Entrepreneurial Mindset, Financial Education, Inspired Living, Personal Finance

The Four Levels of Wealth (and Where Are You Now?)

So what’re the The Four Levels of Wealth? And where are you today?

When I was young, I liked to read story books before going to bed at night. Now that I have two daughters, I found myself re-visiting this old love and reading stories to my little girls before they go to sleep at night. One of my favorite story classics is Alice in Wonderland. Do you remember the scene below?

“Would you tell me, please, which way I ought to go from here?” asked Alice.

“That depends a good deal on where you want to go,” said the Cat.

“I don’t much care where.” said Alice.

“Then it doesn’t matter which way you go.” said the Cat.

Do You Know What You Want?

Isn’t this true? If you don’t know where you want to go, then anywhere will do!

Many people go through life without ever knowing what they truly want and why they want it, and therefore, they just let “life happen to them”.

Don’t let that be you! If you don’t know what you want, how can you get what you want? If you don’t have a dream, then how can you have a dream come true?

Similarly, when it comes to your financial dreams, you MUST know also where you want to go. So, in this blog post, I will share with you The Four Levels of Wealth and how you can achieve them.

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THE FOUR LEVELS OF WEALTH

Level 1: Financial Stability

The 1st level of wealth is known as Financial Stability. This is the most basic level of wealth that everyone should first attain.

To achieve Financial Stability:

(1) You should have accumulated enough liquid assets to cover your current expenses for a minimum of 6 months (often known as the Emergency Fund).

(2) You should have basic insurance to protect you and your family‘s lifestyle should you become temporarily or permanently unable to work or if you pass away suddenly.

Insurance coverage is beyond the scope of this blog post, but I would strongly encourage you to talk to your trusted insurance professionals to find out more about what insurance coverage best suits you.

When you have attained this first level, you will have the peace of mind that should anything unexpected happens such as job retrenchment, business failure, pay cut or injury, you and your family’s lifestyle will be protected for at least the next few months so you have time to get back on your feet financially.

If you have achieved this 1st level, congratulations! Now, let’s move onto the 2nd level which will give you much more freedom and excitement in life.

Level 2: Financial Security

You have achieved Financial Security when your monthly residual passive incomes cover your most basic monthly expenses.

You can establish residual passive incomes by building and acquiring businesses and investments.

In other words, when you reach this level, you can stop working and maintain a very basic lifestyle.

It also means that if you continue to work, then all your active incomes can now be channeled towards your investments or re-invest into your businesses, and this will further compound your assets and increase your cash flow.

So, what do I mean by the most basic expenses?

Think of all the necessities you will need to live a very simple lifestyle. Certainly, this can be subjective, and vary from people to people, country to country, but generally your most basic expenses should include the following.

Most Basic Expenses (Necessities):

(1) Shelter: the rent or mortgage of a basic primary residence
(2) Food: basic grocery for your household
(3) Transportation: public transportation expense to cover all necessary trips to and from work
(4) Insurance: insurance premiums for your basic insurance coverage

The scary part is, most people in the World would NEVER achieve Level 2 Financial Security their entire lives.

Why Most People Never Achieve Financial Security

Some has never thought about it (remember Alice in Wonderland?), some did not think it is possible for them so they never even tried, some did not know how to go about getting there, but in most cases, they just live by the old school saying “go to school, study hard, get good grades, get a good job, and work hard until you are 65 years old to retire.”

The truth is, the economy is getting more and more uncertain, people can get laid off easily from their jobs. And even if you work hard and save money until you are 65 years old, there is still no guarantee that you can retire comfortably and have enough money to spend until you pass.

For example, what if there is an economic crisis after you retire? What if you found out after retirement that you did not save enough money? Or what if you live longer than you have expected? These are scary thoughts.

I have seen financial difficulties happened to perfectly kind hearted, hard working individuals who are still subscribing to the old, traditional formula of “go to school, study hard, get good grades, get a good job, and work hard until you are 65 years old to retire.”

Often times, they live from pay check to pay check, trading time for their money day in and day out their entire life without a Plan B.

Don‘t let that happen to you. Take the time to learn and take actions on how to build and acquire your businesses and investments and build your residual passive income streams.

With that said, let‘s move onto the next level and towards true freedom.

Level 3: Financial Freedom

Many of us have the dream of achieving Financial Freedom (I believe you are one of them since you are reading this blog post) but what does it really mean?

Well, Financial Freedom is when your monthly residual passive incomes exceed your monthly total expenses of your current lifestyle.

In other words, at this level, your passive incomes cover your basic expenses (such as Shelter, Food, Transportation and Insurance) and more (such as having a car, going on one or two annual vacations, occasional entertainment, dining out with your family occasionally, donating to your favorite charities, invest in yourself through personal development seminars and courses).

Reaching this level of wealth means that you have the option, the freedom, of never having work (for money) another day of your life and still maintain your current lifestyle!

Learn from people who have already done it and find yourself a Mentor. If you follow the right path and take massive actions, Financial Freedom can be attainable within 3 to 5 years.

I can tell you from my personal experience that it is amazing to achieve Financial Freedom – being free of financial pressure and worries, working purely out of passion (and impacts), and having the time to spend with your loved ones!

Now, obviously, the more expenses you have, the more luxurious and indulgent your standard of living, the longer it will take for you to achieve Financial Freedom.

Now, if you have achieved Financial Freedom, a BIG congratulation! You have now achieved a level that 90-95% of the population never gets to. But, there is one more step above Financial Freedom. So let’s move on to Level 4…

Level 4: Financial Abundance

So, what is the ultimate level of wealth?

Financial Abundance is when your monthly passive incomes can cover the total monthly expenses of your dream lifestyle. Obviously, this is totally subjective depending on the lifestyle your heart desires.

If your dream lifestyle is to live in a 20,000 square-feet house with a nice sea view and a swimming pool, send your kids to the best private schools in the World, drive a Ferrari, own a yacht and travel the World 12 times a year or more in first-class, then you could be looking at monthly lifestyle that will cost you US$500,000 or more (depending on where you live).

The more luxurious your dream lifestyle is, the longer it will take for you to achieve Financial Abundance.

Most people who do reach this level usually LOVE what they do so much that they keep on working just for fun (and for making a difference in the World), channeling 100% of their active income towards compounding their wealth and charitable causes.

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So, What’s Next?

So these are the Four Levels of Wealth.

Take inventory of where you are financially today, keep learning and keep taking MASSIVE actions towards your goals. It is never too late to start building your residual passive income streams through your businesses and investments.

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With the right strategies and plan in place, you too will be able to achieve your desired level of wealth, be able to take care of your family, have the peace of mind, give back to the society more, and have the freedom to do what you truly love in life.

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Now it’s your turn. So which level of Wealth are you currently at, and what level of wealth would you like to achieve? What action steps are you going to take to reach the next level? Comment below! I would love to hear them and will get back to you.

Millie Leung

Millie Leung helps soul-centered, heart-driven women build a profitable online business and create a life they truly love.