The author and blogger discusses how financial priorities should change with income and net worth, the money/happiness connection, and why deciding how to spend is just as important as deciding how to invest.
Today on the podcast we welcome back Nick Maggiulli. He’s the author of a new book called The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life. His first book was called Just Keep Buying. In addition, Nick writes a wonderful blog called Of Dollars and Data, which is focused on the intersection between data and personal finance. In his day job, Nick is the Chief Operating Officer and Data Scientist at Ritholtz Wealth Management. He received his bachelor’s degree in economics from Stanford University. Nick, welcome back to The Long View.
The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life
Just Keep Buying: Proven Ways to Save Money and Build Your Wealth
“How to Make More Without Working More,” by Nick Maggiulli, ofdollarsanddata.com, July 7, 2025.
“How Much House Is Too Much?” by Nick Maggiulli, ofdollarsanddata.com, Oct. 22, 2024.
“Rich vs Wealthy: Summarizing the Differences,” by Nick Maggiulli, ofdollarsanddata.com, April 18, 2023.
“What Is Liquid Net Worth? [And Why It’s So Important],” by Nick Maggiulli, ofdollarsanddata.com, Dec. 5, 2023.
“Do You Need Alternatives to Get Rich?” by Nick Maggiulli, ofdollarsanddata.com, May 28, 2024.
“Concentration Is Not Your Friend,” by Nick Maggiulli, ofdollarsanddata.com, March 14, 2023.
“Nick Maggiulli: ‘The Biggest Lie in Personal Finance,’” The Long View, Morningstar.com, April 12, 2022.
Federal Reserve Survey of Consumer Finances
“High Income Improves Evaluation of Life But Not Emotional Well-Being,” by Daniel Kahneman and Angus Deaton, Princeton.edu, Aug. 4, 2010.
“Experienced Well-Being Rises With Income, Even Above $75,000 Per Year,” by Matthew Killingsworth, pnas.org, Nov. 14, 2020.
“Income and Emotional Well-Being: A Conflict Resolved,” by Matthew Killingsworth, Daniel Kahneman, and Barbara Mellers, pnas.org, Nov. 29, 2022.
Of Dollars and Data Popular Posts
“Even God Couldn’t Beat Dollar-Cost Averaging,” by Nick Maggiulli, ofdollarsanddata.com, Feb. 5, 2019.
Get Good With Money, by Tiffany Aliche
The Millionaire Fastlane, by MJ DeMarco
The Intelligent Asset Allocator, by William Bernstein
How to Retire, by Christine Benz
(Please stay tuned for important disclosure information at the conclusion of this episode.)
Christine Benz: Hi and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.
Amy Arnott: And I’m Amy Arnott, portfolio strategist with Morningstar.
Benz: Today on the podcast we welcome back Nick Maggiulli. He’s the author of a new book called The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life. His first book was called Just Keep Buying. In addition, Nick writes a wonderful blog called Of Dollars and Data, which is focused on the intersection between data and personal finance. In his day job, Nick is the Chief Operating Officer and Data Scientist at Ritholtz Wealth Management. He received his bachelor’s degree in economics from Stanford University. Nick, welcome back to The Long View.
Nick Maggiulli: Thanks for having me on. I appreciate it.
Benz: Well, we appreciate you being here and congratulations on the book. We often hear that if someone had a successful first book, writing the second one can create some angst. Did you find that to be the case that writing The Wealth Ladder was harder than Just Keep Buying was?
Maggiulli: In some ways, yes, and some ways, no. The only part that was easier was that I had obviously written a book before, so I didn’t have that existential dread of, like, will I finish it? What’s going to happen? I knew I would get through it eventually. I think the part that was actually harder, it was a harder book to write, all else equal, because my writing process was just very different. When I wrote Just Keep Buying, I had so much prior material from my blog that I was just using again. So, I would say 70% of Just Keep Buying was like old blog posts that I kind of repolished and restructured to create Just Keep Buying. But with The Wealth Ladder, I had to just focus exclusively on one idea. So, I ended up writing so much more new stuff. I’d say 80% of The Wealth Ladder is new material. Like, the idea I’ve talked about previously on one blog post, but it was a very like, hey, here’s this blog post, whatever. And then I’m like, hey, I actually have to think about this much more deeply and really kind of do a lot more research to bring this idea to life. And so, it’s much newer and that’s why it was harder.
