTube, you should do this.
[00:21:54.640 --> 00:21:56.160] And maybe those would have worked out.
[00:21:56.160 --> 00:22:00.480] I have no idea, but the amount of time they would take is not even close.
[00:22:00.480 --> 00:22:08.320] It's like exponential, the amount of more time I have to put into this for an uncertain payoff, something that I'm, there's already a lot of competition out there.
[00:22:08.320 --> 00:22:13.120] As I said, like, you know, YouTube and all that pays, you know, one-fourth of what web ads pay.
[00:22:13.120 --> 00:22:19.600] And so it's like, why don't I just get even better at writing and do the thing I'm already kind of have some proof of work on this thing?
[00:22:19.600 --> 00:22:22.000] Or I guess product market fit is what you would say.
[00:22:22.240 --> 00:22:23.680] I have some product market fit on this.
[00:22:23.680 --> 00:22:26.080] And so it's like, I should just keep, you know, doubling down on that.
[00:22:26.080 --> 00:22:33.440] And so if I ever do go, I don't think I would go all in on this just because I don't want to be like a full-time influence or anything like that.
[00:22:33.440 --> 00:22:35.440] But for the time being, it really works.
[00:22:35.440 --> 00:22:37.760] I have the security of the job.
[00:22:37.760 --> 00:22:39.040] I like working with those people.
[00:22:39.040 --> 00:22:40.240] They also put out content.
[00:22:40.240 --> 00:22:41.360] So it's like a nice marriage.
[00:22:41.360 --> 00:22:42.880] Like we're all doing content marketing.
[00:22:42.880 --> 00:22:44.320] So we all learn from each other.
[00:22:44.640 --> 00:22:46.480] It's a win-win for everyone in the ecosystem.
[00:22:46.480 --> 00:22:48.480] So I got very lucky in that sense.
[00:22:48.480 --> 00:22:57.520] But that decision, I think where you really start to think about it is: is my side hustle paying me more than what I'm making from my full-time job?
[00:22:57.520 --> 00:23:10.040] And I don't think it has to happen right at that moment, but I think a better way is saying, okay, cumulatively, since I've started this job and started the side hustle, have I earned more cumulatively than I, with the side hustle than I have with the main job?
[00:23:10.040 --> 00:23:12.760] So let's say you started your job and the side hustle at the same time.
[00:23:12.760 --> 00:23:14.200] Let's just say that.
[00:23:14.200 --> 00:23:21.640] And okay, just now your ARR is higher than it is with your job, but cumulatively, you know, you haven't made enough.
[00:23:21.640 --> 00:23:25.000] So I would say keep going in the horse race until the cumulative number is higher.
[00:23:25.000 --> 00:23:29.400] And so that's a different way of thinking about it because it's not just saying, hey, I just had one good year.
[00:23:29.400 --> 00:23:36.200] It's like, oh, I've been having enough good years that now my side hustle has paid me more than my job has from, you know, time adjusted, basically.
[00:23:36.200 --> 00:23:37.880] So that's how I would try and do it.
[00:23:37.880 --> 00:23:42.200] Not just like, what's paying me more now, but what has paid me more over the same timeframe?
[00:23:42.200 --> 00:23:44.520] And that is the bigger thing to look through.
[00:23:44.520 --> 00:23:45.800] That makes a lot of sense.
[00:23:45.800 --> 00:23:49.560] Something we haven't touched on that I know is a big area of your expertise.
[00:23:49.560 --> 00:23:57.480] As you said, you work in wealth management and a lot of your blogging is around personal finance and investing.
[00:23:57.800 --> 00:24:07.160] If I'm at level two versus level three versus level four and up, I guess, like what are the differences between assets I should own?
[00:24:07.160 --> 00:24:13.080] You know, we hear 80, 20 equities versus bonds is the old rule that I don't, I don't own any bonds, man.
[00:24:13.080 --> 00:24:14.680] I'm not going to own bonds until I retire.
[00:24:14.680 --> 00:24:28.680] It's just a thing that I don't, I, but it's like if I'm worth 50,000 versus 500,000 versus 5 million, would you think the mix is similar or is there a different approach at those wealth levels?
[00:24:29.000 --> 00:24:30.840] I think it really depends on your goals.
[00:24:30.840 --> 00:24:40.840] I mean, if your goal is to, oh, hey, I just need a few million bucks and then I can, I want to be able to coast off that if I need to, then you're going to, you're going to see the person with 5 million is going to have more fixed income.
[00:24:40.840 --> 00:24:42.040] They're going to have more bonds, right?
[00:24:42.040 --> 00:24:42.840] Because there's safety.
[00:24:42.840 --> 00:24:47.120] And how much of that in bonds, that's open, that's going to vary by person, by risk tolerance.
[00:24:47.120 --> 00:24:50.640] I'm guessing in your case, you don't own bonds because you're like, I don't feel like they're growth-oriented.
[00:24:44.840 --> 00:24:51.520] You're like a tech person.
[00:24:51.680 --> 00:24:56.560] Like, it makes sense why you'd be more kind of all in on more of a high-growth, high-risk.
[00:24:56.560 --> 00:24:59.520] I mean, if you're an entrepreneur, you're probably going to be more risk-seeking, anyways.
[00:24:59.840 --> 00:25:04.560] I think allocations will change based more on the person and less on their wealth.
[00:25:04.560 --> 00:25:08.400] Their wealth does matter, their wealth level matters, but I think the person's a little bit more important.
[00:25:08.400 --> 00:25:12.080] So I think the person level two or three could have basically the same allocation.
[00:25:12.080 --> 00:25:15.600] By the time you get into level four, you're kind of want to be more in preservation mode.
[00:25:15.680 --> 00:25:17.520] Also depends on your liability structure.
[00:25:17.520 --> 00:25:25.840] Like if you have four kids, you're going to have probably a different asset allocation than if you're single or you're a dink, you know, two double income, no children, right?
[00:25:25.840 --> 00:25:28.800] That's the same, you know, I think that's going to be very different.
[00:25:28.800 --> 00:25:32.800] So it's more about your personal life than your wealth level necessarily.
[00:25:32.800 --> 00:25:37.600] I think wealth level does matter as you go higher up, and we can start getting into like how we could break that out.
[00:25:37.600 --> 00:25:41.040] But I think there are a lot of other things that impact asset allocation a bit more.
[00:25:41.040 --> 00:25:45.040] And even if you're an entrepreneur, you have lumpy monies coming in inconsistently.
[00:25:45.040 --> 00:25:51.840] You might want to own a fixed income allocation just because the income's coming in, whether it's not as high growth as equities, but it's also hedged a little bit.
[00:25:51.840 --> 00:25:54.800] If you have a tech startup and like tech is mostly the U.S.
[00:25:54.800 --> 00:25:56.480] economy now, you're kind of, if you own U.S.
[00:25:56.560 --> 00:26:00.960] stocks, you're kind of doubling down on what you're already doing, which is your income, right?
[00:26:00.960 --> 00:26:06.720] So I actually could make an argument for why you might need to own some fixed income, but it's really based on you, though.
[00:26:06.720 --> 00:26:09.120] At the end of the day, you have to feel comfortable with it.
[00:26:09.120 --> 00:26:12.480] As we move towards wrapping up, I want to ask you the age-old question.
[00:26:12.480 --> 00:26:14.560] You have an entire chapter with this title.
[00:26:14.560 --> 00:26:16.400] Does money buy happiness?
[00:26:16.560 --> 00:26:18.240] What's your sentiment on that?
[00:26:18.720 --> 00:26:22.400] I have my own thoughts, and I want to weigh in after you do, but I'd love to hear.
[00:26:22.720 --> 00:26:35.000] So, most people know the research, the first paper, which I mean, they may not know the name of the paper, but it's the Angus Deaton Daniel Kahneman paper, which is like, hey, after $75,000 in income, we don't see any more happiness.
[00:26:35.240 --> 00:26:41.960] Well, there's a guy named Matthew Killingsworth, came back, came out with another study that said, Hey, actually, after $75,000 a year, I'm still seeing happiness.
[00:26:41.960 --> 00:26:43.080] And they said, Hey, what's going on?
[00:26:43.080 --> 00:26:44.040] Like, someone has to be wrong.
[00:26:44.040 --> 00:26:44.600] Let's.
[00:26:44.600 --> 00:26:46.280] So they dug into the data.
[00:26:46.280 --> 00:26:47.960] Kahneman got with Killingsworth.
[00:26:47.960 --> 00:26:54.040] They went through all the data and they basically found that the original paper was, the measure wasn't as precise.
[00:26:54.040 --> 00:26:56.120] And so they were actually measuring unhappiness.
[00:26:56.120 --> 00:27:00.280] And so above $75,000 a year, you can't prevent unhappiness.
[00:27:00.280 --> 00:27:03.720] So you can be miserable at any income level, is basically what they're finding, right?
[00:27:03.720 --> 00:27:05.080] So it's a weird double negative.
[00:27:05.080 --> 00:27:07.320] You can't prevent unhappiness, but that's what they found.
[00:27:07.320 --> 00:27:14.040] And so Killingsworth paper was like, hey, no, if you're already happy, more money's probably going to make you happier.
[00:27:14.040 --> 00:27:19.880] But if you're not happy and you're not poor, by the way, because if you're poor, more money is probably going to make you happier too.
[00:27:19.880 --> 00:27:23.160] But if you're not happy and you're not poor, more money is not going to do a thing.
[00:27:23.160 --> 00:27:26.440] So all the people that are looking up, like, will more money make me happier?
[00:27:26.440 --> 00:27:31.560] If you're not poor already, and I'm assuming you're asking that because you're not happy, then the answer is no.
[00:27:31.560 --> 00:27:34.840] More money's not going to make you happier because you have some unhappiness already.
[00:27:35.160 --> 00:27:37.880] If you're happy already, more money is likely going to make you happier.
[00:27:37.880 --> 00:27:41.480] It's a very ironic thing that, like, if you're happy, more money is going to do it.
[00:27:41.480 --> 00:27:42.520] And that's what the data shows.
[00:27:42.600 --> 00:27:45.320] That's true both with income and even more so with wealth.
[00:27:45.320 --> 00:27:51.240] Killingsworth came out with a paper that looked at wealth specifically and like the wealthier people were, the happier they tended to be, right?
[00:27:51.400 --> 00:27:53.800] And that's, but once again, that's assuming they're happy already.
[00:27:53.800 --> 00:27:56.680] So there's all these weird kind of edge cases.
[00:27:56.680 --> 00:28:02.360] But yeah, so to summarize all that, I know there's a lot of research, but like if you're happy, more money will make you happier.
[00:28:02.360 --> 00:28:05.000] If you're poor, more money is likely to make you happier.
[00:28:05.000 --> 00:28:08.760] If you're not poor or you're not happy, more money is not going to do a thing.
[00:28:08.760 --> 00:28:10.600] And so that's the main takeaway there.
[00:28:10.600 --> 00:28:11.480] It's in the book.
[00:28:11.480 --> 00:28:20.320] And it's interesting because, you know, it makes you think like, okay, well, like, if I'm feeling great, if I'm not asking about happiness and I'm feeling great and stuff, more money is probably going to make you even happier.
[00:28:14.840 --> 00:28:22.720] But if you're like, oh, I'm not feeling good, I think, what is the issue?
[00:28:22.720 --> 00:28:23.520] Oh, it's my money.
[00:28:23.520 --> 00:28:28.080] No, it's probably not your money unless you're really in a financial blind.
[00:28:28.400 --> 00:28:30.240] Yeah, and that's been my experience as well.
[00:28:30.480 --> 00:28:38.560] I remember the first day of my life that I had $100,000 in the bank that I hit six figures or really of net worth, but it was mostly cash.
[00:28:38.560 --> 00:28:40.640] And I was like, wow, this is amazing.
[00:28:40.640 --> 00:28:42.800] And I remember when that balance was half a million.
[00:28:42.800 --> 00:28:46.640] And I remember when it was a million, you know, and I remember each level up.
[00:28:46.640 --> 00:28:55.680] And each time for me, it brought a sense of safety, like inner, almost inner peace of like, well, now I could take one year off from working.
[00:28:55.680 --> 00:28:57.600] Now I could take five years off from working.
[00:28:57.600 --> 00:28:58.800] Now I could take a decade.
[00:28:58.800 --> 00:29:00.880] I remember like kind of calculating it that way.
[00:29:00.880 --> 00:29:06.800] For me, it wasn't about, oh, now I can go buy a Maserati, even though I can, but it's just like, that's not, that's not why I did this, right?
[00:29:06.800 --> 00:29:15.200] I've done entrepreneurship for number one, for freedom, but two, for the purpose and the ability to, you know, control and work on whatever I want to work on.
[00:29:15.200 --> 00:29:24.320] But when I heard that study, the 75,000, and of course the headline that whatever it is, the USA Today or CNN pulls out is, oh, you don't need more than 75K a year because you don't get more happy.
[00:29:24.320 --> 00:29:26.000] And I was like, that's bull.
[00:29:26.000 --> 00:29:29.200] Like that is bull in my experience and has not.
[00:29:29.200 --> 00:29:34.960] And I heard some other folks like Sam Parr on my first million was talking and he said, no, I got happier with more money.
[00:29:34.960 --> 00:29:36.400] And I was like, yeah, me too.
[00:29:36.400 --> 00:29:43.200] And so that's what I appreciate about your sentiment is like you're framing it and not, it's not the social media clickbait headline.
[00:29:43.200 --> 00:29:47.120] It's like, no, in reality, if you are happy, make more money.
[00:29:47.120 --> 00:29:47.920] You have more freedom.
[00:29:47.920 --> 00:29:49.120] You have more happiness.
[00:29:49.120 --> 00:29:50.800] Yeah, but it's not an antidote to unhappy.
[00:29:51.120 --> 00:29:54.400] If you're unhappy, money is not going to solve that, right?
[00:29:54.400 --> 00:29:56.640] And once again, unless you're in like, let's just say level one.
[00:29:56.640 --> 00:29:58.800] If you're in level one and you're unhappy, it's probably money.
[00:29:58.800 --> 00:30:00.920] And if you think about like the levels, right?
[00:30:00.920 --> 00:30:03.800] When you're in level one, like most of your problems are probably money problems.
[00:30:03.800 --> 00:30:05.240] They could be solved by money.
[00:30:05.240 --> 00:30:06.760] Oh my gosh, I wish I didn't have to deal with this.
[00:30:06.760 --> 00:30:07.560] Money would solve it.
[00:30:07.560 --> 00:30:11.800] By the time you get to level five and six, money is not, is the least of your worries, most likely.
[00:30:11.800 --> 00:30:14.440] And it's more likely your relationships, your health, your time.
[00:30:14.440 --> 00:30:15.960] Like there's so many other things.
[00:30:15.960 --> 00:30:17.240] And that's what people don't focus on.
[00:30:17.240 --> 00:30:18.760] So that's what I try to talk about.
[00:30:18.760 --> 00:30:23.320] It's like in the book because I'm like, okay, obviously most people are never going to make it to level six, right?
[00:30:23.320 --> 00:30:26.840] But how do I still make it relevant to the typical person, even myself?
[00:30:26.840 --> 00:30:28.920] Like you have to talk about the non-financial things.
[00:30:28.920 --> 00:30:32.360] And those are things that people in level five and six can lose sight of.
[00:30:32.360 --> 00:30:34.760] You're the author of The Wealth Ladder.
[00:30:34.760 --> 00:30:40.120] And as of today, it's available at amazon.com or wherever greater books are sold.
[00:30:40.120 --> 00:30:43.400] We're going to have a link to buy that in the description.
[00:30:43.400 --> 00:30:49.080] And if folks want to keep up with you online, of course, you're blogging at of dollarsanddata.com.
[00:30:49.080 --> 00:30:53.240] And your ex-Twitter handle is dollarsanddata.
[00:30:53.240 --> 00:30:55.000] Nick, thanks so much for joining me today.
[00:30:55.000 --> 00:30:55.960] Yeah, thanks for having me on.
[00:30:56.040 --> 00:30:57.000] Appreciate that.
[00:30:57.000 --> 00:30:59.400] Thanks so much to Nick for joining me on the show.
[00:30:59.400 --> 00:31:04.280] The Wealth Ladder, again, is available on Amazon or wherever greater books are sold.
[00:31:04.280 --> 00:31:07.160] Thanks for listening this week and every week.
[00:31:07.160 --> 00:31:11.080] This is Rob Walling signing off from episode 784.

