How to Climb The Wealth Ladder with a Personal Finance Expert
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Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today on July 4th, an interview about the American dream. Climb aboard the wealth ladder and don't look down. It's Friday, July 4th. Let's ride.

Good morning and happy 4th of July. First, I want to salute all the grill masters out there preparing to sweat buckets over a Weber to feed the entire neighborhood. Your efforts don't go unnoticed. Grill on, grill strong, just don't overcook the burgers. Today, we've got a super fun and informative special episode for you. Toby and I spoke with prolific personal finance author Nick Maggiuli to chat about his new book, The Wealth Ladder, and learn how all of you can climb from one level to the next.

This conversation completely changed my perspective on wealth in America, how to accumulate it, and also how not to squander it. We covered a range of topics from the importance of owning equity in a business to Trump's baby bonds to the most underrated strategy in personal finance. Now, I hope you're listening to this while also getting called underrated in your 4th of July cornhole match. Make sure to spin the bag. Don't throw it. Spin it.

Enjoy the holiday and enjoy this episode. But first, a word from our sponsor, Taco Bell. Are you done?

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Nick, thanks for joining us. Thanks for having me on. Okay, so you devised this concept of the wealth ladder to help people improve their financial lives. What are the basic rungs of this ladder and what was your personal journey climbing it?

So there are six levels to the wealth ladder. I didn't use rungs for marketing reasons. I think levels just sounds better than rungs. Like, oh, I'm on rung one. But each level is a 10x increase from the prior level. So level one, this is less than $10,000 in wealth, which you could just think of as your net worth.

all of your assets minus all of your liabilities. So that's like everything you own, your cash, your financial assets, et cetera, home equity, and then subtracting out all your debt, credit card debt, loans, et cetera. So level one is less than $10,000 in net worth. Level two is a 10X jump, which is $10,000 to $100,000 in net worth. Level three is $100,000 to $1 million in net worth.

Level four is $1 million to $10 million in net worth. Level five is $10 million to $100 million in net worth. And level six is $100 million plus. In terms of my journey up, it's changed over time. And so like I would say, even though I started with like, I didn't have $10,000, I would consider myself in level two because I had a good education and everything. So I started in level two, kind of grew up in like a level two household. And

And over time, you know, I just worked hard on everything, saved money, got to level three. And then I started writing and doing all the blog and book and all that other stuff. And so that kind of helped accelerate me into level four. I would have gotten there. I think my initial projections were like in my 50s. And then because of like it's basically like having a second job that I do on the weekends, which is writing. So I've been doing for nine years. And so that's kind of how I got into it.

level four. But I can talk more about that and give data on each one of those levels, the percentage of households in each level, et cetera. So writing a book about the levels of wealth allows you to climb up the levels of wealth. There's some meta right there. Along with each level, though, you explain some of the freedoms associated with each one. So level two brings grocery freedom. Level three brings restaurant freedom all the way up to level six, which brings impact freedom. Briefly take us through what kind of those freedoms mean.

So I think when a lot of people think about spending, like they usually just spend based on their income. And I think spending based on your wealth is a far better way of approaching this problem. And when I say spending, I don't mean like all of your spending, just like on the margin. Like you go to the grocery store and you're like, oh, I kind of want that nicer thing. It's like, oh, at $1 more, should I get it right? And so if you're in level two, I think you have the freedom to do that. You can spend that extra dollar, $2, et cetera.

And if you're in level three, let's say you're at a restaurant like, oh, do I want to buy the salmon for $35 or the burger for $25? That marginal difference is around $10, right? And so as you start to think about this, you're like, oh, I'm in level three. I can probably start to buy what I want at a restaurant. And then it goes up from there. Level four is travel, freedom, et cetera.

But the thinking behind this is that if you take your wealth and you multiply by 0.01%, that's why I call the 0.01% rule, that number is going to end up being what this marginal amount is, right? So in level two, you know, $10,000 times 0.01% is $1. $100,000 times 0.01% is $10. Another way to do the math is just divide your net worth by $10,000. That also gets you the same number.