Arnott: You also describe yourself as a writer who used to hate writing. How did you get over that hurdle?
Maggiulli: I think you just have to write about what you want to write about. I think that’s the big thing. I think if you guys remember back to grade school and stuff, it’s like, OK, you need to write a 1,000-word essay on The Scarlet Letter. And maybe you guys love that book, or you didn’t, or whatever—you’ve written a 1,000-word essay on The Catcher in the Rye, whatever it is, you have to write about stuff that someone else wants you to write about. And I think that makes it very difficult to be passionate about writing when you’re writing about something else that maybe you don’t necessarily care for. So once it’s like, hey, here’s a topic I really like writing about—personal finance, investing, and so on—I find it’s much easier to keep writing and do something that I used to hate because I wasn’t writing about what I wanted to. Now that I get to write about what I want to, I enjoy it.
Benz: So a basic premise of your new book, The Wealth Ladder, is that financial strategies that worked for us earlier in our lives don’t necessarily work when we’ve amassed more money. And so to use a simple example, if I have $10 million, I probably don’t need to be clipping coupons anymore. So was there a specific catalyst for this thesis? Was there an example or a series of examples in your life that lent themselves to wanting to write a book on this thesis?
Maggiulli: Yeah, I didn’t realize it at the time, but looking back, it’s very obvious now. In my first job out of college, I was working in consulting, and it was a good job. I was getting paid well and everything, but after a few years, I was hitting kind of an upper limit. I was like, hey, OK, now I know that I can see my 5% annual raises, I’m going to get this, let’s say indefinitely, I’m just pretending to project on my career. I could see what my bonuses would be and everything. And I’m like, this is capping out. Early on, this was great when I didn’t have any money. All this stuff was nice. I was very fortunate early in my career. But after a while, you’re like, hey, there’s no real long-term potential here. Like, yes, I could just keep getting these nice raises or whatever, but I realized I had to change something up and I needed to do something I was more passionate about and had more upside potential.
And so for me, that was like, hey, maybe I should really like start talking about personal finance and investing, and maybe I should eventually move my career into that space, which is kind of what happened. But it took me a few years to get there. But that was kind of the big catalyst for me, was my old strategy of OK just work, get your bonus, reinvest it. Like that’s fine. It would have still worked. It just would have taken a lot longer for me. I started to realize I had to change my strategy up. I had to start this “side hustle,” which is blogging and writing and all that stuff. So that was the big kind of turning point for me. But people feel this all the time. You’ll see, hey, this strategy that used to work doesn’t work anymore. Another example I give in the book is, I used to when I was a little kid, I helped my dad—we’d get cans and all the cans we drank, we put them in garbage bags, and we’d take them down to get the CRV values.
You get like $20 for a bag, $40 for a few bags, whatever. And that made sense at the time. But now it’s my dad has his whole insurance business. He doesn’t have time to do that anymore. It doesn’t make sense for him to go and collect cans. The wage is now worth it, so to speak. So it’s all those types of things.
Arnott: I was just thinking that we should probably take a step back and give people a quick definition of what The Wealth Ladder is. Can you kind of summarize the concept and how you came up with that?
Maggiulli: Yeah, of course. So The Wealth Ladder is just a new framework for thinking about building wealth. And that framework is based on six distinct levels of wealth. And when I say wealth, I just mean your net worth. So that’s all of your assets, everything you own minus all of your liability. So everything you owe. So for example, take all the cash in your checking account, that’s an asset, your home value, that’s an asset, and so on. That’s all in the asset category. Subtract out everything that you owe to others. So if you have a mortgage, student loan debt, credit card debt, and so on. That’s all your liabilities. You net those two numbers, and you get to a number. That’s your net worth. And you don’t need to have it down to the penny. You just have to know the range because that range determines what wealth level you’re in. So level one, I say is less than $10,000 in net worth. Level two is $10,000 to $100,000. Level three is $100,000 to $1 million. Level four is $1 million to $10 million. Level five is $10 million to $100 million. And finally, level six is $100 million plus. The thing that makes the framework very easy is once you know one of the levels, because they’re all just factors of 10 off of each other, you can kind of figure out the rest.