Prompt 2: Key Takeaways

Now please extract the key takeaways from the transcript content I provided.

Extract the most important key takeaways from this part of the conversation. Use a single sentence statement (the key takeaway) rather than milquetoast descriptions like "the hosts discuss...". 

Limit the key takeaways to a maximum of 3. The key takeaways should be insightful and knowledge-additive. 

IMPORTANT: Return ONLY valid JSON, no explanations or markdown. Ensure:
- All strings are properly quoted and escaped
- No trailing commas
- All braces and brackets are balanced
Format: {"key_takeaways": ["takeaway 1", "takeaway 2"]}

Prompt 3: Segments

Now identify 2-4 distinct topical segments from this part of the conversation.

For each segment, identify:
- Descriptive title (3-6 words)  
- START timestamp when this topic begins (HH:MM:SS format)
- Double check that the timestamp is accurate - a timestamp will NEVER be greater than the total length of the audio
- Most important Key takeaway from that segment. Key takeaway must be specific and knowledge-additive.
- Brief summary of the discussion

IMPORTANT: The timestamp should mark when the topic/segment STARTS, not a range. Look for topic transitions and conversation shifts.

Return ONLY valid JSON. Ensure all strings are properly quoted, no trailing commas:
{
  "segments": [
    {
      "segment_title": "Topic Discussion", 
      "timestamp": "01:15:30",
      "key_takeaway": "main point from this segment",
      "segment_summary": "brief description of what was discussed"
    }
  ]
}

Timestamp format: HH:MM:SS (e.g., 00:05:30, 01:22:45) marking the START of each segment.

