Level Up Your Finances with The Wealth Ladder Framework (with Nick Maggiulli)

Transcript:

On this episode of the Personal Finance Podcast, we're gonna talk about the Wealth Ladder with Nick Majuli.

What's up everybody, and welcome to the Personal Finance Podcast. I'm your host Andrew, founder of Master money.co. And today on the Personal Finance podcast we're gonna be talking about the Wealth Ladder with Nick Majuli. If you guys have any questions, make sure you join the Master Money Newsletter by going to Master money.co.

Slash newsletter, or don't forget to follow us on Spotify, apple Podcast, YouTube, or whatever your favorite podcast player is. Now, today we're gonna be diving into the Wealth Ladder by Nick Majuli. Now, Nick wrote this amazing book called The Wealth Ladder that I think really is going to reshape a lot of the ways that you think about money.

And in this episode today, we're gonna be talking through the Wealth Ladder framework and what that actually means. You know what the different levels are and there are different levels of net worth. We're gonna talk through some key philosophies and rules, because Nick has some really important ideas that I think a lot of people need to understand when it comes to the way that you spend your money, when it comes to the way that you actually think about cutting back when it comes to how to grow your income.

We're also gonna talk about your career, your income, and leveling up, how much money you make every single year, and why that is so powerful. And we're gonna be talking through mindset and long-term success. So this is an episode that I think is really, really powerful for a lot of people. This is the second time Nick has come on this show.

Love it every single time he comes on. So without further ado, let's welcome Nick back to the Personal Finance Podcast. So Nick, welcome back to the Personal Finance Podcast. Thank you for having me on. It's been a few years, so I am really excited to have you back on. 'cause first of all, you're one of my favorite authors to read.

I mean, just keep buying was absolutely amazing. And now you have a new book coming out called The Wealth Ladder that I just read through that I absolutely love. And there's some really cool stuff that we're gonna kind of talk through today and dig out of it. But you've already made a huge impact with just keep buying, sold hundreds of thousands of copies.

So what kind of inspired you to write the wealth ladder and how does this differ from your first book? Yeah, so would just keep buying. My goal was like, what's the one financial strategy that has the highest probability of success, right? So if I know nothing about you, I have nothing about your background, I literally have no information.

What would I tell you to do? And I tell you to, you know, just keep buying a diverse basket of income producing assets, right? That's like the short, uh, version of the book. However, I said, what if I had some information about you? What if I just knew like, your current net worth, like all I have is your current wealth.

Then I would give very different information, right? I may not say like, I still think just keep buying is a great strategy, but if you like, if I know your current wealth, and even more importantly, if I know where you want to go, I might give you different advice, right? If you're like, oh, I wanna be a billionaire, I wouldn't tell you to buy the s and p 500.

I would tell you very different advice, right? So, and of course most people don't wanna be billionaires, but you get my point, right? And I think the analogy that I use with the well flatter is like. Think about a fitness coach, they're gonna give very different advice to someone who's like morbidly obese versus a well-trained athlete.

Right? You're gonna, the principles will be the same, right? Diet, exercise, all the things we know, sleep, all that stuff. However, the main difference is they're gonna give different tactics and strategies to follow for different people. And it's the same thing I think is, this is what I'm trying to do with the Wealth Ladder, is I'm trying to give different strategies based on where you currently are and more importantly, where you want to go.

Absolutely. I think the book kind of envision, you know, shows all of that, you know, coming out and I think there's some really cool stuff that people can take away from that. So what personal experiences, and you kind of lead to some of these in the book, but what personal experiences or data led you to the six levels of wealth?

So for the six levels, I think I just realized that I. You need ever, as you get more wealth, you need even more and more wealth to like change your lifestyle. Like for someone that has like $0, like $10,000 can be transformational. You can, like, you're not worrying about money, like, oh, you know, if you're paycheck to paycheck, like, I'm not saying you're financially free with $10,000, but you just have a weight lifted that's not gonna be there anymore.

Now, compare that to a millionaire. Give them $10,000. They're probably not gonna feel any differently. They may not even notice it. It's like a rounding error, right? So that's a case where the amount of money you need to change your life changes as you get more wealth. And so that's the core concept behind all of this.

I mean, mathematically it's called like a, you know, log wealth, but the whole idea is just a 10 x change is what matters. So every wealth level is 10 x higher than the level before. So level one, as I say, is less than $10,000 in wealth, uh, or net worth. And once again, just a quick. Aside. Net worth is all of your assets minus all of your liability.

So if that's, that includes home equity, that includes your retirement accounts, everything. That's all your assets, minus any debt, you owe, any of those things, right? Your student loans, et cetera. So once you have your number, you don't need to even know your exact number. You just need to know what range am I in?

And that's your wealth level, right? So level one is less than 10,000. Level two is 10,000 to a hundred dollars in wealth. Our a hundred thousand dollars in wealth level three is a hundred thousand to a million dollars in wealth. Level four is 1 million to 10 million in wealth level five, 10 million to a hundred million.

