The "7 Levels of Wealth" is a framework that outlines stages of financial progress, from dependency to abundant wealth as presented by Ramit Sethi in his recent Youtube video.
- Survival (Dependence):
- Struggling to meet basic needs like food, shelter, and bills.
- Living paycheck to paycheck, often relying on debt or external support.
- No savings or financial cushion.
- Stability (Break-Even):
- Basic needs are consistently met without relying on debt.
- Income covers expenses, but there's little to no savings.
- Financial stress is reduced, but no significant wealth accumulation.
- Security (Savings):
- Emergency fund established (e.g., 3-6 months of expenses).
- Some savings or investments, providing a safety net.
- Focus shifts from survival to planning for the future.
- Accumulation (Growth):
- Actively saving and investing to build wealth.
- Income exceeds expenses, allowing consistent contributions to retirement accounts, real estate, or other assets.
- Debt is managed or eliminated, and wealth begins to compound.
- Independence (Financial Freedom):
- Passive income from investments or assets covers living expenses.
- Work becomes optional; you could maintain your lifestyle without a job.
- Focus shifts to optimizing investments and lifestyle.
- Abundance (Wealth Overflow):
- Wealth exceeds personal needs, allowing for luxuries, philanthropy, or legacy-building.
- Significant investments generate substantial passive income.
- Freedom to pursue passions, travel, or give generously.
- Legacy (Ultimate Impact):
- Wealth is used to create lasting impact, such as funding charities, building institutions, or passing down generational wealth.
- Financial decisions focus on long-term societal or familial benefits.
- Complete financial freedom with a focus on purpose and contribution.
I love this framework because it helps me gauge where I am (Level 4.3) and where I want to work towards (Level 5).
Reaching Financial Independence at Level 5 allow me to wake up and not need to work to pay my bills is thrilling.
It’s not about quitting my job, but about having the freedom to choose.
As long as I can hit Level 5, I’ll be a happy woman. Honestly, I’m not even thinking about Level 6 or 7 right now—abundance and legacy sound amazing, but they feel so far off.
One step at a time, right?