Prompt 4: Media Mentions

Now scan the transcript content I provided for ACTUAL mentions of specific media titles:

Find explicit mentions of:
- Books (with specific titles)
- Movies (with specific titles)  
- TV Shows (with specific titles)
- Music/Songs (with specific titles)

DO NOT include:
- Websites, URLs, or web services
- Other podcasts or podcast names

IMPORTANT: 
- Only include items explicitly mentioned by name. Do not invent titles.
- Valid categories are: "Book", "Movie", "TV Show", "Music"
- Include the exact phrase where each item was mentioned
- Find the nearest proximate timestamp where it appears in the conversation
- THE TIMESTAMP OF THE MEDIA MENTION IS IMPORTANT - DO NOT INVENT TIMESTAMPS AND DO NOT MISATTRIBUTE TIMESTAMPS
- Double check that the timestamp is accurate - a timestamp will NEVER be greater than the total length of the audio
- Timestamps are given as ranges, e.g. 01:13:42.520 --> 01:13:46.720. Use the EARLIER of the 2 timestamps in the range.

Return ONLY valid JSON. Ensure all strings are properly quoted and escaped, no trailing commas:
{
  "media_mentions": [
    {
      "title": "Exact Title as Mentioned",
      "category": "Book",
      "author_artist": "N/A",
      "context": "Brief context of why it was mentioned",
      "context_phrase": "The exact sentence or phrase where it was mentioned",
      "timestamp": "estimated time like 01:15:30"
    }
  ]
}