And then the last level, level six is a hundred million plus. Right? And we can go into all of those wealth levels, different strategies and things related to that. But that's kind of the breakdown. Exactly. And I think this is a really great way for a lot of people to kind of think about their wealth building because like you said, there is a lot of differences between, you know, if you want to get to level six, for example, you're gonna take a lot of different actions than someone who is gonna go, you know, maybe level three or level four, uh, who really just wanna build wealth, kind of retire, spend time with their family, those types of things.

And so it's a big, big, drastic. Difference on how you actually act, how you spend with your money, how you actually look at income, how you look at your investments. Everything begins to change, which is what we'll start to talk about here, uh, today as we go through this. So a lot of people will come to me on this show, for example, and they'll say, Hey, I just feel stuck.

I always feel like I'm trying to get ahead and I just really can never get ahead. What do you think, you know, causes most people to get stuck when they're trying to do everything right financially? I think the issue isn't effort, it's strategy. Now, what do I mean by that? I think there's a lot of people out there and when you say doing everything right, like they're working hard, they're going to their job, they're doing everything they're supposed to do, and they're not seeing the progress.

And so the issue isn't their effort. I think a lot of people just say, well, if I work hard, then I'm gonna get whatever I want in life. And that's not necessarily true 'cause it's like, what are you working on? And the simple example I give is, imagine working 50 hours a week in a minimum wage job. You're working hard, but like you're not gonna build that much wealth relative to someone who's working less hours, but those hours are just earning them so much more, right?

And so I think it's more about, okay, what am I working on? What's the strategy I'm trying to follow to get to where I want to get to? So I don't want people, I'm not saying effort doesn't matter. Of course, effort matters. Everyone knows effort matters, but effort is not. Um, sufficient to get to your financial goals, you need to have the right effort on the right strategy as well.

And so it, and it takes time to build that and we can get into what strategies, what do you mean? And we can kind of get into those in a second here, so Absolutely, and that's true. So there's a different strategy for each level of wealth, and you kind of dive into the, some of these on the book, but can you talk about how they kind of build upon each other when you're trying to level up?

We kind of walk through each of those stages and what they mean, but can you talk through just, you know, how each level of wealth kind of builds upon each other? Yeah, so I say with each level of wealth, there's a certain thing you're trying to like accomplish or there's a certain thing you wanna maximize.

And so for example, let's just start in level one. Someone with less than $10,000 in wealth. For them it's mostly safety. Like, it's like getting to a place where bad luck is not going to derail your financial life, right? Where, oh, I got a flat tire now I can't get to work now I lose my job. Like you can imagine like this, like cycle, a bad cycle from something that's relatively trivial for someone with more wealth.

Like for someone in level three, level four, oh, a flat tire or something like that is not a big deal. Like, yes, it's annoying, but it's not gonna derail your financial life for someone in level one. It could be catastrophic. And so that's where I think the thinking needs to change. Okay. In every level you have something to focus on.

Level one that's like safety. I just need to get to a place where I have enough. Resources where I don't have to worry so much about bad luck. Level two, that's where I started to talk about education skills. What skills can you build to kind of change, you know, your trajectory so that you can start building more income and actually get to level three, et cetera.

Right? And we can go through each one of these levels. Level three, I talk about investing, right? And like that's where I'm like, you really need to invest because over the long term. Not only are you earning income, but you need your money to earn income. Right? So it's like now that you've actually built wealth, how do you get that wealth to build more wealth for you?

Right? And then in level four, that's where we start getting into like, once you're in level four, you're basically in level four for the rest of your life. Unless you make a big shift and do something like, and by the way, level four is 1 million to 10 million. Um, unless you make a big shift like, oh, I'm gonna start a business.

I'm gonna go and get a lot of equity in a business, or I'm gonna join a startup that has a. Chance of, you know, growing a lot and I'll have 'em exit where I have over $10 million at the end. Right? So the strategies change, but they build on each other and like you don't have to complete, like I don't have to go through these like in order.

But I think if you actually look at how most people succeed, they actually do end up going through them in order in a lot of different ways. And we can definitely get into that. Like I think most people who actually look at the data, most people that start businesses aren't in their twenties. They're in their forties, fifties.

Like they've had experience, they've done all the other. Things. And so the most likely age of someone starting a business is actually like in their forties. It's not someone in their twenties that's actually exceptional. So just when you look at the data on who's actually succeeded at doing this stuff, it's like, oh yeah, someone with experience, someone that went through and kind of built some wealth and then used that, used their resources to kind of start a business, et cetera.

So. And how do you see that, you know, when they go through those stages. I think that's super interesting to kind of dive into a little bit because I think for, I just look at my life alone and I'm in my thirties now, my mid thirties, and I just look at kind of the stages that I went through. I went through that very early stage of just trying to get, you know, my first 10 grand and my first a hundred K saved up.

And we talk about that a lot in the show too. Just people ask, Hey, how do I get my first a hundred K? So we kind of go through the process of, you know, the things that I did. And the biggest thing was obviously, and we'll talk about this even more. But the biggest thing was increasing my income. And you write about that all the time on how powerful your income is.

