Defining Wealth: The Three Levels of Wealth
Wealth is a term that we hear quite often, but what does it really mean? The truth is that wealth is subjective, and it means different things to different people. For some, wealth may mean having a lot of money in the bank, while for others, it may mean having a happy and fulfilling life. In this post, we will explore the three levels of wealth, and how they can help you define what wealth means to you.
The first level of wealth is your living expenses. This is when you create enough passive income to cover all of your basic necessities such as your mortgage, utilities, food, and other expenses that you need for survival. For most people, this number is around $8,000 gross per month. This level of wealth ensures that you are not struggling to make ends meet, and you have enough to cover your essential expenses without having to worry about money.
The second level of wealth is your lifestyle. This is when you are doing what you want, with whomever you want, wherever you want, as much as you want. It’s that total sense of freedom. This level of wealth means that you have enough passive income to support your desired lifestyle without having to work a traditional job. For most people, this number is around $20,000 per month. This level of wealth provides you with the financial freedom to travel, eat out, and enjoy life without having to worry about money.
The third level of wealth is legacy. This level of wealth is typically a net worth number. Legacy is about who you want to set up financially and what causes you want to support after you are gone. It is about leaving a lasting impact on the people and causes that you care about. To determine your legacy number, ask yourself how much money you want to leave behind, and how big your net worth needs to be to achieve that goal.
Defining these three levels of wealth is important because they create more urgency in your decision making. By setting smaller targets, you can focus on achieving them within a shorter time frame, which creates a sense of urgency. When you break down your financial goals into smaller, achievable targets, it becomes easier to focus on them and take the necessary steps to achieve them.
In conclusion, defining wealth is a personal journey, and it means different things to different people. By understanding the three levels of wealth, you can define what wealth means to you and take actionable steps to achieve your financial goals. Remember to ask yourself the four critical questions: What is your definition of wealth? How much passive income do you need to cover your living expenses? How much money do you need to live the lifestyle you desire? What is your legacy number? Take the time to answer these questions and set about hitting these targets. You may find that wealth building is simpler than you thought.