And so basically, when you take your net worth, you divide by that, that just gives you a number. And that marginal number is like how much your wealth generates every single day, like on average. And this is a very conservative return. 0.01% a day is roughly, you know, 3.7% a year, which I think is a relatively conservative return. No one's going to be like...

oh, that's too much or anything. So that's the idea. If your wealth is generating this, like when you're making decisions, like about what to spend, like based on where your wealth level is, I think that's kind of how you unlock this quote, spending freedom to spend more in certain categories. If you're supposed to spend based on your wealth and not your income, that might be a problem for some people because I know my income, but I don't necessarily know the wealth, my wealth on top, on the top of my head. I don't know which level exactly I'm in. So would you advise people to

kind of know their net worth off the top of their head? You don't need to know exactly, but you should know like approximately what wealth level you're in. Like you don't need to know. I need to know down to the penny, but like you would probably know, oh, I'm not in level four or I'm in level three or et cetera. And so figuring that out, I think is,

incredibly important just to start. And of course, like you have to like your income is your main pillar, which you have to spend through. This is more of like the splurge spending. So I want to give people freedom to spend more money, but without going overboard. And I think these levels like is a way to do that because it gives you the freedom to spend more over time without worrying about like, oh, am I spending too much? Am I going to actually hold myself back? And the answer is no, because of this equation and everything. You hear a lot of personal finance

Experts stress the importance of ownership, aka you'll never be a millionaire with a salary. In your view, how much is ownership a key driver of wealth?

Ownership is a massive driver of wealth and you can be a millionaire with the salary. It's definitely possible Your salaries probably have to be pretty high and you have to I mean you could do it just by saving in cash But it's much easier if you're investing in income producing assets, right? And those are the types of assets when I looked at the wealth ladder the biggest difference between those in levels 1 to level 3 and those in levels 4 to level 6 which is like the lower part of the wealth ladder and the higher part and

is income producing assets, the percentage they own. In levels one to three, less than 25% of their wealth on average is in income producing assets. So things like stocks, bonds, real estate, private businesses. But on the upper half of the wealth ladder, levels four to six, over half of their assets are in income producing assets and actually just keeps going up. And each wealth level, it just moves up over time. And I have an image in chapter three of the book, which shows that.

So in terms of the ownership society thing, that is the biggest differentiator when you look at a household's balance sheet is how much money do you have in income-producing assets versus not. We just did a story. Wall Street Journal also did a story on the stealthy wealthy, which was the level of one percenters who derive their income from very boring, often regional businesses like

carpet removal or something like that. So it was interesting to see how ownership, people think it means like starting a million dollar, billion dollar tech company or something like that. But oftentimes it's something as mundane as removing carpet at elementary schools or something like that. But you also do make it pretty clear within the book that the only real shot of

moving up the ladder is owning something. So for someone in maybe a cushy job where they're making $500,000 a year, a pretty solid income, what's your pitch for why they should still consider building something of their own? Uh, they don't have to like that. I mean, if you're have a cushy job, like you, if you say, if you're in 500 K a year, you're very likely to be in level four if you're not already there. And so like,

I think that's the big one of the big points of the book is like you don't have to get to level five. I don't think this is necessary. Level five and six. That's the top two percent of U.S. households in the United States. I don't recommend it. I think you have to work really hard to get there. I think you can have an amazing life in level four, which is like the upper middle class. And so my pitch to them is like, do you why do you want to do this? It's not even a pitch. It's a question. And if you have a good answer to that question, then maybe you can push yourself to

oh, start a business or do something to quote, get to level five, 10 million plus. So in the book, you looked at the science of can money buy happiness? What did you learn? So you guys have probably heard that old study that, you know, after an income of $75,000 a year, you know, money can't buy any more happiness. Well,

Well, there's a guy named Matthew Killingsworth who came back and had a different study where he's like, no, my data shows that money keeps buying happiness all the way up as your income even goes up. And so he sat down with Kahneman and Dean and he looked at the paper and everything. And the long story short was the original paper, that $75,000 figure, was showing that more than $75,000 does not prevent unhappiness. I know that's a weird because it's double negative, but basically it's

no matter how much income you make, you can't like, that's not an antidote for not being happy, right? Like anyone could be unhappy regardless of their income. That's the takeaway there. So once they adjusted for that, they actually said, okay,

If you're already happy, more money tends to make you happier. But if you're not happy, more money is not going to do a thing. Right. So that's kind of the thing. So my summary of it is like if you're happy, more money will likely make you happier. But it's like it takes like a big jump, like a 10x, like a level jump, basically. If you're poor, more money is going to make you happier. But if you're not poor and you're not happy, more money is not going to do a thing. That's like the main takeaway of the research. I guess kind of on that topic, you kind of warn people.

that at the higher levels of the ladder, costs often start to rise exponentially as well for relatively small gains in convenience or experience. For instance, there was one anecdote that some wealthy property owners in Seattle were spending $3,000 a month on landscaping alone. So what is one maybe cost upgrade that you see some richer people start to make that they often come to maybe regret?