You and I kind of agree on that. I think it's the most powerful thing that you can do when it comes to building wealth, is growing that income and then sequentially, you know, you start to build up that income over time, you can start to invest your dollars and you get to level two. And as you start to build up some of that money.

You can see a drastic impact where it reduces your stress and anxiety as you start to go through that process and then you start to build up enough confidence, oh, maybe I should start a business and or two, as I start to level up even further. And you know, I think there's a really, really, you know, compelling case to actually go through each of these stages because you learn so much along the way where.

And maybe the data tells you this, maybe it doesn't. But my feeling is that sometimes the probability is much higher that you would fail with a business if you have not gone through some of these stages to kind of see, you know, and have some of that experience going forward. But what does the data say about that is, have you seen more success when people kind of go through these stages?

Is it something that, you know, experience does really matter and or is it something that it doesn't really matter and it kind of just depends on the person. The one thing there is like if you actually look at the data on entrepreneurs, like the entrepreneurs that have already started a business and done it, they are more likely their next business is gonna be much larger.

Like the revenue's gonna be much larger. So it's just, it's building on this thing over time. And so they find, once again, as I said, like. Entrepreneurs are more likely to be older, more likely to have experience in their industry. It's not like, oh, hey, I'm gonna go and, you know, disrupt this industry. I've never worked in, no.

It's like people that have been in the industry, they know how it works, they've seen the issues, and they're like, I can make this better. And that's what they do. So I'm not saying you can't start a business if you're in level one or level two or whatever. It's just. A lot of the people that do start businesses are probably further up the, well flatter.

I'm not saying they're in level four already, where they have a, you know, a million to $10 million, but they're probably at least in level three, where they have, you know, a hundred thousand to a million dollars where they have some financial resources they can use to start their business and kind of build it from there.

I love that. I think that's a true indicator of just kind of what you see a lot of people go through. Obviously you can start the business early as well, but it's just, that experience I think is pretty interesting to look at. At what level do you see a lot of people get stuck? Because I think there's a lot of, it's pretty important for a lot of people to kind of think through.

Is there a level that you see that, uh, you know, a lot of people just plateau. Yeah, I think generally, I mean overwhelmingly if you actually look at the data, they followed households over time. So a lot of the wealth data out there is snapshots of like society at different points in time. So it's different households.

There is a data set called the panel study of income dynamics from the University of Michigan and they look at the same set of households over time. So it's like really following like life cycle, like what's going on throughout your life. And I looked at every, I categorized the wealth levels, adjusted for inflation, all this stuff, and followed them over time and basically.

Over a 20 year period, which wealth level, if you start in, are you most likely to stay in the same wealth level and it's level four, like getting into level four, which is 1 million to 10 million. 64% of those households will still be in level four, 20 years later, right? Only 8% will make it out to level five, right or above, and the remaining 25% or more will fall, or I guess it's 28%.

Will fall below level four. So it's very interesting to see that data. But what that means is like people get stuck in level four. Now, once again, there's nothing wrong with getting quote stuck in level four. It's like level four is great, one to 10 million is great. That's where people, you know, a lot of people, it's on purpose too.

They're like, I don't want to keep working. Like I'm good. I can coast, I can chill out, I can take my foot off the gas and it's fine to get stuck. I don't wanna say, oh my God, you're stuck. But if you're like, I wanna keep making it. When you get to, you know, level four, that's where the math starts to get really tough in terms of getting outta level four.

Like, you know, if you just think about, okay, if you have a million dollars and you're saving a hundred KA year, you're adding 10% to your wealth every year, right? A hundred thousand on a million, right? 10%. Once you have $5 million, that a hundred thousand dollars in savings, which is still a great amount of savings, is only adjusting your wealth by 2%.

Over time is just less effective. And so the stuff that got you into level four is not like the strategy that gets you in there is not the strategy that gets you out. And that's kind of the big thing I saw in the data. And that makes complete sense 'cause that obviously that level four is where a lot of people just try to land when it comes to, if they wanna just have a traditional retirement, you know, you wanna make sure that you, you know, you follow the 4% rule, you had a 25 extra income, whatever else, and you're just looking to go towards, you know, you have your nine to five, you're building wealth over time.

A lot of folks will kind of go to that level four, which makes a ton of sense why they would plateau there. Uh, just because they don't really wanna go further. They just wanna be retired, they wanna spend more time with their family, that type of stuff. And so I think that's super, super interesting. Now I wanna dive into one of my favorite parts of the book.

And I think this is something that could flip the script for a lot of people on how they think about their money and their money psychology. And you kind of challenged the idea of spending based on income. And instead you suggest spending based on wealth. And I think this, when I started to read this part, I thought this was just such a powerful mind shift for a lot of people and it made so much sense.

So why is this shift so powerful to you? I think it's because income is fickle and it's more fickle than people realize. And so, you know, if you, there's this, the study they did where they say, uh, one in 10 households, or roughly 10% of US households are going to experience a 50% decline in income in the next two years.

And they check this over time and it's roughly around 10%. Right? All that means is imagine you had 10 couples. One of those 10 couples, one of those partners is gonna lose their job. It's not that crazy. I have 20 people, you know, you have 20 people. One in 20 people are gonna lose their job in the next two years.