If no media is mentioned, return: {"media_mentions": []}

Full Transcript

[00:00:00.240 --> 00:00:02.800] Welcome back to another episode of Startups for the Rest of Us.
[00:00:02.800 --> 00:00:11.760] I'm your host, Rob Walling, and today I welcome Nick Majuli, the author of a new book called The Wealth Ladder that just came out today, actually.
[00:00:11.760 --> 00:00:15.600] And if you decide you want to pick up a copy of that book, it's of course on Amazon.com.
[00:00:15.600 --> 00:00:18.400] We will link to that in the show notes.
[00:00:18.400 --> 00:00:28.640] But Nick is the COO at Rit Holtz Wealth Management, and he's been blogging at Of Dollars and Data since 2017, so almost nine years.
[00:00:28.640 --> 00:00:37.360] He's an expert in data-driven personal finance, and he's given a lot of thought to the levels of wealth that people achieve.
[00:00:37.360 --> 00:00:43.280] And we're going to dive into the wealth ladder during this call and how level one is being paycheck to paycheck.
[00:00:43.280 --> 00:00:45.200] Level two is having grocery freedom.
[00:00:45.200 --> 00:00:48.800] It's a net worth of $10,000 to $100,000 and on up.
[00:00:48.800 --> 00:00:50.640] It's a really interesting conversation.
[00:00:50.640 --> 00:00:57.600] Nick has given a ton of thought to this topic, and he backs it up with personal experience, but also with data.
[00:00:57.600 --> 00:01:04.480] And, you know, he's followed and read the studies around money, happiness, and all these topics.
[00:01:04.480 --> 00:01:10.960] During our conversation, Nick and I talk about ways to invest and move up the wealth ladder.
[00:01:10.960 --> 00:01:26.800] And if you're an accredited investor and you're interested in indexing across hundreds of early stage, ambitious B2B SaaS companies, you should consider joining me and investing in TinySeed Fund 3.
[00:01:26.800 --> 00:01:30.720] Our investment thesis at TinySeed is starting to prove out.
[00:01:30.720 --> 00:01:38.000] We've had some great exits recently with Jim Desk, who you've heard on this podcast, as well as Scraping Bee.
[00:01:38.000 --> 00:01:47.920] And if you're interested in investing in mostly bootstrap founders who are building something different, head to tinyseed.com slash invest to check out some of our early results.
[00:01:47.920 --> 00:01:54.400] And if you decide to fill in that form, it goes directly to my co-founder, Enar's inbox, and he will reach out to you.
[00:01:54.400 --> 00:01:57.680] TinySeed.com/slash invest if you're interested.
[00:01:57.680 --> 00:02:00.000] And with that, let's dive into my conversation with Nick.
[00:02:08.840 --> 00:02:10.920] Nick Madruli, welcome to the show.
[00:02:10.920 --> 00:02:12.600] Thanks for having me on, Rob.
[00:02:12.600 --> 00:02:14.040] Yeah, it's great to have you here.
[00:02:14.040 --> 00:02:18.520] You are the author of two books, one from 2022 called Just Keep Buying.
[00:02:18.520 --> 00:02:31.160] But the reason you're on the show today is this episode goes live on July 22nd, which is the day that the wealth ladder will be available in Amazon and I'm guessing in all the places that you can buy books.
[00:02:31.160 --> 00:02:33.000] So excited to have you on.
[00:02:33.000 --> 00:02:35.560] Yeah, I'm excited for the book launch.
[00:02:35.560 --> 00:02:36.360] All right.
[00:02:36.360 --> 00:02:39.160] So I'm curious, you know, you've written so much.
[00:02:39.160 --> 00:02:43.000] So you blog at of dollarsanddata.com.
[00:02:43.000 --> 00:02:48.600] You've been a very prolific blogger for the past eight years, nine, eight years, it looks like.
[00:02:48.600 --> 00:02:49.960] It'll be nine at the end of this year.
[00:02:49.960 --> 00:02:50.680] So that's correct.
[00:02:50.680 --> 00:02:51.800] Eight and a half, let's say.
[00:02:51.800 --> 00:02:52.520] Congrats.
[00:02:52.520 --> 00:02:55.720] A lot of people, you know, so I used to, a lot of people used to be a blogger.
[00:02:55.720 --> 00:02:59.480] I blogged from 2005 until like 2011, 12-ish.
[00:02:59.480 --> 00:03:01.880] And then I moved to podcasting and YouTube and all that.
[00:03:01.880 --> 00:03:04.520] But you are like, this is a lost art.
[00:03:04.520 --> 00:03:05.400] Is it working for you?
[00:03:05.400 --> 00:03:08.600] Like blogging continues to be how you express yourself?
[00:03:08.600 --> 00:03:09.400] Yeah, I love it.
[00:03:09.400 --> 00:03:10.600] I just love writing.
[00:03:10.600 --> 00:03:13.640] I think it's more my medium where I can sit and really think through.
[00:03:13.640 --> 00:03:17.000] And I'm not a perfectionist, but I'm closer to a perfectionist than not.
[00:03:17.000 --> 00:03:24.520] So I can really get everything perfect for, you know, versus when I'm trying to go off the cuff, you know, I might say something not exactly as I'd want to, right?
[00:03:24.520 --> 00:03:27.800] And so I love writing and it still goes.
[00:03:27.800 --> 00:03:29.320] And, you know, web ads are great.
[00:03:29.320 --> 00:03:34.600] And, you know, people like, if you look at like, you know, per thousand views, what gets paid the most, it's actually bloggers.
[00:03:34.600 --> 00:03:35.480] It's not even close.
[00:03:35.480 --> 00:03:40.200] It's like 4x more than YouTube, it's more, it's much more than TikTok and much more than Twitter.
[00:03:40.200 --> 00:03:44.520] So, Pete, it's a lost art, but if you get people to read your stuff, it works well.
[00:03:44.520 --> 00:03:50.160] So, and you've written a lot and given out so much practical advice about money.
[00:03:50.480 --> 00:03:54.880] What motivated you to write the wealth ladder specifically?
[00:03:54.880 --> 00:03:59.840] As in, was there a gap in the advice you were seeing that brought you to write the book?
[00:04:00.160 --> 00:04:02.880] Yeah, and some of the gap I was creating in a way.
[00:04:02.880 --> 00:04:09.760] And so, I think a lot of the personal finance advice out there is very one-size-fits-all solution, like, hey, just do this.
[00:04:09.760 --> 00:04:11.760] And I even did that with just keep buying.
[00:04:11.760 --> 00:04:17.840] And the point when I wrote that first book, it was like, hey, if I know nothing about you, like, what piece of advice would I give you?
[00:04:17.840 --> 00:04:22.800] And that advice is, you know, the continual purchase of a diverse set of income-producing assets, et cetera, right?
[00:04:22.800 --> 00:04:27.120] And so that's like, I know nothing about you, no priors, you know, just keep buying.
[00:04:27.120 --> 00:04:28.160] But then I said, you know what?
[00:04:28.160 --> 00:04:29.840] What if I could control for something?
[00:04:29.840 --> 00:04:31.280] What if I knew something about you?
[00:04:31.280 --> 00:04:33.440] Like, I knew your starting wealth level.
[00:04:33.440 --> 00:04:40.000] And more importantly, if I knew where you wanted to go, like, oh, I want to get to that wealth level, then I could tailor the advice better.
[00:04:40.000 --> 00:04:44.160] I can kind of, it's more of like a choose your own adventure story instead of like a one-size-fits-all thing.
[00:04:44.160 --> 00:04:51.360] And so it's not that my one-size-fits-all solution was bad, but there are people that are deeply in debt, like just keep buying is not their answer, at least not yet, right?
[00:04:51.360 --> 00:04:56.240] And then people that are like, hey, I want to get to a major exit, I want to go 10 million plus, et cetera.
[00:04:56.560 --> 00:04:58.320] Just keep buying is not going to get them there either.
[00:04:58.320 --> 00:05:00.160] They're going to have to become an entrepreneur, et cetera.
[00:05:00.160 --> 00:05:08.480] And so I kind of zoomed out a little bit from the just keep buying framework and I just created a larger framework that says, hey, depends on where you want to go.
[00:05:08.480 --> 00:05:10.160] That's the thing you have to focus on.
[00:05:10.160 --> 00:05:12.000] So that's why I came up with the wealth ladder.
[00:05:12.240 --> 00:05:17.440] I wanted a more complete view of wealth building and not just a single answer.
[00:05:17.440 --> 00:05:21.120] And there's nothing wrong with the single answers, but a lot of people just say, hey, just do this and that's it.
[00:05:21.120 --> 00:05:24.960] That's all you got to do is just, you know, and I'm like, no, it really depends on where you're starting.
[00:05:24.960 --> 00:05:27.200] It depends on where you want to go, et cetera.
[00:05:27.200 --> 00:05:32.040] That's one reason we wanted to have you on the show is, you know, I'm a kind of a personal finance nerd.
[00:05:32.040 --> 00:05:44.680] I've read a lot of personal finance books, and the one-size-fits-all or fits-most approach isn't bad when 80% or 90% of people, say, in the country, are in the same kind of situation.
[00:05:44.680 --> 00:05:46.760] And I used to be in that situation, right?
[00:05:46.760 --> 00:05:50.920] It's like level one and level two people probably need the same type of advice.
[00:05:50.920 --> 00:05:58.360] But as I progressed in my journey and built a little more wealth, I did find that personal finance books didn't apply or didn't apply as much, and I had to kind of go out on my own.
[00:05:58.360 --> 00:06:03.320] So that's what we, you know, what we really liked about the wealth ladder framework that you have.
[00:06:03.320 --> 00:06:06.440] Now that we've gotten this far in the episode, let's define what that is.
[00:06:06.440 --> 00:06:08.280] I'd love to hear so folks can understand.
[00:06:08.280 --> 00:06:14.760] I've just used terms like a level one and level two, but talk us through what those six levels of wealth are.
[00:06:14.760 --> 00:06:18.360] Yeah, so the six levels of wealth are dependent on your net worth.
[00:06:18.360 --> 00:06:22.840] So as your listeners probably know, that's all of your assets minus all of your liabilities.
[00:06:22.840 --> 00:06:27.240] So that's, you know, assets, it's, you know, your car, your home, if you have a business, right?
[00:06:27.240 --> 00:06:31.000] Whatever the fair value is, your stocks, cash in your bank account, et cetera.
[00:06:31.000 --> 00:06:35.720] Subtract out any mortgage debt, business loan, credit card, et cetera.
[00:06:35.720 --> 00:06:36.760] And that gives you a number.
[00:06:36.760 --> 00:06:38.760] Let's hope that is a positive number, right?
[00:06:38.760 --> 00:06:42.040] And then depending on your net worth, you'll fall in one of the six levels.
[00:06:42.040 --> 00:06:45.240] The first level is less than $10,000 in net worth.
[00:06:45.240 --> 00:06:46.360] That's level one.
[00:06:46.360 --> 00:06:50.440] Level two is $10,000 to $100,000 in net worth.
[00:06:50.440 --> 00:06:53.960] Level three is $100,000 to $1 million in net worth.
[00:06:53.960 --> 00:06:56.840] Level four is $1 to $10 million in net worth.