I think it's just like the amount of labor you hire. And I'm not, I don't know. I don't have data on like, oh, hey, how have you regretted hiring all these people or doing all this stuff? But at some point, the costs get pretty large, right? And I think like, even if you look at something like flying a private jet, like the typical net worth of someone who flies a private jet is around $20 million, or they have a net income annually of about $2 million. That's like what the data shows. That's like kind of the middle of the bell curve. But these types of things are like,

it's just shocking that people spend this much money for like, I mean, yes, it's a better experience, but is it that much better than getting a business class seat where you have to spend like, you know, I don't know either, but like, I just, I can't believe it's that much better. So yeah. And what do they regret? I don't know the answer to that, but I would guess just overpaying, like having so many different people you're hiring and it just, it's a large burn basically. And is that, we've talked a lot about progressing up the ladder, but is that how you slide down the ladder the quickest? Uh,

I think it depends where you are to,

different things will cause you to slide down the ladder depending on where you are. If you're in level five and six, for the most part, it's over concentration, which is like, oh, all my net worth is in this one business. Like I'm worth a hundred million dollars, but all I have is this business and I have like 200 grand in a checking account. Like you'll lose the business or it has a massive decline or something bad happens. Like you're back to like level three, which is still good. I mean, you're still fine, but relative to that change is pretty large, right? So it really depends where you are to,

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Well, I want you to put your career coach hat on right now because you do emphasize the importance of choosing a career for someone's future wealth. And the framework you lay out for deciding on one is I think it's inspired by Scott Galloway. It's the intersection of a what you're good at, be what you're interested in and see what people will pay for. But given

the rise of AI and new technologies, it's not so easy to know what skills employers will pay for three years down the road. How would you use your framework to navigate the period of uncertainty that a lot of people are feeling right now? I think the thing you have to do right now is you have to say, okay, what's probably always going to be valuable? And I know everyone's like, well, you don't go into software engineering because you can't get an intro job. I agree with that. But at the same time, like I am a little bit of a programmer. I'm not a full-on software engineer, but

I've used these things and they are pretty good, but you still need someone with technical skill. And there's so many people that have no technical skills.

Technical skill trying to code stuff up and it just doesn't work and at the end of the day like I think those are still valuable skills So maybe not software engineering per se but getting technical skills is one idea Another is sales if you can sell something at the end of the day like I don't think robots are gonna be selling us stuff It's gonna be people and so at least at least in face-to-face interaction So if you can sell stuff, that's another huge skill, right? And then I think credentials, you know

you know, lawyers and doctors, are they going to go the way of, you know, loot, you know, I think they have large lobbies. So it's going to prevent them from seeing their pay drop a lot as it is. I mean, even in the US, doctors get paid, I don't know, like five to six X more than in the UK for doing basically the same thing. So the fact that that can exist, I think there is some sort of mechanism there that prevents that from moving forward. So in terms of just summarizing that, like,

sales, technical skills, or finding some sort of credential thing that probably has some sort of protectionism around it. Or football player. Yeah. Oh, yeah. If you're a celebrity, yeah. By the way, I've agreed. Senior voice, yeah, go do that. Yeah. I thought you were going to say podcaster for sure. You guessed it. No, I think podcaster. I would not recommend that. Yeah. I heard the Google AI podcast, like they're pretty good. Pretty good. Although of that framework though, and you did touch on this a little bit in your book, what you're interested in, what people will pay for, and what you're good at, what would you say...

you should put the most value on of that kind of three pronged framework? Depends where you are in your life, what wealth level. And the reason why is, you know, if you're in level one, you're starting out, you have to get paid. Like that's just essential. Right. And then the thing I would focus on after that is like, what are your strengths? Because if you're good at something, I think you, and this is what Scott Galloway talks about, which I talked about in the book a little bit is like,

If you do something that you're good at for a long time, like you will get praise for that and you will start to like the praise. And so then you may even start to like the activity. Right. Like I used to hate writing. And the reason why I started to like it is because I started writing about things that I cared about. I didn't have to write, you know, a 500 word essay on the Scarlet Letter. Right. I'm like writing about like, you know, money and wealth and other things that are more interesting to me. So.