That's not that crazy of a stat, but that's kind of the math. And so if you think about that, incomes move around a lot and they're fickle in that sense. And because of that, wealth is less so. Right. And of course wealth can decline and stuff, but those are rare. Like how often do we have a 50% decline in stocks?

It's rare. It happens, but it's like once a generation, it's not once every few years. Right. So this is one of those things where when you actually look at the data, like. Income just can shift so much. If you spend based on your income, you can get into a bad spot. Now, I'm not, of course, you have to spend based on your income or you have to survive in something.

But my idea with spending based on wealth is saying, okay, once you've built some wealth, then you can kind of free up your spending a little bit more. We can kind of talk about the rule that does that. Um, the analogy I want you to think about, just imagine a professional athlete, right? They have five to seven years of really, really good income, and then it drops off a cliff, right?

If those people spend based on their income, they end up broke. It's happens time and time again. What they should do is not spend a lot build, you know, save some of that money, build up wealth, and they'll build wealth relatively quickly and then they can start to spend a bit more. But that's like the big difference, right?

Because if you know your income's gonna drop off in five years, you have to like let that, that income has to last your whole life. Right. And that's a thing that a lot of these, you know, athletes don't necessarily think through. And it's really tough because, I mean, how would imagine getting, not having much and then getting dumped, you know, millions and millions of dollars every year, you're not used to that.

No one's used to that. So that's where like you have to shift your mindset and like spend based on your wealth, not on your income. Absolutely. And I think this is something, I did this in my twenties, even like early on where, you know, and I didn't even understand this concept fully, I was just trying to retire as fast as I possibly could.

So I remember early on just saving a huge portion of my income becoming extremely frugal in my twenties, and now I'm way more relaxed than I used to be. Uh, and my kind of mindset has shifted, but it's after, you know, your net worth starts to grow over time. And I think it's just really cool, um, when you kind of.

Read through this, it just opens up your mind to the difference making when it comes to spending. So that kind of leads us to the 0.01% rule. And I think this is, uh, you know, a difference maker to just think through for a lot of people, you know, how should they spend their dollars based on this concept?

So how does this allow people to spend more freely without sabotaging their future? So, yeah, the 0.01% rule basically means you can spend 0.01% of your wealth every day, and your wealth will remain the same, all else equal, right? So imagine, let's just make this very simple. Imagine you're spending all of your income, all your spending matches your income.

So you have no savings right now. On top of that, you could in theory spend 0.01% of your wealth, which is roughly one 10,000. So if you have $10,000 in wealth, you could spend $1 a day and your wealth would stay, would roughly stay the same over time. And how do I come up with that 0.01% a day? If you do that on an annualized basis, if you've got 0.1, 0.1%.

Per day, every single day for a year. That's roughly 3.7%. It's very conservative. It's basically saying your wealth conservatively is going to get at least a 3.7% return, right? It's just a simple rule that we use. So take your wealth divide by 10,000, and that's how much you can spend per day. And so if you say, well, my wealth's a hundred thousand, Nick.

Okay, then you can spend $10 per day. And so how I lay this out in the book is every wealth level has a level of what I call spending freedom, right? So in level two, which is 10,000 to a hundred thousand dollars in wealth, I say you have grocery freedom, right? So if you start with 10,000, you can spend a dollar extra a day.

By the time you have a hundred thousand dollars, you can spend 10 bucks extra a day. And what I mean by that is you go to the grocery store, you don't gotta look at the price. You're like, oh, I wanna get the, the cage free eggs instead of the non cage-free. That little two $3 difference, it doesn't really matter, right?

In the grand scheme of things. So by the time you're really at the end of level two, you can kind of buy what you want in the grocery store. Level three, which is a hundred thousand dollars to a million dollars in wealth, that's gonna what I call restaurant freedom. So by the time you, as you start to go through level three, you're like, Hey.

I can go and spend more, I can, I don't have to debate. Should I get the burger for $25 of the salmon for 35? Like that $10 difference is small. So you can start to spend more at restaurants and, and I say by the time you have a million dollars in wealth, you don't really have to look at the restaurant prices, maybe the wine menu you stay away from, but everything else, like you can kind of just buy what you want at a restaurant.

Right? So that's kind of where. As you start to go through each level, you get different levels of freedom. And so why I like this rule is because it allows for some lifestyle creep, but it only allows for it once you've demonstrated financial discipline and built wealth. So you're like, Hey look, I've actually built this wealth so I've shown I've actually been able to save money.

So it kind of takes the pressure off so you can spend a little bit more. Right? And so once you're in level four, that's what I call travel freedom. So obviously travel freedom means different things to different people. I'm not saying you can fly private, but okay. You know, you have, you know, $1.5 million in wealth, you can probably up.

Grade your seat a little. I'm not saying you have to fly business class, but okay, maybe you get a better seat with a little more leg room or something, right? You can just do little things and that rule is gonna grow with your wealth over time. And so it's just a different way of thinking about it. And once again, every, all our spending decisions are on the margin, right?