[00:06:56.840 --> 00:06:59.720] Level five is $10 million to $100 million in net worth.
[00:06:59.720 --> 00:07:02.600] And level six is over $100 million in net worth.
[00:07:02.600 --> 00:07:07.400] And the nice thing about this is if you just memorize one of the levels, you can back out the rest.
[00:07:07.400 --> 00:07:09.320] You just divide by 10 or multiply by 10.
[00:07:09.320 --> 00:07:12.600] So I just say, like, hey, remember, level three is 100K to a million.
[00:07:12.600 --> 00:07:17.120] That also happens to be like where the middle class of the United States is in terms of wealth.
[00:07:17.120 --> 00:07:18.720] Around 40% of U.S.
[00:07:14.840 --> 00:07:20.000] households are in level three.
[00:07:20.560 --> 00:07:24.560] So that's according to the Survey of Consumer Finances data from the Federal Reserve.
[00:07:24.560 --> 00:07:26.240] So 40% are in level three.
[00:07:26.240 --> 00:07:27.920] You have 20% in level one.
[00:07:27.920 --> 00:07:29.120] That's less than 10,000.
[00:07:29.120 --> 00:07:31.840] 20% in level 2, that's 10 to 100,000.
[00:07:31.840 --> 00:07:34.880] So you have 80% of households in levels 1, 2, and 3.
[00:07:34.880 --> 00:07:37.200] 18% are in level 4 approximately.
[00:07:37.200 --> 00:07:38.160] That's 1% to 10 million.
[00:07:38.160 --> 00:07:39.440] That's like your upper middle class.
[00:07:39.440 --> 00:07:41.520] I mean, depending where you live, et cetera.
[00:07:41.520 --> 00:07:44.480] And then the last 2% is level 5 and up.
[00:07:44.480 --> 00:07:49.760] And level 6 in particular only has like 10,000, 11,000 households in there of over 100 million.
[00:07:49.760 --> 00:07:51.840] Very, very rare, long tail of wealth.
[00:07:51.840 --> 00:07:53.040] But that's the framework.
[00:07:53.040 --> 00:08:08.480] And the whole idea behind the wealth ladder is like, depending on which wealth level you're in, the strategy might need to change to get up to the next level, what to avoid changes, like all sorts of things are going to change how you spend money, how you can think about spending money, kind of having more spending freedom as you go up the ladder.
[00:08:08.480 --> 00:08:14.000] And so we can talk about income, spending investments within that and touch on any one of those things.
[00:08:14.000 --> 00:08:19.680] What I like to add on to that is like level one, you call paycheck to paycheck, which makes sense, less than $10,000 in net worth.
[00:08:19.680 --> 00:08:20.720] Yeah, that makes sense.
[00:08:20.720 --> 00:08:22.640] Level two is grocery freedom.
[00:08:22.640 --> 00:08:24.240] You can buy what you want at the grocery store.
[00:08:24.240 --> 00:08:25.680] Level three is restaurant freedom.
[00:08:25.680 --> 00:08:30.240] And I remember hitting that actually, like distinctly being like, wow, I don't look at the prices on menus anymore.
[00:08:30.240 --> 00:08:31.760] Level four is travel freedom.
[00:08:31.760 --> 00:08:33.200] You travel when and where you want.
[00:08:33.200 --> 00:08:34.560] Level five is house freedom.
[00:08:34.560 --> 00:08:36.400] You can likely afford your dream house with a little impact.
[00:08:36.400 --> 00:08:38.720] And then level six is impact freedom.
[00:08:38.720 --> 00:08:42.880] You can use money to have a profound impact on others.
[00:08:42.880 --> 00:08:46.720] The focus of this podcast is entrepreneurship.
[00:08:46.720 --> 00:08:52.240] And there's a lot of indie hackers, SaaS founders, and it's folks that are trying to change their station in life.
[00:08:52.240 --> 00:08:56.560] Like, that's often the number one goal is like, freedom, purpose, and relationships.
[00:08:56.560 --> 00:09:02.280] And freedom, of course, you know, you use the word freedom at every level, impact freedom, house freedom, travel freedom.
[00:08:59.920 --> 00:09:06.280] And so, the majority of our listeners are probably in levels one through three.
[00:09:06.520 --> 00:09:10.040] There's certainly a chunk in four and five as well.
[00:09:10.040 --> 00:09:19.880] What are the most important levers or the mindset shifts from moving up between levels, especially maybe from three to four?
[00:09:20.200 --> 00:09:26.040] Yeah, I think the biggest shift when going from three to four, and so like the big difference there is income, really.
[00:09:26.040 --> 00:09:29.400] I mean, income is true, it's across the wealth ladder.
[00:09:29.400 --> 00:09:35.240] But as you go from level three to four, I think, and that's once again, I'm defining that as the middle class to the upper middle class.
[00:09:35.240 --> 00:09:37.160] A lot of their life is very similar.
[00:09:37.160 --> 00:09:40.200] Like, they're probably on the same plane, but maybe they're sitting in different seats.
[00:09:40.200 --> 00:09:42.760] Like, they're probably, you know, living in adjacent neighborhoods.
[00:09:42.760 --> 00:09:45.400] They probably both own a home, but one's like a slightly nicer house, right?
[00:09:45.400 --> 00:09:50.600] And you, you go down, you know, one owns a Toyota, one owns a Lexus, maybe like they have very similar lifestyles.
[00:09:50.600 --> 00:09:53.160] One's just like slightly upgraded, and that's kind of what the upper middle class is.
[00:09:53.160 --> 00:09:58.040] It's not like you're flying private, you're not, you don't have a bunch of people on staff that are working for you necessarily.
[00:09:58.040 --> 00:10:00.680] You might have a company you own, but that's a that's a different type of thing.
[00:10:00.680 --> 00:10:04.280] I don't mean like personal, like chefs or drivers or things like that.
[00:10:04.280 --> 00:10:06.680] That's where you start to get into level five wealth.
[00:10:06.680 --> 00:10:26.280] But I think some of the mindset shifts as you, because at least how I framed it in the book, and when you're talking to business owners, a little bit different because how I frame it, most people that are in like level three, I'm like, Yeah, you just got to get a decent job, save money, put it, you know, buy income-producing assets, you know, buy a diversified basket of equities, stocks, bonds, et cetera, and just give it time and you will eventually get to level four.
[00:10:26.280 --> 00:10:27.400] And that's generally true.
[00:10:27.400 --> 00:10:29.720] You look at the data, it's it's pretty clear there.
[00:10:29.720 --> 00:10:38.120] But if you're a business owner, it's a little bit different because I think as a business owner, you need to create a business that you can eventually sell that doesn't just require your input.
[00:10:38.120 --> 00:10:39.400] And this is not even my idea.
[00:10:39.400 --> 00:10:51.120] This is like E-Myth Revisited, a very old book, which is like, Do you have a business or do you just have a glorified job where like you're like, yeah, you're making good money, you control your time, but like you are, without you, the business would fail completely.
[00:10:51.120 --> 00:11:00.320] And so I think the step you need to make as like an entrepreneur is like, how do you go from creating a business that relies on you to creating a business that you can actually sell to someone else?
[00:11:00.320 --> 00:11:05.280] And that is how you're going to get that jump into level four or even level five, obviously, if it gets big enough.
[00:11:05.280 --> 00:11:06.720] Now, once again, I'm not the expert on this.
[00:11:06.720 --> 00:11:10.240] I would defer to you on business stuff and you know, SaaS startups, et cetera.
[00:11:10.240 --> 00:11:23.520] But I think just mentally when I'm thinking about it, like the businesses that are sold that get people into level four are probably where the owner is not as necessary for the functioning of the business as I guess the businesses for those in level three are.
[00:11:23.840 --> 00:11:25.920] That's my guess just off the top of my head.
[00:11:25.920 --> 00:11:29.200] I haven't seen a ton of data on that, but that's just how I'm thinking about it.
[00:11:29.200 --> 00:11:31.040] And I don't know if you would agree or not.
[00:11:31.040 --> 00:11:33.120] Yeah, I would say very likely.
[00:11:33.120 --> 00:11:38.880] Most of the wealth that I see built in entrepreneurship is not actually from taking profit out of an operating business.
[00:11:38.880 --> 00:11:41.040] Most of it is from exits, is from selling it.
[00:11:41.040 --> 00:11:44.000] And that's something that a lot of folks I don't think are familiar with.
[00:11:44.000 --> 00:11:52.880] In your research or experience, and it doesn't need to be with entrepreneurs, but just in general, what does it take to move from level four to level five?
[00:11:52.880 --> 00:11:57.280] So to remind the listeners, level four is one to 10 million of net worth.
[00:11:57.280 --> 00:12:00.960] And so if someone's worth, I know a lot of folks actually who are worth two million bucks, three million bucks.
[00:12:00.960 --> 00:12:07.280] They either had some stock options at a, you know, at a big company or they've just saved over time or maybe they got a little bit of an inheritance from relatives.
[00:12:07.280 --> 00:12:08.880] So they're two and three million bucks.
[00:12:08.880 --> 00:12:14.880] But to get up to 10, 15, 20, 30, like you don't, I don't think you save your way to that, right?
[00:12:14.880 --> 00:12:20.160] So is there a common, what are the ways that you've seen or have heard of to make that jump?
[00:12:20.160 --> 00:12:29.600] So, excluding celebrities, athletes, entertainers who have these very huge contracts that will get them into that level five or above, for the most part, it's going to be entrepreneurship.
[00:12:29.600 --> 00:12:31.640] And you're taught what you already brought up, exits.
[00:12:31.640 --> 00:12:34.920] And I can just do the math for you that makes it very simple, right?
[00:12:34.920 --> 00:12:37.560] Let's say today you just got to a million dollars.
[00:12:37.560 --> 00:12:38.760] Let's just say you have a portfolio.
[00:12:38.760 --> 00:12:40.600] Let's ignore like home equity and all.
[00:12:40.600 --> 00:12:43.160] Let's just say you have a million dollars in a portfolio, right?
[00:12:43.160 --> 00:12:44.280] You got there today.
[00:12:44.280 --> 00:12:45.880] Remember, already that's already an accomplishment.
[00:12:45.880 --> 00:12:47.080] It's not easy to get to a million.
[00:12:47.080 --> 00:12:47.800] You got there today.
[00:12:47.800 --> 00:12:51.800] It's earning 5% a year and you're adding 100K to it every year.
[00:12:51.800 --> 00:12:55.160] So you're saving $100,000 after tax, a considerable amount of money.
[00:12:55.160 --> 00:12:57.320] Do you know how long it would take you to get to 10 million?
[00:12:57.320 --> 00:12:59.320] The answer is 28 years.
[00:12:59.320 --> 00:13:00.680] It's a long time.