So if you just remember, hey, level three is $100,000 to $1 million in wealth or net worth, then you can figure out, OK, level four must be $1 million to $10 million. Level two is $10,000 to $100,000, and so on. So I find that this is very helpful for a host of reasons because I think it maps on the economic classes in the United States. We can get into that. It maps on to spending behavior, investment behavior, a whole bunch of stuff. And that’s what the first part of The Wealth Ladder, the book, is about. It’s about just understanding this concept and why it’s very useful as a framework for thinking about how you spend money, income decisions, career decisions, and then also how you invest your money.
Benz: So yeah, let’s expand on that, how it maps on to the economic classes in the US. Can you talk about that? Like what percentage of the population roughly falls into each of those six bands?
Maggiulli: So once again, I’m going to just give you the rough percentages. The exact percentages are in the book. Because it’s just easier to give you. So roughly 20%—and remember, this is household wealth. So this is your household. So if you have a partner, obviously you include their wealth. Twenty percent are in level one. That’s less than $10,000. Roughly 20% are in level two, which is $10,000 to $100,000 in wealth. And that would probably be like, lower middle class, working class. That’s what level two is. Level three, that’s $100,000 to $1 million. That’s about 40% of the US. So that’s your middle class. That’s like where most Americans are, 40% of the U.S. And then level four, which is $1 million to $10 million—that’s millionaires—that’s going to be about 16% of the US.
So I’m not saying 20 because you’ll see why in a second. So roughly 16% in the US—actually let’s just say 18% to make the math a little bit easier—18% of the US is $1 million to $10 million. And then the last two, like level five and level six, that’s the last 2% of the United States, more or less. So that’s an approximation of where everyone is. So it’s 20% in level one, 20% in level two, 40% in level three, and then roughly 20% in everyone above level four. And most of that is obviously in level four, which is $1 million to $10 million. And this is actually a big change because level four, that $1 million to $10 million bucket has grown significantly since, especially since covid. When you look at the snapshot data and in 2019 it was not as large as it is now. So that cohort is getting bigger and bigger. And that’s what I call the upper-middle class. I know you’re saying $10 million is upper-middle class, like no, most of the US it’s definitely not. It’s definitely upper class. But in parts of the US if you have like $6 million, you’re probably upper-middle class in a very high-cost-of-living city. I know that’s shocking to some people, but I think that’s the truth of it.
Arnott: And the data source for a lot of this data is the Federal Reserve Survey of Consumer Finances.
Maggiulli: Yep, the 2022/23, it uses some 2023 data as well. So the core of the surveys are in ’23. But yes, it’s the FCF. So the Federal Reserve runs this data, the snapshot every three years. I’m very interested in the 2025 data, which will be released next year in 2026, but we have to wait for that. It’s like every three years we get this treasure trove of information. And it’s very interesting to see how it plays out.
Arnott: Yeah, definitely. Can you talk a little bit about the composition of wealth within each of the bands? So, how does it break down between cash holdings versus real estate or retirement accounts, other accounts, things like that?
Maggiulli: Yeah, so I’ll just say in general—I don’t have all the numbers like memorized at the top of my head—but I’ll say in general, those in the lower half of the wealth ladder, so let’s say level one, level two, level three, you see a lot more assets in cash, in vehicles, and in your primary residence. So you’re home. And then those in the upper half of the wealth ladder—level four, five and six—you see most of their assets are in retirement accounts, individual stocks, stock holdings, and some sort of equities, and then individual businesses. So like personal business investing. And so those in level six with the $100 million plus in wealth, over half, on average, if you took all the people in that bucket—there’s not too many in the data, but what they have, they do their best to sample them. Over half of their wealth is in individual businesses.
And which makes sense. Like you think of all the billionaires out there, like almost all of their wealth is going to be concentrated in one big business. Jeff Bezos has Amazon, Bill Gates for the longest time had Microsoft. He’s now very diversified. So that’s a whole separate discussion. But if you’re trying to figure out like what’s the difference in the assets between those lower on the wealth ladder and those higher on the wealth ladder, it’s really just a shift into income-producing assets. If you look at the assets held by those lower on the wealth ladder, those assets don’t produce income. Cash, vehicles, your primary residence, none of that is kicking off an income stream to you. Then you compare that to those in level four, which is $1 million to $10 million, and so on, or above. All those people in levels four and up, most of their assets are in income-producing assets, things like stocks, things in your retirement account, bonds, in businesses, and so on. So that’s the big shift I see. And so like it’s even kind of ironic because in my first book, Just Keep Buying, the mantra was the continual purchase of a diverse set of income-producing assets. And that still holds now that I’ve looked through the data across the spectrum, that is still the case. I still believe that. It’s just interesting that you can kind of see that type of pattern happening as individuals acquire wealth.