We're always looking like, what am I spending this marginal thing? No one's like. Going to buy a car and they're like, oh, do I want to get a Toyota Corolla or a Maserati? No. It's like you're either getting a Corolla or a Camry. That's the marginal decision you're making. And so on that margin, I think your wealth should determine that spending decision and not necessarily your income.

So that's kind of how I want you to think about these types of things. For sure. And I think overall, you know a lot of people listening right now, if you have certain things, just think about like your dream lifestyle that you want to have. Does it include some of these things? I remember like the first time I could read a menu from left to right instead of right to left.

That's when I kind of. Started to feel rich or wealthy. It was one of those things where I didn't have to look at prices anymore. You could just kind of go to a restaurant, you could order what you wanted. And that's where I started to realize, hey, maybe I should make a list of some of the things that I want outta life and some of the things that just don't matter as much to me anymore.

Uh, and that can help you kind of target some of these levels, uh, to see where exactly where you want to land, because many people. Out there, you know, we're talking about, hey, cutting back on lattes. I think the old traditional personal finance advice was, Hey, just cut back on your latte, the latte effect, or stop spending so much dining out or stop spending so much extra, you know, on your groceries.

Those types of things. Uh, and you push against that. You and I kind of agree on this big time. So what should people actually be focusing on? Growing your income like at night and day. Like if you look, it's the strongest relationship in personal finance and especially like, I actually have this in the book, which each wealth level, what the median income, household income is for each wealth level, and it's overwhelmingly obvious that the more wealth you have, the more income you have and vice versa.

Right? There's very few households with. Low wealth and high income, or high income and low wealth. They're very correlated. So basically it's like, oh, I built my wealth by cutting spending. Like there are people like that, but there are few and far between. Most people overwhelmingly just got there through income.

So I'm not saying you shouldn't care if you're in level one and you're in a tough situation. I think you do have to really look at your spending and say where you can cut back. Right. But once you get into level two, like, okay, you've built some wealth, right? You're kind of moving along. You really gotta focus on income.

'cause income is the lever. It just makes it e, you don't have to budget, right? Like I'm not a good budgeter like pe. There's people right now in level one that are far better budgeters than me because they have to budget, they need to know, they don't have the resources. So they're very good at tracking every penny, coupons, all that type of stuff.

I don't know how to do any of that crap because I've been very fortunate that I've had a decent income since I graduated college and I haven't had to. Worry about those types of things, right? But that's the difference. That difference is the income, right? And so it's like, well, how do I build income?

That's a whole nother conversation. But you can start to see, that's where I want you to focus on. I don't want you to focus on, I need to spend less money. I need you to focus on how can I build more income? Exactly. The income is the catalyst to building wealth. It just increases your delta so much. We call the difference between your income and your expenses.

We talked about the gap there, and that gap is so incredibly important because. The larger you grow that gap, the more you can spend it on things that you love. In addition, the more you can spend on growing your net worth so that you can have that time freedom, that financial freedom that most people kind of go after.

And I think it's just such a powerful strategy. Now, you kind of talk about this too, where your financial strategy should evolve over time as your life starts to, it begins to evolve. People get married, people have kids. A lot of things will change throughout their life as they go throughout time. So what changes should someone make, you know, when they're moving on from their early career to maybe their mid-career?

I think mid-career is the point where you need to kind of make some decisions about, am I gonna stay on this path, like the path that I'm currently on. Am I gonna start a side hustle or something like that? Is a possible other thing I could do, or am I gonna break away and kind of go on my own? I'm not saying that's, those are the only three options.

There's obviously more than that, but for example, I'll just tell my story. When I was 27 years old. I was like, I could project out all my future raises, what my bonuses gonna be and everything. I'm like, okay, this is nice, but there's a limit to this unless I go and get a PhD or an MBA or something. Like I'm not gonna get paid more at my current company.

That is my old company that was at, and they were fine. Everything was great there, but I, I could see there was no more growth for me. Like there was just the standard growth and I could just see that. I'm like, that's not gonna work. So I'm like, I need to start doing something else. I love personal finance.

Maybe I'll write about this. And I did that for. Three years didn't make any money. And then over then I started writing ads on my blog. That's I started to monetize and I wrote a book and everything else came from that. But like, it took a long time to get there, but it was this focus on, okay, what else can I do besides just my nine to five to kind of change my career?

And now I'm obviously in a different company, so like I moved my career as well to match kind of what I really care about, which is investing, personal finance, managing money, et cetera. So I think the thing to focus on is like, okay, what should I be doing next to kind of. Get where I want to go. And that's where I tell people like, that's what's so important about raising your income.

So is there anything that you would do? Like if someone's looking at their career right now and they feel like it's just stagnating and they feel like, you know, they're just really not getting that much farther, maybe they get the 3% raise every year, the 5% raise, whatever it could be at their company. Is there anything that you can think through to how they could break through to the next level?

Should they, you know, look at different companies, should they look at different outlooks or is there any tips that you have for that? Yeah. So with stagnation, the things I like to think about is like, am I learning? Am I getting more responsibility or am I getting paid more and paid more? Like in a significant way?