[00:13:00.680 --> 00:13:05.640] That's 28 years of grinding, saving 100K after tax, like probably having to cut back in areas, right?
[00:13:05.640 --> 00:13:06.440] Like think about it.
[00:13:06.440 --> 00:13:08.360] Even if you're like, you know what, Nick, I can save even more.
[00:13:08.360 --> 00:13:09.400] I have an even higher income.
[00:13:09.400 --> 00:13:11.160] I'm going to save 300K a year.
[00:13:11.160 --> 00:13:13.160] You do the math there, guess how long it takes?
[00:13:13.160 --> 00:13:16.200] Start with a million, 5% a year, $300,000 a year.
[00:13:16.200 --> 00:13:17.400] It still takes 17 years.
[00:13:17.400 --> 00:13:19.640] It still takes almost two decades saving.
[00:13:19.960 --> 00:13:24.280] You have to be making almost a million dollars after tax and costs and everything to save 300K, right?
[00:13:24.280 --> 00:13:28.280] So it's like, it's an absurd amount of money and it's an absurd amount of time to get there.
[00:13:28.280 --> 00:13:40.680] So as you can see, like your traditional job is just not going to, you know, a nine to five or any of that, or even a business that's, you know, hey, I make 100K a year in profit, that's great, but that, if that's all your savings, that's not going to get you there, unfortunately.
[00:13:40.680 --> 00:13:42.440] And, you know, you can just do the math as well.
[00:13:42.440 --> 00:13:48.200] Like if you're saving 100K a year on a million dollars, that's 10% and you're increasing your wealth by 10% a year.
[00:13:48.200 --> 00:13:50.280] By the time you get to 5 million, it's 2%.
[00:13:50.280 --> 00:13:54.440] So your job or your income source is not moving the needle that much anymore.
[00:13:54.440 --> 00:13:56.920] So really, who are the people that get into level five and above?
[00:13:56.920 --> 00:13:59.240] It's basically always going to be entrepreneurs.
[00:13:59.240 --> 00:14:01.240] I mean, I don't know another way of getting there.
[00:14:01.240 --> 00:14:04.520] Obviously, ignoring trust fund, inheritance, marriage, all those types of things.
[00:14:04.520 --> 00:14:08.840] Like, in terms of actual career paths, it's going to be people that get into exits of some sort.
[00:14:08.840 --> 00:14:10.040] And there's two types, obviously.
[00:14:10.040 --> 00:14:22.160] There's like, hey, you own the full business and you sell for a decent amount of money, or you start early at a company at a startup, you get equity, and then that becomes a really big company, like an early Uber, or you got into NVIDIA before AI went on.
[00:14:22.240 --> 00:14:27.120] You know, all those people are worth in level five now just because they were early enough and they got enough stock options.
[00:14:27.120 --> 00:14:30.560] And then NVIDIA just went through the roof and became the most valuable company in the world.
[00:14:30.560 --> 00:14:32.480] So that's kind of what the data shows.
[00:14:32.480 --> 00:14:36.240] Like, not saying there's no other path, or you could wait a long time too.
[00:14:36.240 --> 00:14:40.480] You could have $2 million today and just wait, you know, another 40 years, you know, and you'll get to 10.
[00:14:40.480 --> 00:14:43.280] But that's who wants to have $10 million when they're 90, right?
[00:14:43.280 --> 00:14:44.480] That's not the purpose, right?
[00:14:44.480 --> 00:14:48.720] So when I'm thinking about these types of things, it really is entrepreneurship, business ownership.
[00:14:48.720 --> 00:14:50.640] And you see that in the investment data as well.
[00:14:50.640 --> 00:14:55.520] Like people in level five and six, the vast majority of their wealth is in private business ownership.
[00:14:55.520 --> 00:14:57.040] And I don't just mean like stocks, retirement.
[00:14:57.040 --> 00:15:00.000] I mean like actually owning some sort of a business.
[00:15:00.000 --> 00:15:01.600] Yeah, that makes a lot of sense.
[00:15:01.600 --> 00:15:10.800] Something I was really intrigued by is you emphasize spending based on wealth, not income, right?
[00:15:10.800 --> 00:15:13.920] And like income can be lumpy for entrepreneurs, right?
[00:15:13.920 --> 00:15:15.360] Or unpredictable.
[00:15:15.360 --> 00:15:20.240] So I guess how do you think about spending based on wealth versus income?
[00:15:20.240 --> 00:15:26.640] And I guess that relates pretty well to the feast or famine cycles, you know, that some entrepreneurs might experience.
[00:15:26.640 --> 00:15:29.440] Yeah, I think this is especially true for entrepreneurs who don't have that.
[00:15:29.440 --> 00:15:33.520] You know, every two weeks they're getting that same paycheck of the same amount.
[00:15:33.520 --> 00:15:36.560] And when I say this, of course you have to spend based on your income.
[00:15:36.560 --> 00:15:41.840] Like if you have zero income, like you know, your wealth's not going to throw off enough to live on unless you just have a lot of wealth already.
[00:15:41.840 --> 00:15:44.000] And then why are we even having the conversation?
[00:15:44.000 --> 00:15:48.480] But let's say, okay, you have your rent, you have whatever your mortgage, you have your fixed costs.
[00:15:48.480 --> 00:15:52.400] My question is: on that marginal spend, can I buy that extra thing?
[00:15:52.400 --> 00:15:55.120] Can I go and get that nicer meal at the restaurant?
[00:15:55.120 --> 00:15:57.120] Can I stay at that nicer hotel?
[00:15:57.120 --> 00:16:01.880] I came up with a rule for this, which is based on the wealth flatter, and it's called the 0.01% rule.
[00:16:01.880 --> 00:16:05.880] And so, all you do is you take your net worth and you multiply by 0.01%.
[00:15:59.600 --> 00:16:09.560] So, that's 0.0001, or more simply, divide by 10,000.
[00:16:09.560 --> 00:16:10.520] That's probably easier for people.
[00:16:10.520 --> 00:16:17.240] So, take your net worth, divide by 10,000, and that is how much your wealth is conservatively generating each day.
[00:16:17.240 --> 00:16:22.040] 0.01%, you do that over 365 days, that's about 3.7% a year.
[00:16:22.040 --> 00:16:23.880] I think it's a very conservative return.
[00:16:23.880 --> 00:16:29.640] If we assume that's happening every day, that's like kind of like your, it's trivial, it's a trivial amount of money.
[00:16:29.640 --> 00:16:35.240] So, when you're at the grocery store and you're like, hey, do I want to get the normal eggs or the cage-free eggs for $2 more?
[00:16:35.240 --> 00:16:38.920] If your net worth's over $20,000, that $2 is meaningless to you.
[00:16:38.920 --> 00:16:40.360] You can spend that $2, right?
[00:16:40.360 --> 00:16:45.720] And so, that's just a simple example, but it really maps onto the spending freedoms we talked about earlier.
[00:16:45.720 --> 00:16:54.120] So, someone in level two, which is $10,000 to $100,000 in net worth, by the time they get to $100,000, they can do kind of what they want at the grocery store.
[00:16:54.120 --> 00:17:05.160] And then, you know, in level three, I call that restaurant freedom because by the time you're at the end of level three, by the time you have a million, your wealth's throwing off a hundred bucks a day, you can kind of buy what you want at a restaurant, besides like the super expensive wine, basically.
[00:17:05.160 --> 00:17:07.320] So, and that just maps upward from there.
[00:17:07.320 --> 00:17:12.680] So, when you're thinking about spending, I like to use this rule because it allows your lifestyle to creep.
[00:17:13.080 --> 00:17:18.040] I think the personal finance industry has a problem because it's either, oh, you can't lifestyle creep at all, right?
[00:17:18.040 --> 00:17:20.120] And that's usually most of the advice out there.
[00:17:20.120 --> 00:17:26.600] And I'm saying you can, but only after you've built wealth, after you've shown some financial discipline, then you can start to spend more.
[00:17:26.600 --> 00:17:28.120] And the data actually shows that as well.
[00:17:28.120 --> 00:17:35.960] In general, people with higher incomes, higher wealth do spend more than those with lower incomes and lower wealth, but it rises more slowly than income, right?
[00:17:35.960 --> 00:17:40.040] So, like, the wedge between income and spending is just on average goes up over time.
[00:17:40.040 --> 00:17:41.800] So, the people with higher income save more, right?
[00:17:41.880 --> 00:17:43.480] Savings rate goes up basically.
[00:17:43.480 --> 00:17:45.280] So, that's just, you know, it's shown in the data.
[00:17:45.440 --> 00:17:58.240] People are already naturally kind of doing this, but this is a rule that makes it very easy to be like, hey, hey, you know, maybe I've, if you're like deep in level three, let's say you have $800,000 of your net worth, you're like, okay, I can go and buy what I want in a restaurant, but I still got a flight coach, you know?
[00:17:58.240 --> 00:17:59.600] And so that's how I think about it.
[00:17:59.840 --> 00:18:01.360] Or you just got into level four.
[00:18:01.360 --> 00:18:04.800] Okay, maybe you can get to a slightly nicer seat on the airplane, right?
[00:18:04.800 --> 00:18:09.120] Or you can stay at a slightly nicer hotel depending on, you know, where you are in level four, et cetera.
[00:18:09.120 --> 00:18:11.680] So these are just different ways I like thinking about this.
[00:18:11.680 --> 00:18:17.680] And it's not perfect, but it's, I'm just trying to get new frameworks out there to get people to rethink how they're spending money.
[00:18:17.680 --> 00:18:25.040] I heard you mention that on another podcast I was listening to, and I was really intrigued by it because I had never heard anyone talk about that divided by 10,000.
[00:18:25.040 --> 00:18:33.760] And I appreciate the specificity of each of these levels because I remember hitting each of them because I grew up at level one.
[00:18:33.760 --> 00:18:39.040] And I think by the time I was in high school, late high school, like I think my parents got to level two.
[00:18:39.040 --> 00:18:42.400] And then that was it, you know, and then I came out and then I was at level one, right?
[00:18:42.400 --> 00:18:44.160] You graduate, you become a construction worker.
[00:18:44.160 --> 00:18:46.480] And then I remember getting level two and it was entrepreneurship.
[00:18:46.480 --> 00:18:51.760] Like, well, I saved my, I had a good job as a developer and I saved my way into level two.
[00:18:51.760 --> 00:19:04.960] And I think maybe, because what level two is to 100K of net worth, I probably crept a little higher than that, you know, but then it was entrepreneurship side hustles, started putting money in the bank account at a rate that we weren't consuming it, right?
[00:19:04.960 --> 00:19:08.320] Because you kind of spend your salary, or at least that's the way we did mostly.
[00:19:08.320 --> 00:19:16.800] But once I started side hustling and making a couple grand a month and we just socked that away, that became like a, I felt like that was a bit of a cheat code at the time.