Benz: I’m going to home in on that level four, which you said is growing. And my guess is that if we were to think of the composition of the audience listening to this podcast, I’m thinking a lot of them would probably be in that band or their clients would be in that band. It’s a big range, $1 million to $10 million. And it seems like you could argue that being at the top or bottom of the range could really make a material difference in someone’s lifestyle in their level of financial security and retirement. Do you encounter a lot of people who don’t really aspire to be in level five or six, but probably want to be further up within level four? What’s your take on that?
Maggiulli: Oh, for sure. It brings me back to that quote from—Rockefeller was asked by a journalist how much money is enough and he answered, “just a little bit more.” And so I think that’s always the case. Like we’re always kicking the can down the road. Like people have their fire number. Oh, once I hit $3 million then I’ll have enough income to never have to worry again. But then, oh, well, inflation went up so maybe I need $4 million. Or oh, this happened, maybe I need this. And oh, like it’s easy to keep. And some of these are justified. Like, prices change, things change. Like it’s fine to change your mind over time. But I think it’s very easy to keep playing that relative game and keep kicking the can down the road in terms of what’s enough. I think it’s a tough thing. It’s not easy to come up with what’s enough. Yeah, is it better if you had $2 million, would you probably feel more comfortable with $8 million?
Yes, probably, and that’s why I said some with $8 million is probably closer to the lifestyle of someone in level five than some with $2 million is. But they’re more similar in a lot of ways than meets the eye. So in terms of just thinking about that, yeah, I agree, people obviously feel like they need more. At the same time, I think the big shocking thing is once you get to that level of wealth, once you’re in level four, like even a significant amount of money to most Americans is not going to fundamentally change your lifestyle. If you have $5 million, an extra $100,000 is going to basically do nothing for you. Even though you could go on a bunch of vacations with that. I know that sounds so out of touch, but it’s not like that extra $100,000 is going to allow you to go fly private all the time. Or you’re going to have a full-time butler for the rest of your life. It’s not enough wealth to fundamentally change how you live your day to day. But it just goes to show the value of money changes as you have more of it and it just becomes I would say less useful at some point over time.
Arnott: What about people who might not feel wealthy or free to spend at each of those levels? For example, someone in level four with between $1 million and $10 million who still wants to skimp a lot on airfare and travel, things like that, hotel expenses. Do you think it’s common to have disconnects like those?
Maggiulli: I think there’s a few things to think about with this. First is like, how is your wealth comprised? If you have, oh, hey, I have a net worth of $4 million, but $3 million of that is in my house, which I bought a long time ago, now it’s worth a lot. That’s going to feel very different than, oh yeah, I have $4 million and it’s liquid, or I have a $500,000 house, which I love. And I have another $3.5 million liquid. It’s just a different feeling in terms of the amount of cash you have. So I think composition is a piece of it. The second piece of it is, all the money formulas, rules, spending rules, and so on, in the world can’t overcome human psychology in a lot of cases. So some people are just going to feel like, hey, I should never pay that much for this.
It just feels like a rip off to them, even if they could easily afford it, and so on. And for the record, like when I think about these spending rules and how to think about spending money, like with the wealth ladder, once you hit certain levels, I kind of think you start to get a certain amount of “freedom” in a certain spending category. So level four, $1 to $10 million, I consider that the beginning of travel freedom. So you can start to upgrade your seat on an airplane, you can start to say, hey, maybe I can stay in a slightly nicer hotel, and so on. By the time you get to $10 million, you can basically do anything besides fly private, I think. You can stay at basically any hotel, you can always get first class if you want to. But it’s kind of that slow progression that happens over time. And so your point is well taken in that having $1 to $10 million, that you could have $5 million and still not feel comfortable upgrading to first class. And that’s completely fine. It’s really up to you. But I do think a lot of it is a psychological thing.
Benz: So in the book, you note that falling down the wealth ladder is actually quite rare. But it seems like there are a lot of examples of people who have fallen down the wealth ladder where their net worth is lower over time. What are some common reasons that might happen? And why do you think it doesn’t really happen that much?