One other line that I highlighted in the book is that the most expensive thing some people own is their ego. What does that mean in the context of maybe managing your wealth?

I think there's like the difference between people in level three Which is a hundred K to 1 million dollars and the difference between people in level four which is 1 million to 10 million dollars I think a lot of it is ego and what I mean by that is like people in level four and level three live very similar lives right like they're on the same airplane like they're Probably in roughly similar neighborhoods or they're close by they shop at probably similar stores but the difference in terms of

you know, like what's the actual difference? It's a lot of it's just paying for status and all these other things. Right. So I think when you when you realize that, I think a lot of people in level three can start buying like people in level four as if like, oh, it's a much better life. And it's their ego that's costing them, that's preventing them from saving more. So that's kind of where that comes from. It's like you don't need to go and buy all these fancy things because a lot of them don't actually fundamentally change your life that

much. And on the same topic of ego, you know, when you're climbing a ladder, like in real life, you're always looking up to the next level or wrong. Like that is the concept of a ladder. You're looking up. How do you know when it is okay to say, I think I'm satisfied with how high I've climbed. It's getting a little, you know, there's, we're at high altitude here, or is that just not possible?

I mean, it's difficult because what's going to happen over time is as you kind of climb the wealth ladder, if you do start moving into nicer neighborhoods or hanging out in different areas, et cetera, take up more expensive hobbies, you're

you are going to meet people who are even richer than you are. And you're going to just end up seeing that, that next level, as you say. Right. And so the way to, to counteract that is to like, kind of remember where you come from and like, what do you actually value? So as I talk about in the book, like, what do I talk about in level five and six? Because like, that's not going to be relatable to most people. It's not even relatable to me. It's realizing that,

your wealth amplifies different things over time. And once you get into level five and six, all of the non-financial parts of your life are amplified. And why is that? Because you can't buy these things. You can't write your kids a check and say, love me. You can't buy a new cardiovascular system because you've been neglecting your health, right? So once you realize that, so people get to this point where they're like, yeah, I probably have enough. I can stop. So I

I think it's starting to focus on the non-financial parts of your life that improves that. So if I'm like a board at a public company, should I try to be incentivizing CEOs with something else besides stock compensation or, you know, is, are they still, I mean, Elon Musk, you know, is going to war over his particular compensation package and he's already worth over $300 billion. Well, yeah, once again, the most expensive thing some people own is their ego. So I think I would just rephrase that. Okay. Uh,

This is a little bit of a curveball, but let's say the government called you in and said, Nick, you're an expert at getting one person from level one wealth to level two wealth. But we were the government. We want to get millions of people from level one wealth to level two wealth. What ideas would you give them and how different would those be from the advice you would give to an individual?

Oh, that's a great question. I mean, my initial reaction to this is like because going from level one to level two, that first few thousand dollars is huge because it it just you have so much more security. Like think about what happened during COVID when people got these stimulus checks. I remember seeing on Twitter people saying like, oh, my gosh, I've never like felt this like more relaxed about my money because I have a few thousand dollars. I'm not going paycheck to paycheck.

Now, as much as I want to be like, okay, let's just have a big redistribution program. The problem is a lot of that money is going to get spent. That's going to create inflation. So it's a lot more complicated when we start doing macro stuff. So in terms of what you, what I would do to try and get more people out of level one, I actually think this idea of starting like, you know, a baby fund, a thousand dollars, put that in the government pays for it. And then by the time they're 18, they're maybe out of level one, let's hope, right? Something like that is actually a decent idea. Of course, like,

What are the long-term effects of that is hard to predict. So as much as I want to be like, oh, I want to control the government and do all that, I really don't know. And my guess is a baby bond is the closest we're going to get. That's so interesting because on today's show, we're recording this a little bit in the past, but we talked about this idea of Trump accounts, which are doing exactly what you said is –

kind of giving a nest egg to every baby born in America of $1,000. Do you think investing it in the market, one of the reasons why they're doing this, they want people to dip their toe in and have skin in the game when it comes to investing in financial markets. So do you think that $1,000 account tied to investing in the stock market is the best way to do that?