[00:19:16.800 --> 00:19:25.760] And I do remember suddenly being like, whoa, I don't really look at the grocery prices anymore versus when I was in college, if it was buy one, get one free, I just, I was like, I'm eating that.
[00:19:25.760 --> 00:19:27.840] I don't even know what that is, but it's cheap.
[00:19:27.840 --> 00:19:29.760] So I'm going to, you know, I'm going to buy that.
[00:19:30.200 --> 00:19:37.400] I want to switch it up and kind of double click on what I just said, which is side hustles, because I saw in the book, you do talk about entrepreneurship.
[00:19:37.400 --> 00:19:41.080] You talk about focus versus distractions.
[00:19:41.080 --> 00:19:46.600] And, you know, we do see a lot of founders and indie hackers that have a lot of side hustles going all at once.
[00:19:46.600 --> 00:19:52.920] And I'm curious, like in your research and experience, how do side hustles help at level three?
[00:19:52.920 --> 00:19:57.640] And when do they become maybe a barrier to building real wealth?
[00:19:57.640 --> 00:20:02.200] I guess that's a very difficult question because you don't know what something's going to become, right?
[00:20:02.200 --> 00:20:06.040] Like if I, if I had started like my blog of dollars and data, that was a side hustle.
[00:20:06.040 --> 00:20:09.240] For three years, I didn't make any money, but I also wasn't trying to make money.
[00:20:09.240 --> 00:20:10.440] I still had my full income.
[00:20:10.760 --> 00:20:12.280] I still to this day have a full-time job.
[00:20:12.280 --> 00:20:15.080] So I'm technically all this stuff I do is a side hustle.
[00:20:15.080 --> 00:20:19.480] But once you're, I was in level three, I was like, hey, I'm doing well, but like I want to do this other thing.
[00:20:19.480 --> 00:20:20.520] Who knows what it could lead to?
[00:20:20.520 --> 00:20:22.520] I didn't know anything about monetization of my content.
[00:20:22.520 --> 00:20:23.400] I didn't know about books.
[00:20:23.400 --> 00:20:25.000] I didn't had no plan to write a book.
[00:20:25.000 --> 00:20:25.640] Now I have two.
[00:20:25.640 --> 00:20:27.480] It's like all these things kind of happen.
[00:20:27.480 --> 00:20:29.480] And so I just happened into it.
[00:20:29.480 --> 00:20:33.160] In terms of your question of like, okay, so how do you know when it's helping or when it's not?
[00:20:33.160 --> 00:20:34.920] It's like, is it bringing an income?
[00:20:34.920 --> 00:20:36.760] Look at how much time you're spending too.
[00:20:36.760 --> 00:20:47.240] I know initially when you start a lot of these things, when I did my, I did my hourly wage for dollars and data back in like 2020, for every hour I worked, I'd earned like $12 an hour by the time I turned monetization on, right?
[00:20:47.240 --> 00:20:48.120] So it wasn't a lot.
[00:20:48.120 --> 00:20:51.320] But now if I redo that calculation, it's over $100 an hour.
[00:20:51.320 --> 00:20:52.760] And I'm using the same total hours.
[00:20:52.760 --> 00:20:55.560] It's just like my average hourly earning is now shooting up.
[00:20:55.560 --> 00:21:02.040] So I think that's the thing I would look at is like, is your average hourly earnings going up over time in that side hustle?
[00:21:02.040 --> 00:21:03.080] And you have to put in some time.
[00:21:03.080 --> 00:21:05.960] You can't be like, oh, I spent 10 hours one week encoding this and I didn't make any money.
[00:21:05.960 --> 00:21:07.800] Like, I've been at this for eight and a half years.
[00:21:07.800 --> 00:21:13.640] Like, you got to spend at least a year on some of these things and really try at them and say like, okay, that's not working or it is.
[00:21:13.640 --> 00:21:16.560] And then start looking, is your average hourly going up?
[00:21:16.560 --> 00:21:21.600] And if so, like, focus on the things that are working and you're going to have to abandon projects that aren't working.
[00:21:21.600 --> 00:21:25.280] And it's unfortunate, but like, I've tried a bunch of different stuff that hasn't worked, right?
[00:21:25.280 --> 00:21:26.640] And I just said, hey, you know what?
[00:21:26.640 --> 00:21:28.000] The thing that does work is writing.
[00:21:28.000 --> 00:21:30.080] And I just want to get as good as I can at writing.
[00:21:30.080 --> 00:21:30.960] And that's it.
[00:21:30.960 --> 00:21:32.960] It's still a side hustle and it's doing quite well.
[00:21:32.960 --> 00:21:39.120] I mean, I could in theory go all in on it, but I don't want to because it only requires, you know, five to 10 hours a week.
[00:21:39.120 --> 00:21:40.880] I put in that, I just write a blog post.
[00:21:40.880 --> 00:21:43.760] I have to write one blog post a week and that maintains everything I do.
[00:21:43.760 --> 00:21:45.440] I don't do all this other side stuff.
[00:21:45.440 --> 00:21:46.480] I don't get distracted.
[00:21:46.480 --> 00:21:51.120] I think when you're talking about distractions, like if you do start finding something to work, just keep doing that.
[00:21:51.120 --> 00:21:54.640] I've had so many people, oh, you should start a TikTok, you should start a YouTube, you should do this.
[00:21:54.640 --> 00:21:56.160] And maybe those would have worked out.
[00:21:56.160 --> 00:22:00.480] I have no idea, but the amount of time they would take is not even close.
[00:22:00.480 --> 00:22:08.320] It's like exponential, the amount of more time I have to put into this for an uncertain payoff, something that I'm, there's already a lot of competition out there.
[00:22:08.320 --> 00:22:13.120] As I said, like, you know, YouTube and all that pays, you know, one-fourth of what web ads pay.
[00:22:13.120 --> 00:22:19.600] And so it's like, why don't I just get even better at writing and do the thing I'm already kind of have some proof of work on this thing?
[00:22:19.600 --> 00:22:22.000] Or I guess product market fit is what you would say.
[00:22:22.240 --> 00:22:23.680] I have some product market fit on this.
[00:22:23.680 --> 00:22:26.080] And so it's like, I should just keep, you know, doubling down on that.
[00:22:26.080 --> 00:22:33.440] And so if I ever do go, I don't think I would go all in on this just because I don't want to be like a full-time influence or anything like that.
[00:22:33.440 --> 00:22:35.440] But for the time being, it really works.
[00:22:35.440 --> 00:22:37.760] I have the security of the job.
[00:22:37.760 --> 00:22:39.040] I like working with those people.
[00:22:39.040 --> 00:22:40.240] They also put out content.
[00:22:40.240 --> 00:22:41.360] So it's like a nice marriage.
[00:22:41.360 --> 00:22:42.880] Like we're all doing content marketing.
[00:22:42.880 --> 00:22:44.320] So we all learn from each other.
[00:22:44.640 --> 00:22:46.480] It's a win-win for everyone in the ecosystem.
[00:22:46.480 --> 00:22:48.480] So I got very lucky in that sense.
[00:22:48.480 --> 00:22:57.520] But that decision, I think where you really start to think about it is: is my side hustle paying me more than what I'm making from my full-time job?
[00:22:57.520 --> 00:23:10.040] And I don't think it has to happen right at that moment, but I think a better way is saying, okay, cumulatively, since I've started this job and started the side hustle, have I earned more cumulatively than I, with the side hustle than I have with the main job?
[00:23:10.040 --> 00:23:12.760] So let's say you started your job and the side hustle at the same time.
[00:23:12.760 --> 00:23:14.200] Let's just say that.
[00:23:14.200 --> 00:23:21.640] And okay, just now your ARR is higher than it is with your job, but cumulatively, you know, you haven't made enough.
[00:23:21.640 --> 00:23:25.000] So I would say keep going in the horse race until the cumulative number is higher.
[00:23:25.000 --> 00:23:29.400] And so that's a different way of thinking about it because it's not just saying, hey, I just had one good year.
[00:23:29.400 --> 00:23:36.200] It's like, oh, I've been having enough good years that now my side hustle has paid me more than my job has from, you know, time adjusted, basically.
[00:23:36.200 --> 00:23:37.880] So that's how I would try and do it.
[00:23:37.880 --> 00:23:42.200] Not just like, what's paying me more now, but what has paid me more over the same timeframe?
[00:23:42.200 --> 00:23:44.520] And that is the bigger thing to look through.
[00:23:44.520 --> 00:23:45.800] That makes a lot of sense.
[00:23:45.800 --> 00:23:49.560] Something we haven't touched on that I know is a big area of your expertise.
[00:23:49.560 --> 00:23:57.480] As you said, you work in wealth management and a lot of your blogging is around personal finance and investing.
[00:23:57.800 --> 00:24:07.160] If I'm at level two versus level three versus level four and up, I guess, like what are the differences between assets I should own?
[00:24:07.160 --> 00:24:13.080] You know, we hear 80, 20 equities versus bonds is the old rule that I don't, I don't own any bonds, man.
[00:24:13.080 --> 00:24:14.680] I'm not going to own bonds until I retire.
[00:24:14.680 --> 00:24:28.680] It's just a thing that I don't, I, but it's like if I'm worth 50,000 versus 500,000 versus 5 million, would you think the mix is similar or is there a different approach at those wealth levels?
[00:24:29.000 --> 00:24:30.840] I think it really depends on your goals.
[00:24:30.840 --> 00:24:40.840] I mean, if your goal is to, oh, hey, I just need a few million bucks and then I can, I want to be able to coast off that if I need to, then you're going to, you're going to see the person with 5 million is going to have more fixed income.
[00:24:40.840 --> 00:24:42.040] They're going to have more bonds, right?
[00:24:42.040 --> 00:24:42.840] Because there's safety.
[00:24:42.840 --> 00:24:47.120] And how much of that in bonds, that's open, that's going to vary by person, by risk tolerance.
[00:24:47.120 --> 00:24:50.640] I'm guessing in your case, you don't own bonds because you're like, I don't feel like they're growth-oriented.
[00:24:44.840 --> 00:24:51.520] You're like a tech person.
[00:24:51.680 --> 00:24:56.560] Like, it makes sense why you'd be more kind of all in on more of a high-growth, high-risk.
[00:24:56.560 --> 00:24:59.520] I mean, if you're an entrepreneur, you're probably going to be more risk-seeking, anyways.
[00:24:59.840 --> 00:25:04.560] I think allocations will change based more on the person and less on their wealth.
[00:25:04.560 --> 00:25:08.400] Their wealth does matter, their wealth level matters, but I think the person's a little bit more important.
[00:25:08.400 --> 00:25:12.080] So I think the person level two or three could have basically the same allocation.
[00:25:12.080 --> 00:25:15.600] By the time you get into level four, you're kind of want to be more in preservation mode.