Maggiulli: It depends. So how you fall down the wealth ladder depends on where you start. And I’ll give you a quick example of this. So let’s say you’re in level two, you have somewhere between $10,000 and $100,000. If you told me someone was in level two today and in five years from now, they’re in level one, my guess is what happened to them is they kind of got unlucky. All else equal, like I don’t know anything about their life, but they probably got unlucky in some way. Maybe they had some really bad medical issue. Maybe they lost their job and as a result had to start pulling down out of their 401(k) or out of some cash they had. So usually if you’re in a lower wealth level and you happen to fall even lower than that, it’s probably from some form of bad luck. That’s usually my take. Of course, spending, and so on, that can happen. But that’s not what I see in the data overall. What I see in the data is most people aren’t really bad spenders.
So that’s the first piece is probably bad luck. Now if you’re in let’s say level five, you have $10 million to $100 million, and you told me, hey, five years from now, this person is going to be in level four, $1 million to $10 million or even level three, less than $1 million. Like what happened? It’s also a form of bad luck, but it was probably because they had an investment that went bad, or they were not diversified. So when you talk about people that have really, really high amounts of wealth that end up bankrupt, or close to zero, or just a much lower wealth level in the future, it’s usually because their business went under, they had an investment go bad, they were way too concentrated. We hear stories about this all the time in the financial media of a hedge fund manager that blew up and now they’re bankrupt. It’s like, how does that happen? How can they be that rich and you still lose everything, because they just weren’t diversified.
It’s that simple. So the types of things that makes some person fall down the wealth ladder are going to vary. There’s some form of maybe luck in some way if you want to think about it, but some it’s like things like that affect you as an individual. Like, oh, I got sick. Oh, I lost my job. That’s going to be probably someone lower on the wealth ladder. As you gain more and more wealth, it’s usually something to do with your actual assets. Like something really bad happened to your assets that caused you to lose your fortune. So that’s what I would say to that.
Arnott: How much does our socioeconomic status at birth determine where we end up on the wealth ladder? And have there been any changes in economic mobility over time?
Maggiulli: So parental wealth is highly correlated with economic outcomes. Obviously, there’s a lot of anecdotal examples. It explains why many of the most successful entrepreneurs came from well-to-do families like Bill Gates, Zuckerberg, Bezos, and so on—they all came from wealthy families. Of course, these weren’t like ultra, ultra-wealthy families, but they were wealthy enough. So I think there is a big correlation there between where you start, or where your parents start, I guess, or where you start in that sense and where you end up. I think it kind of sets a floor in your future wealth level. Like if you grew up upper-middle class, it’s very unlikely you’re ever going to be in level one. Something really crazy would have to happen for that to happen, like for your family to even allow that.
So when I think about that, there’s this sort of floor that doesn’t obviously guarantee that you’re going to have the same financial success as your parents. But I think it means that your wealth level is likely to be similar to theirs over time. And so in terms of talking about mobility, they actually just did a study, and they found that incomes are still going up. But if you’re saying, well, that can’t be true, Nick. Like I know for a fact that like millennials and Gen Z, their income isn’t higher than their previous generation. That is actually true. Their income isn’t higher. But how is their income higher? Like what are you saying, Nick? It’s because there’s no more transfers from parents.
So parents are giving their kids, there’s something like 50% of millennial and Gen Z are getting some sort of financial transfer from their parents, whether that’s a monthly stipend, whether that’s a down payment on a house, help with the down payment on a house, things like that. So when they actually just measured incomes without looking at where the source of income was coming from, you’ll see that incomes are actually still going up in some way. And so there is still some economic mobility, but there’s a transfer that’s going on. So maybe it’s not fair to say economic mobility is going up when that’s coming from transfers. But it’s a new world we’re in now where this is the first generation that they’re relying more on their parents for the economic help and they are still doing OK.
So it’s a weird—the data is still coming out. And so I want to see how this plays out, especially as all the boomers start to pass on and that wealth gets passed over. That’s going to take another 20 or so years. Like this is going to take time to move through all this stuff and seeing how that ends up and where, because I remember for a long time, everyone was like, oh, millennials are the poorest generation ever. And now they’re all backtracking all that stuff just because it just took us a little bit longer to get there. And once again, there’s more transfers of this sort that are happening that are kind of changing the data in a way.
Benz: You share a bit of your personal story at the beginning of the book and really throughout it. And you just mentioned the can-collecting example. And the gist is that you did not come from money. I’m wondering if you can talk about how your lived experience has affected how you approach to personal finance?