Not like, okay, two, 3% raise, that's not gonna really move the needle. Right? So the answer to all those questions is no. If you're not learning, if you're not getting more responsibility, you're not getting paid more, you're stagnating in some way, right? And if, and then you have to really ask yourself like, is this where I wanna be?

Or do I wanna do something else? And so. The big thing, I like to think about the framework. I think about for really like supercharging, your income over time is leverage. Now what do I mean by that? That this is not my idea? It comes from, uh, naval ravikant, and the idea is leverage is like the more output.

Per unit of input, right? So most people, like, as I said, the minimum wage worker, they don't have a ton of leverage. Every hour they work, they get their wage right. And that's how most people are, even if they're not minimum wage, maybe they make more, but like they're getting paid on an hourly basis. And the question is, what can I do to divorce my time from my earnings?

Right? And so the leverage framework has, there's four different way the four different types of leverage. One is labor. That means, hey, I own a business. I'm hiring other people to do the work, so I'm paying them less than the value they're creating for the business as a whole. That's one piece of that another's capital.

I can use someone else's money. They don't want to take a risk. I'm willing to take the risk and I think it's gonna pay off and use that money to build a business. So that's another piece of, of leverage, another type. Content. That's the one I do where, and you as well, we create content that people enjoy in some way.

And so you can scale that to lots of people. Like there's nothing stopping, you know, millions of people from buying my book tomorrow. There's nothing stopping millions of people from listening to your podcast, right? Thi this is because of the internet, it's scales, and that that also goes with the last type of lever, which is code, which is like software type stuff.

Like I can build something that can scale to lots of people at once. And so once you can divorce your time from your earnings, that's when you can really start to see your earnings increase Now. You're like, Nick, how do I do that? Like it's not gonna happen overnight. Like it takes a long time. Like as I said, I took three years of earning nothing, just writing this stuff 'cause I loved it.

So follow your passion, follow your interest, figure out where those go and see if there's a way to eventually monetize that type of stuff. And so it's gonna take time, but there are ways to use one of these types of leverage to build something that can actually earn you more money. Agreed. And I think that's just where, you know, a lot of people just have to have that consistency based on, you know, some of the things that we do like, same thing here where we started this show like for months and months and over a year, like nobody was listening.

And then over time it just started to grow more and more and more. And I think you just have to kind of stay consistent with it in whatever your passions are to try to kind of break through some of those barriers, which is really, really powerful for a lot of people out there. Let's say for example, they're just starting out and they're just trying to survive.

They're just trying to get by very early on what mindset shifts would be required for them to kind of, you know, get from just that survival mode to kind of getting to the next level of wealth. Where would you start if you were starting all over? The main thing I would focus on is income. And once again we, I know we've already talked about this as like, you know, beating a dead horse here, but really realizing that that's the lever is the most important thing.

And I think, you know, I've spent so much time, even when I was starting, I spent so much time thinking about investments and all these other things, which are great in all, but investments really matter once you have wealth. Then they really, really matter, right? But like when you don't have much, when I had a thousand dollars, you know, in my 401k, it didn't matter what the market did.

It didn't like it had no impact, like relative to like my wealth, right? Even 30% return is $300. That's not that crazy. I could spend that in a week going out with friends, right? So like my whole annual return was eaten away in like one, you know, in one week basically. So. That's where it's like, what should I be focusing on is income and buying.

Income producing assets. You have to really think about like becoming an owner of society, like we're in a capitalist society. Love it or hate it. That's what we're in. And capitalism is about owning capital. It's about owning, you know, owning the means of production. That's the society we're in the, that's how economic rewards are.

Gathered over time, so to speak, right? So basically you have to be a capitalist. You have to own income producing assets, and that's the long term goal. And whether you create those assets yourself, whether you buy them and you know, index fund s and p 500 or whatever, or a diversified portfolio doesn't really matter.

The idea is don income producing assets. So that's the big mindset shift. Of course, you can't do that until you have income. So once you have enough income, then you start doing that stuff. And as they start to build income, let's say for example, they start to get higher up on that, that wealth ladder, and they start to kind of grow their wealth over time.

How do you think through, you know, balancing, you know, enjoying life right now, but then in addition, being able to also contribute to your financial future, making sure you're on track for your financial goals in that future. That's where I'm not just, once again, I'm just trying to plug the book, but that's where the 0.01% rule comes in.

That rule really does, I believe it really works. Like this is what happened to me when I was young. I, when I went to a restaurant, I, oh my God, I never, ever, I was like always, oh, I gotta get the cheapest thing or get the thing or, you know, I was always very cognizant of that. And then obviously as I built wealth, once I started getting into level three, I didn't even know this at the time, but I started kind of taking, you know, I could spend a little bit more at a restaurant and now to this day, I go and I get whatever I want at the restaurant, right?

Because I don't, you know, I have restaurant freedom. I've gone past level three. But I'm in level four now, and I, even though I have some travel freedom, I always fly coach at most. Maybe I will pay for like a window seat if sometimes they don't allow that. They only allow like the, you know, oh, you can only book the middle seat.