I mean, it's one way to do it. I think that once again, the biggest issue with a lot of people lower on the wealth ladders, they have very little ownership of American society. And that's not going to change just from this thing, but it helps a little bit and at least opens the door to like continuing that idea. And once again,

I think the biggest issue is income. Like once you have income, it's much easier to buy all these things and to own income producing assets. So I don't want to, you know, skirt away the core issue, which is like most people lower on the wealth ladder just simply don't have enough income. It's not their spending. It's their income. I talk about that. But thinking about opening up a more higher ownership society would be

make a big difference here. Okay, we've got a few minutes left. We're going to ask some fill-in-the-blank questions. Fill-in-the-blank, the most overrated thing in personal finance is... Cutting your spending to build wealth. Oh, so build income faster than cutting wealth. I love that. But also, you just recently had a tweet, too, that...

caused a little bit of a stir where you said one of the most overrated things in personal finance is, you know, passing on generational wealth to your children. Talk to me a little bit about that and why that caused such a stir. I think it causes a stir because I have nothing against it, but at the same time, like, a lot of the people who build generational wealth are like, oh, I came from nothing. It's like, okay, so then you want to then give your child every advantage so that they don't build the same character-building qualities that you had? I don't know. It's a debate. I'm kind of open to it. So I think...

And there's, you know, Warren Buffett has this great quote, which is like, I want to give them enough so they can do anything, but not so much that they do nothing. Right. So you want to help your kids, but you don't like maybe pay for their college through college. They're covered after that. They're kind of on their own, something like that.

once again, it's a personal issue. Everyone's going to be different about this. So there's that scene from succession that you put in your book too, about cousin Greg, who gets a $5 million inheritance. He's like, wow, I'm good for life. But then I forget who it was actually come to and said, you're actually the poorest rich person. Why is actually $5 million? I mean, again, it's a, it's a show, but like, why is that kind of a bad level to be at in a way? Well, five, once again, like, you know, level four, I call that the no man's land of wealth because like

the things that got you into level four, which is 1 million to 10 million are very different than the things that get you out, right? Like you can have a good salary, save, invest, get into level four to get to level five and beyond. You got to start a business or do something completely different. So in terms of the no man's land, once you're in there, it's very hard to get out. Even if you have, let's say you hit a million dollars today,

and you save $100,000 a year earning 5% a year, it would take you 23 years before you hit 10 million. Remember, that's saving 100K after tax. It's a lot of money. So you see the math. It just gets really tough to get out.

Here's the next fill in the blank question. I think you could probably guess what it is. The most underrated thing in personal finance is increasing your income for sure. It's like and the data is getting like every piece of data I've seen on this is overwhelming. I know that's like, well, Nick, is that an obvious answer? Well, if it's so obvious, we wouldn't be talking about cutting lattes and avocado toasts and all the stuff, which I still see to this day, which is, I think, a distraction.

I guess the final fill in the blank question is where people can buy your book, The Wealth Ladder at fill in the blank. Amazon, everywhere books are sold, like Barnes and Noble, you name it. So thank you guys for having me on. I truly appreciate it. Appreciate it. So this is your second book now, right? And you're still, you know, shopping this book around, but what is a topic that you would want to dive in for potentially a third book?

I have no clue. And that's a great, I only had two ideas. The first one was just keep buying my first book. And this is it. Yeah. I think I ran, I run out of ideas. So we'll see. Going up the book ladder. The book level two is where you stop. I guess. I guess so. Nick, I wish we could keep going, but that is all the time we have. Thanks so much for jumping on the show. I'm ready to start moving up the levels of baby.

If you enjoyed hearing Nick today, his book, The Wealth Ladder, Proven Strategies for Every Step of Your Financial Life, comes out later this month. But you can order it or preorder it on Amazon whenever you listen to this. Nick, this was so much fun, man. Thank you. Thanks, Neil. Thanks, Toby. Appreciate it.

Oh man, I am fading. I either need an iced coffee or vacation or both. Toby, what if I said you could get the benefits of both in one cup? What? That got all over the studio. But yes, Taco Bell's new lineup of refresca drinks are like a little out of office in a cup. So I am to believe that agua refrescas with green tea and freeze-dried fruit, Rockstar Energy refresca with extra energy, and the new refresca freeze are all handmade to order? That is correct.

He left. Anyway, head to Taco Bell dot com slash morning dash brew to learn more. That's Taco Bell dot com slash morning dash brew. At participating Taco Bell locations for a limited time only while supplies last. Agro refrescas are made with artificial colors and natural fruit flavoring and contain less than one percent juice. Rockstar Energy refrescas contain 200 milligrams of caffeine and are not recommended for children, pregnant or nursing women or persons sensitive to caffeine.