Maggiulli: Yeah, I think it provides a different perspective. I mean, my biggest cultural shock was going to Stanford where I just got to meet people from all walks of life. Many of you came from much wealthier families. And now looking back, I truly believe that the more wealth levels you’ve lived in, the more people you’ve lived around, the more you can just relate to people from different economic backgrounds. Like I know what it’s like to have parents that went bankrupt. I know what it’s like to live most of my life in level two. Like I know what it’s like to now actually build some wealth. And so I work at a wealth management firm where I talk to advisors, who talk to clients that have very different problems than the problems I had growing up. And it’s just, it’s interesting to see that. And I just try to bring that very experience to my writing. That’s the whole goal is like, I think because I’ve seen a little bit of both sides of the economic spectrum, I can kind of write about it in a way that maybe someone that hadn’t grown up like that would have written about it.
Arnott: You devote the first part of the book to talking about spending decisions. And I’m wondering if you can talk about how can people decide, if what they think is a high ROI expenditure is actually wise and going to pay off from something that isn’t really worth it?
Maggiulli: Yeah, I think it just varies from person to person. I personally don’t like spending money on fancy clothes, but I have no problems spending a lot of money at a restaurant. Like that’s just what I value. I value the experiences, especially food experiences. You may value a nice car, you may value, really high-quality electronics, whatever. Everyone’s different. And so the only way to know what’s high ROI is to determine what you really value in life and then spend money accordingly. I think that’s the hard part though. It’s like, know thyself is this thing we talk about, it’s been talked about in Greek philosophy for thousands of years, but that’s really the answer is like, what do you really want? And that’s what’s the high ROI stuff is like where you’re going to get the highest return on investment is on the things that you actually value. But the hard part is figuring out what you value.
Benz: You share what you call as the 0.01% rule. Can you talk about what that is and how it can aid with decision-making about doing spending, and what expenditures to stress out about and which to not stress out about?
Maggiulli: Yeah, so the 0.01% rule basically says that you can spend 0.01% of your wealth or just another way of looking at it’s one-10,000th. So you could call this the one-10,000th rule as well. You can spend one-10,000th of your wealth on a daily basis without having to worry about anything. And so I’ll explain where that comes from. So let’s say your net worth is $10,000. You’re basically right on the cusp between level one and level two. That means you can spend an extra $1 per day without any worry about jeopardizing your future wealth. And where that $1 that 0.01% comes from is, on an annualized basis, if you’ve got a return of 0.01% a day, that’s like a little bit under 4% a year. It’s like 3.7% a year. It’s very conservative return. So every day your wealth is generating that much money.
So if you have $10,000 in wealth every day in theory, you’re generating an extra $1 a day without doing anything. So in theory, you could spend that $1 and not jeopardize your future wealth. So if you have $100,000 in wealth, you could spend $10 a day. If you have $1 million in wealth, you can spend $100 a day, et cetera. Now, obviously this isn’t your total spending. If you live in the United States, you’re not going to survive on $1 a day. This is the marginal spend. Everyone’s making a spending decision, you’re making it on the margin.
Like when you go to buy a car, you’re not saying, oh, should I get a Toyota Camry or a Maserati? You’re debating between the Camry and the slightly nicer Camry. That’s what I’m saying. You’re always doing it on the margin. Like when you sit down in a restaurant and you’re like, do I want to get the burger for $20 or the salmon for $30? That marginal difference is $10. And so my argument is that once you have like $100,000 in wealth, that extra $10, you can spend that every time you go to a restaurant without worrying about it. And so the 0.1% rule works in that way by just it allows you to have some lifestyle creep because you’ve shown financial disciplines. Like, hey, look, I’ve reached this level of wealth so I can now spend more in certain categories. But until I reach that level of wealth, I’m not going to do that.
And so like in my example—I still to this day, I don’t have basically any travel freedom. When I go to a restaurant, I’ll buy whatever I want. I don’t care. But I am still getting the coach seat. Maybe I will upgrade my seat to a slightly nicer seat, not a first class seat, but I’ll go like get something with more leg room. That’s where I’m at in my wealth journey. Like one day if I do well, if things go well for me, I will maybe always get a first class seat, but that’s not in the cards for me right now. And so I’m spending according to my wealth level, and I’m very strict about that. It’s because that the extra whatever $100 or whatever it is, is not enough to upgrade to first class every time. So I can’t spend that money. That’s how I work through it.