You can have to have pay for the window seat. Sometimes I'll pay for that, or I'll pay for more leg room, but that's it. I haven't had a business class flight. The only time I did, I did during COVID because it was like $400 and I was. I got to fly business class for $400. That was so cool for me. So I did it once, but that was, 'cause it was COVID, no one was flying.

It was a very weird time. Right. So, you know, I got COVID business class, so to speak, but my point is like. I am restricting myself, I'm following this rule. Like I don't have travel freedom. I still take coach, I try and find deals on everything I can in that, you know, sector of my spending. Uh, yeah. If I had 10 million bucks, I'd be like, sure, I could buy whatever I, you know, I could get a, you know, first class every time.

But I don't do that. So I really believe that allows, and it doesn't have to be the spending categories, you can find other spending categories, but I'm trying to come up with a framework that's like, Hey, I can spend more over time. After I've built wealth, right? And so that's kind of what I've tried to follow that path, and I'm gonna continue following that path going forward.

So it allows you to enjoy life, but you're gonna have to be restricted in certain areas of your life. That's the difference. Absolutely. And I couldn't agree more, I think. Uh, is there a, a certain level of wealth that you found from other people, maybe just from the research or just talking to other people that you think that people start to begin to kind of feel some financial peace?

Or does it depend on the specific person and kind of. Their upbringing and their, their money psychology there. Is there like a level that you see kind of, there's less stress and anxiety with those folks when it comes to their finances than maybe with other folks? Yeah, so I don't have a study on this.

Obviously I can create the levels so we don't have like can bucket these types of things. But in general, I would say it's like level three and level four. At that point you can kind of, you don't have to worry as much about money and, but at the same time you don't have so much money that you're like, it can create stresses in other ways.

And I talk about this in the book and we can get into that as well. But I think the thing with like. Level three, especially in the United States, if you're in like a low cost of living area, you can have an amazing life in level three. I think if you're in a high cost of living area, if you're like New York City and you're level three, it's a hundred thousand to a million dollars in wealth, it's not gonna feel as nice as once you're in level four, we have one to 10 million.

And even then, like. You might have to be the upper end of that so you can really like completely relax and not have to worry about anything. But it varies a lot by, based on also, as you said, your psychology matters, like how you're raised. If you're always worried about money, you're probably always gonna be worried about money.

Like you think about, like Scott Galloway, he talks about this a lot. Like he just never had money. And even though he has more, he spends so much money every month, he still has struggles with it. I think that's, this is in a good example of like psychology at the end of the day matters a lot in these things, but I think like you can live an amazing life.

For, you don't have to worry as much about money in level three and level four, especially level four. I think by the time you get to like, that's why I call it the upper middle class United States. Once you're there, like I tell people, don't keep pushing. Like it's not necessary anymore. But obviously not everyone's going to listen.

Not everyone cares, and so this is where we can have bigger debates around. So. And I agree. I think for a lot of folks, and for most people out there, when you keep pushing in, you know, in those levels, and this is just my opinion, but when you keep pushing, you know, above some of the level fours, uh, the stress, the return on time, much stress you have, you know, when you're trying to build a business or when you're trying to do some of these other things, sometimes for most people it's just not worth it.

And I think, um, that's just something to think through for a lot of people because your stress levels can go so incredibly high that it's just, it's a big difference maker for sure. Mm-hmm. What surprised you most while researching or writing this book? How hard it's to get outta level four. Like the math is insane.

When you run the math, you're like, what? Like how, so let's say you start with a million dollars, right? You have a, you've already made it to level four. That's already not easy in itself. Like takes people their lifetimes to do. This is not an easy thing to do. You just made it to a million dollars. If you're saving a hundred thousand dollars a year after tax and you're earning 5% on your money while doing it.

How long does it take you to get to level five? To get to $10 million? It takes 28 years. This is after you've already accumulated a million dollars, which has already probably took you a few decades, right? So it's like, it's insane. And then, well, Nick, what if I, you know, I'm gonna save $300,000, right? If you triple that, saving $300,000 after tax is a ton of money.

You have to be making it and probably double that at least right after taxes, and you're paying for your lifestyle. All this stuff. Even if you're saving 300 KA year, it takes you 17 years. Like you have to be grinding for so long to get to. Like, it just goes to show like it's so difficult to break outta this wealth level and the only people that do it have to do something very different.

It's like you start a business, you have to sell it for a lot of money, right? And so obviously it's very difficult to do. Less than 2% of the United States is in level five or level six, right? So it goes to show, it's difficult to do and it's not something I recommend for people to do, but. Once you run the math on that, you start to realize like there is a fundamental shift there that I think a lot of people don't talk about or don't think about.

And once you get there, you're like, oh wow. Like I really like working That extra five, 10 hours a week is not going to get you out of that. It's gonna help with your current wealth, but it's not gonna get you to like, oh, I'm gonna fly private and have Lamborghinis. Like, it's just doesn't happen. Right? You need to do something fundamentally different to get there.