[00:25:15.680 --> 00:25:17.520] Also depends on your liability structure.
[00:25:17.520 --> 00:25:25.840] Like if you have four kids, you're going to have probably a different asset allocation than if you're single or you're a dink, you know, two double income, no children, right?
[00:25:25.840 --> 00:25:28.800] That's the same, you know, I think that's going to be very different.
[00:25:28.800 --> 00:25:32.800] So it's more about your personal life than your wealth level necessarily.
[00:25:32.800 --> 00:25:37.600] I think wealth level does matter as you go higher up, and we can start getting into like how we could break that out.
[00:25:37.600 --> 00:25:41.040] But I think there are a lot of other things that impact asset allocation a bit more.
[00:25:41.040 --> 00:25:45.040] And even if you're an entrepreneur, you have lumpy monies coming in inconsistently.
[00:25:45.040 --> 00:25:51.840] You might want to own a fixed income allocation just because the income's coming in, whether it's not as high growth as equities, but it's also hedged a little bit.
[00:25:51.840 --> 00:25:54.800] If you have a tech startup and like tech is mostly the U.S.
[00:25:54.800 --> 00:25:56.480] economy now, you're kind of, if you own U.S.
[00:25:56.560 --> 00:26:00.960] stocks, you're kind of doubling down on what you're already doing, which is your income, right?
[00:26:00.960 --> 00:26:06.720] So I actually could make an argument for why you might need to own some fixed income, but it's really based on you, though.
[00:26:06.720 --> 00:26:09.120] At the end of the day, you have to feel comfortable with it.
[00:26:09.120 --> 00:26:12.480] As we move towards wrapping up, I want to ask you the age-old question.
[00:26:12.480 --> 00:26:14.560] You have an entire chapter with this title.
[00:26:14.560 --> 00:26:16.400] Does money buy happiness?
[00:26:16.560 --> 00:26:18.240] What's your sentiment on that?
[00:26:18.720 --> 00:26:22.400] I have my own thoughts, and I want to weigh in after you do, but I'd love to hear.
[00:26:22.720 --> 00:26:35.000] So, most people know the research, the first paper, which I mean, they may not know the name of the paper, but it's the Angus Deaton Daniel Kahneman paper, which is like, hey, after $75,000 in income, we don't see any more happiness.
[00:26:35.240 --> 00:26:41.960] Well, there's a guy named Matthew Killingsworth, came back, came out with another study that said, Hey, actually, after $75,000 a year, I'm still seeing happiness.
[00:26:41.960 --> 00:26:43.080] And they said, Hey, what's going on?
[00:26:43.080 --> 00:26:44.040] Like, someone has to be wrong.
[00:26:44.040 --> 00:26:44.600] Let's.
[00:26:44.600 --> 00:26:46.280] So they dug into the data.
[00:26:46.280 --> 00:26:47.960] Kahneman got with Killingsworth.
[00:26:47.960 --> 00:26:54.040] They went through all the data and they basically found that the original paper was, the measure wasn't as precise.
[00:26:54.040 --> 00:26:56.120] And so they were actually measuring unhappiness.
[00:26:56.120 --> 00:27:00.280] And so above $75,000 a year, you can't prevent unhappiness.
[00:27:00.280 --> 00:27:03.720] So you can be miserable at any income level, is basically what they're finding, right?
[00:27:03.720 --> 00:27:05.080] So it's a weird double negative.
[00:27:05.080 --> 00:27:07.320] You can't prevent unhappiness, but that's what they found.
[00:27:07.320 --> 00:27:14.040] And so Killingsworth paper was like, hey, no, if you're already happy, more money's probably going to make you happier.
[00:27:14.040 --> 00:27:19.880] But if you're not happy and you're not poor, by the way, because if you're poor, more money is probably going to make you happier too.
[00:27:19.880 --> 00:27:23.160] But if you're not happy and you're not poor, more money is not going to do a thing.
[00:27:23.160 --> 00:27:26.440] So all the people that are looking up, like, will more money make me happier?
[00:27:26.440 --> 00:27:31.560] If you're not poor already, and I'm assuming you're asking that because you're not happy, then the answer is no.
[00:27:31.560 --> 00:27:34.840] More money's not going to make you happier because you have some unhappiness already.
[00:27:35.160 --> 00:27:37.880] If you're happy already, more money is likely going to make you happier.
[00:27:37.880 --> 00:27:41.480] It's a very ironic thing that, like, if you're happy, more money is going to do it.
[00:27:41.480 --> 00:27:42.520] And that's what the data shows.
[00:27:42.600 --> 00:27:45.320] That's true both with income and even more so with wealth.
[00:27:45.320 --> 00:27:51.240] Killingsworth came out with a paper that looked at wealth specifically and like the wealthier people were, the happier they tended to be, right?
[00:27:51.400 --> 00:27:53.800] And that's, but once again, that's assuming they're happy already.
[00:27:53.800 --> 00:27:56.680] So there's all these weird kind of edge cases.
[00:27:56.680 --> 00:28:02.360] But yeah, so to summarize all that, I know there's a lot of research, but like if you're happy, more money will make you happier.
[00:28:02.360 --> 00:28:05.000] If you're poor, more money is likely to make you happier.
[00:28:05.000 --> 00:28:08.760] If you're not poor or you're not happy, more money is not going to do a thing.
[00:28:08.760 --> 00:28:10.600] And so that's the main takeaway there.
[00:28:10.600 --> 00:28:11.480] It's in the book.
[00:28:11.480 --> 00:28:20.320] And it's interesting because, you know, it makes you think like, okay, well, like, if I'm feeling great, if I'm not asking about happiness and I'm feeling great and stuff, more money is probably going to make you even happier.
[00:28:14.840 --> 00:28:22.720] But if you're like, oh, I'm not feeling good, I think, what is the issue?
[00:28:22.720 --> 00:28:23.520] Oh, it's my money.
[00:28:23.520 --> 00:28:28.080] No, it's probably not your money unless you're really in a financial blind.
[00:28:28.400 --> 00:28:30.240] Yeah, and that's been my experience as well.
[00:28:30.480 --> 00:28:38.560] I remember the first day of my life that I had $100,000 in the bank that I hit six figures or really of net worth, but it was mostly cash.
[00:28:38.560 --> 00:28:40.640] And I was like, wow, this is amazing.
[00:28:40.640 --> 00:28:42.800] And I remember when that balance was half a million.
[00:28:42.800 --> 00:28:46.640] And I remember when it was a million, you know, and I remember each level up.
[00:28:46.640 --> 00:28:55.680] And each time for me, it brought a sense of safety, like inner, almost inner peace of like, well, now I could take one year off from working.
[00:28:55.680 --> 00:28:57.600] Now I could take five years off from working.
[00:28:57.600 --> 00:28:58.800] Now I could take a decade.
[00:28:58.800 --> 00:29:00.880] I remember like kind of calculating it that way.
[00:29:00.880 --> 00:29:06.800] For me, it wasn't about, oh, now I can go buy a Maserati, even though I can, but it's just like, that's not, that's not why I did this, right?
[00:29:06.800 --> 00:29:15.200] I've done entrepreneurship for number one, for freedom, but two, for the purpose and the ability to, you know, control and work on whatever I want to work on.
[00:29:15.200 --> 00:29:24.320] But when I heard that study, the 75,000, and of course the headline that whatever it is, the USA Today or CNN pulls out is, oh, you don't need more than 75K a year because you don't get more happy.
[00:29:24.320 --> 00:29:26.000] And I was like, that's bull.
[00:29:26.000 --> 00:29:29.200] Like that is bull in my experience and has not.
[00:29:29.200 --> 00:29:34.960] And I heard some other folks like Sam Parr on my first million was talking and he said, no, I got happier with more money.
[00:29:34.960 --> 00:29:36.400] And I was like, yeah, me too.
[00:29:36.400 --> 00:29:43.200] And so that's what I appreciate about your sentiment is like you're framing it and not, it's not the social media clickbait headline.
[00:29:43.200 --> 00:29:47.120] It's like, no, in reality, if you are happy, make more money.
[00:29:47.120 --> 00:29:47.920] You have more freedom.
[00:29:47.920 --> 00:29:49.120] You have more happiness.
[00:29:49.120 --> 00:29:50.800] Yeah, but it's not an antidote to unhappy.
[00:29:51.120 --> 00:29:54.400] If you're unhappy, money is not going to solve that, right?
[00:29:54.400 --> 00:29:56.640] And once again, unless you're in like, let's just say level one.
[00:29:56.640 --> 00:29:58.800] If you're in level one and you're unhappy, it's probably money.
[00:29:58.800 --> 00:30:00.920] And if you think about like the levels, right?
[00:30:00.920 --> 00:30:03.800] When you're in level one, like most of your problems are probably money problems.
[00:30:03.800 --> 00:30:05.240] They could be solved by money.
[00:30:05.240 --> 00:30:06.760] Oh my gosh, I wish I didn't have to deal with this.
[00:30:06.760 --> 00:30:07.560] Money would solve it.
[00:30:07.560 --> 00:30:11.800] By the time you get to level five and six, money is not, is the least of your worries, most likely.
[00:30:11.800 --> 00:30:14.440] And it's more likely your relationships, your health, your time.
[00:30:14.440 --> 00:30:15.960] Like there's so many other things.
[00:30:15.960 --> 00:30:17.240] And that's what people don't focus on.
[00:30:17.240 --> 00:30:18.760] So that's what I try to talk about.
[00:30:18.760 --> 00:30:23.320] It's like in the book because I'm like, okay, obviously most people are never going to make it to level six, right?
[00:30:23.320 --> 00:30:26.840] But how do I still make it relevant to the typical person, even myself?
[00:30:26.840 --> 00:30:28.920] Like you have to talk about the non-financial things.
[00:30:28.920 --> 00:30:32.360] And those are things that people in level five and six can lose sight of.
[00:30:32.360 --> 00:30:34.760] You're the author of The Wealth Ladder.
[00:30:34.760 --> 00:30:40.120] And as of today, it's available at amazon.com or wherever greater books are sold.
[00:30:40.120 --> 00:30:43.400] We're going to have a link to buy that in the description.
[00:30:43.400 --> 00:30:49.080] And if folks want to keep up with you online, of course, you're blogging at of dollarsanddata.com.
[00:30:49.080 --> 00:30:53.240] And your ex-Twitter handle is dollarsanddata.
[00:30:53.240 --> 00:30:55.000] Nick, thanks so much for joining me today.
[00:30:55.000 --> 00:30:55.960] Yeah, thanks for having me on.
[00:30:56.040 --> 00:30:57.000] Appreciate that.
[00:30:57.000 --> 00:30:59.400] Thanks so much to Nick for joining me on the show.
[00:30:59.400 --> 00:31:04.280] The Wealth Ladder, again, is available on Amazon or wherever greater books are sold.
[00:31:04.280 --> 00:31:07.160] Thanks for listening this week and every week.
[00:31:07.160 --> 00:31:11.080] This is Rob Walling signing off from episode 784.