Arnott: You also write that housing is really a consumption good and not an investment. Why is that? And are there any levels where housing is more important in building wealth and getting to the next level?
Maggiulli: I think housing is important for most Americans because it is the primary way in which they build wealth, even though it is a consumption good. But when you pass on and you pass that property on to the next generation, that’s when it becomes a nonconsumption good at that moment of time. So if you assume, oh, I have children, they have their own house already. When you pass and you pass on your property, that’s the moment when it’s no longer a consumption good. Now it’s an asset for your family. So it really depends on when. It’s like when you’re thinking about it throughout your lifecycle. Like, yeah, for you, it’s a consumption good, but for your offspring and so on, it won’t be a consumption good. So I think primary residence is, once again, the homeownership rate is still like 66% or something like that in the US. Most households have a home. I don’t expect that to change in any drastic way. It’s going to be anywhere between 60% and 70%, probably throughout the rest of my life.
And it is a way to build wealth because you own this thing, the property prices don’t change too much. I know in recent years they’ve gone up a ton, but I don’t expect them to move a lot for a host of reasons. There’s, what do we call it, a Nimbyism or whatever, people preventing other houses from being made, and so on. I don’t expect major changes in-house prices going into the future. Does that mean that they’re going to keep growing at the same rate? No. And so we could get into a discussion about the future real estate prices, but generally it’s been a pretty stable asset class. And I think there’s a lot of entrenched political and cultural reasons why it will remain a relatively stable asset class. Now, does that mean it’s going to beat the stock market or whatnot? I have no clue. That’s why I say you got to diversify.
Benz: So you write in the book that people can get into overspending trouble if they have high incomes but not necessarily high net worths. But you point out that income can be fickle. So you believe that people should use their net worth to guide how much they can reasonably spend. Can you talk about that?
Maggiulli: So they’ve done studies on negative income shocks among US households and something like 10% of households are going to see a 50% or greater decline in income over the next two years. So like one in 10 households are just going to have a massive hit to their income in the next two years. And what does that mean? Usually most households are two income-earners. All that just means is one earner is going to lose their job in the next two years. It’s not unreasonable that one person might lose their job in two years, right? So one in 10, that is. So because of that, that’s why I think income is fickle. And more importantly, among higher earners, negative income shocks tend to be persistent. So in other words, if you have a very high-paying job and you lose it, I wouldn’t expect to get back that old income you had, that higher income anytime soon. And trust me, I have friends where this has happened, like, oh, I lost my high-power job doing this. And I got another job, but I took a 40% pay cut or I took this.
It’s like almost starting, unless you can get a job right away back in the exact same role you were doing, it can be tough for people. So that’s why I think you have to spend based on wealth, not income, because as volatile as wealth can be, it is far less fickle than income. Wealth has a little bit more staying power. Of course, there’s things like the Great Depression where wealth dropped off a cliff quickly, but that’s usually not the case. And so your wealth will be a lot more stable than your income will be over the long haul.
Arnott: You also note that income-earning activities that made sense for us at one stage in our lives wouldn’t necessarily make sense as we move up the wealth ladder. Can you talk a little bit more about that and maybe share some examples?
Maggiulli: Yeah, you guys gave the extreme example earlier of the person with $10 million clipping coupons. At some point in your financial life, certain income-generating tasks won’t make as much sense. I think in the formal way that economists talk about this, they call this your opportunity cost. An opportunity cost is just what you have to give up when you do something. So if you work for an hour, your opportunity cost is anything else you could have done besides work in that hour. So you’re like, oh, I could have gone to the gym. I could have done this. Whatever it is, that’s your opportunity cost. So your opportunity cost still can have an income. Like if you go and do something like, hey, this is a great income-generating activity, but now that my income is so much higher, or that I’m more skilled, or whatever it is, that old income-generating opportunity may not be worth it anymore. So as you gain more wealth, your opportunity costs typically increase.
Like when I first graduated college, I didn’t have a problem working 60-hour weeks, if I had to. My opportunity costs were relatively low. I didn’t have as much else I could be doing with my time. Yes, I could see friends, family, but that was about it. I didn’t have a wife. I didn’t have all these other things that now take up more of my time. But as I’ve gotten older and I’ve built more wealth, every additional hour means more to me than just the additional money does. And so I think you’ll see that with time. That’s what I’ve found most people I’ve spoken with. That’s how it changes over time. So I could spend more time going to work out or going to see friends instead of just working an additional hour because at some point, the money’s not worth it anymore. And so that’s where that transition slowly happens over time, but that’s kind of the thinking there with the wealth ladder.