Absolutely. And the book goes deep into that. And I, it's just fascinating, just some of the stuff that you talk through in the book and just, it makes you kind of rethink, you know, those, some of those levels, those upper tier levels and how hard it truly is to get there. For sure. So I wanna shift gears to just some rapid fire questions that we like to ask, and I think, um, we got some cool ones for you this time too, but what's a belief about money that you've held in your twenties that you've completely changed your mindset around?

Oh yeah, so it's inve the investing idea. Like when I was very young, I've focused so much on my investing, but it just didn't matter. Like what, you know, I just give a quote like this, a 10% return on $10,000 is smaller than a 2% return on a hundred thousand dollars. Right? It's just like the math, you're like, it doesn't matter.

Like you need to get wealth. Before the returns actually matter. And so I was spending all this time focusing on this, that, and I'm like, I wasn't focusing on my income at all. And so I wasn't thinking about my career. I was thinking about like, oh, what's my 401k? What's my investment mixture? I have 15% bonds or 20% bonds.

Like I was over obsessed on stuff that had very little impact on my life and not obsessed at all or not. Focusing at all on the things that did, which was my career. It's not like I've had a bad career, but like if I had really optimized and focused on that, I think, you know, things could have been very different.

Not that I'm complaining or I have regrets and want to go back, but it's just, I bet there's people out there listening to this and they're young and they're like, oh, I want to get started on this. I'm gonna listen to all these podcasts. Oh, this is a great podcast. I'm gonna listen to it. And they're like, you know, they have like 10 grand in their investment account and they're obsessed about what their allocation is and like, no offense.

Don't obsess on that. Like it just set something and then move on and foc like, you really need to focus on other things. It's, it can, it's such a time waste in my opinion, like it's good to learn and learn this stuff, but don't obsess. It's not necessary, especially with that amount of wealth. For sure, especially, you know, early on, you know, your first a hundred K, your contributions matter so much more than you know, any return that you would ever have.

You just gotta build up that, you know, we're focused on that income so you can have more of that delta to put into your investment accounts to grow it over time. It's just so incredibly important. What's the most underrated financial decision you've ever made? Uh, not selling any of my index funds. I've literally never sold, I've only sold individual investments.

I've never sold an index fund except, you know, obviously rebalance. That's like a tax thing, but like, besides that, I've never sold anything. So, yeah, I think, and you gotta stay diversified. That's the only way this works. You can't just be like, oh, I'm a hundred percent s and p or a hundred percent levered s and p.

Like, that's a little risky. But if you stay diversified, like this is just, it's incredible how well it works over time. What's your go-to splurge when you have a big financial win? I'll go out with my fiance or be, by the time this drops with my wife my, I go out with my wife when we go to dinner, so it's like a nice restaurant.

That's our thing. We like to go to nice restaurants, so absolutely. What is a financial rule that most people follow that you think is flat out wrong? I don't think most people follow it, but I think they believe it. Ma always max out your 401k. I think that's a not a great rule. I think for some people it makes sense, but I think a lot of people need more optionality, especially where housing prices are, you need money for a bigger down payment.

I think maxing 401k is not the thing to do if you're young. I love it. And then what does, this is the last one that we always ask everybody, but what does wealth mean to you? I think wealth means living life on your own terms. Now, that doesn't mean that you're financially independent and you don't have to work for money.

That doesn't mean you can buy whatever you want, but you can choose what opportunities you wanna work on. You can say, Hey. I really don't wanna do this. If you really have a, like a moral opposition to something, you can say no and do something else. Right? And I think that's where you have to get to.

Building wealth is allowing you to do that. Choosing who you wanna work with, you know, choosing how you wanna spend your time. Doesn't mean you spend every second of your day exactly as you want, but it's giving you some of that freedom. Say, Hey, I'm willing to. Work and sacrifice these times so I can spend my other time like this, right.

So I think it's finding that balance and it takes time to get there. I think like when you're young, you've gotta work a lot. It's just how it is. Like that's just the nature of it. I did it too. I was doing 50, 60 hour weeks, you know? But 'cause you build that wealth and then you have that flexibility and freedom.

So I think it takes time to get there. But that's what I would say. It's the ability to choose and live the life on your own terms. I love that answer. I think that's fantastic. So Nick, thank you so much for coming on here. This is absolutely amazing. Uh, your book was absolutely incredible. I encourage everybody to go out and get it.

So where can they find out more about you and where should they go get the book? Uh, my blog is of dollars and data.com. I'm writing every week. Um, obviously like I write about all sorts of different stuff. But yeah, the book you can find anywhere. Uh, books are sold, Amazon, you know, Barnes and Noble, et cetera.

And, uh, you can also find@wellflatterbook.com if you wanna just see like the landing page and all that. But yeah. Um, and also. I'm on social media, Twitter, Instagram, LinkedIn. Feel free to DM me. I respond to every dm. If it's a legit dm, it's not trying to pitch me on something, I will respond to every single one.

So thank you for your time. Awesome. Thank you so much, Nick, for coming on here. We truly appreciate it. Yeah, thanks for having me on again, Andrew. I truly appreciate it. Um, thanks.