Benz: Your book is about money. It’s not really a self-help book. But as we ascend the wealth ladder, should we give ourselves more freedom to say no to some work activities that we don’t enjoy and yes, to perhaps some that are less remunerative, but maybe more enjoyable? I’m wondering if you can talk about how you can square your desire to ascend the wealth ladder with your desire to spend time in a way that’s agreeable.
Maggiulli: Yeah, I think you have to ask yourself, what are your priorities and why? What does getting to a particular wealth level mean to you? Would it give you more time, more freedom? What are you actually looking for? The real question is what will you do once you get there? I think you have to imagine kind of like, oh, here’s where my life would be great and then back out from there. Because if you know that, then you can determine whether you actually need to get to that spot. Because a lot of people, I don’t know if they always think about that end state and they just say, oh, once I have X dollars, then I will be able to do all this stuff. And sometimes that’s true, but for a lot of people, they can actually do that without getting to that level of wealth. So I think people can live very fulfilling lives in level three and four completely. I’m 100% convinced of that. But I’m also convinced it’s easy to persuade yourself that that’s not the case. It’s easy to persuade yourself, oh, I need to have $10 million plus to really have made it, to really have happiness. And at some point, once you have enough wealth, it’s all the other things in life that impact your day-to-day happiness and well-being. And you don’t realize that until you maybe get to that point like, oh, wow, that didn’t matter as much. But it’s one of those things that I just I think about a lot. And I think it’s something that’s very overlooked in the wealth space.
Arnott: We also wanted to talk a little bit more about some specific questions for each level. And looking at level one, I think a common question with people who are basically living paycheck to paycheck is what to prioritize if they do have extra funds. So should they pay down debt or build an emergency fund or try to invest? What kind of advice would you give someone in that situation?
Maggiulli: Yeah, I would say emergency fund all the way. Because once again, in every wealth level, like some part of your life gets amplified. And for those in level one, it’s bad luck. Because if you don’t have a lot of money and something happens, let’s say you have a car, your tire blows out, you have to get a new tire. Like there’s just ways where bad luck is amplified in a way that it’s not amplified for some with more money. Like, oh, if I have a tire—I don’t even have a car—but let’s say I had a car and my tire blew out. Like that’s not a problem. It’s annoying. It’s an annoyance for me, but it doesn’t change my life at all. I just get the tire fixed and move on. For someone on level one, maybe who doesn’t have a lot of money, if that happens, that could really send them into a financial tailspin. So the thing you want to focus on is like de-amplifying that bad luck. So get that emergency fund. Then once you feel like you have some sort of safety, so enough, then you got to start doing everything to get out of debt. And so there is a lot of little things you have to do to get there. And it’s not easy, but like just getting from level one to level two, I think is the biggest lifestyle change you could ever have as an individual.
Like having that freedom, just to breathe and not have to worry about, OK, if some bad thing happens to me, I’m not screwed. Yeah, it’s not great. But that’s the thing I try and emphasize for a lot of people is get out of level one, because it is much scarier when you’re in there and any one bad thing could send your life in a different direction. Like that’s the thing that’s really scary and unfortunate.
Benz: And it seems like credit rating, a poor credit rating at that level is kind of the ultimate amplifier, multiplier, whatever you want to call it. That if that’s something that’s working against you, it makes it really hard to climb out.
Maggiulli: And that takes time to get that off. If you go into bankruptcy, it takes seven to 10 years or whatever it is before it’s off your credit report. So it’s like, these are the types of things where that stuff can follow you. And so you could even get your act together and it’s like five years later, but that’s still there haunting you, unfortunately. So anything you can do to prevent that is ideal. And of course, it’s not easy. A lot of times you probably already maybe got into that position because of bad luck. So it’s not a great place to be. And it’s one of those things where you just have to try your best to get out of it.
Benz: So you have a fun discussion in the level two chapter about finding the intersection of what you’re good at, what you’re interested in, and what someone will pay you to do. Can you walk us through that exercise and why it’s so important?
Maggiulli: Yeah, I think the exercise is important because I think the goal, I think most people I hope would agree with this is like, you want to maximize your long-term income while also enjoying the work you do. If we all enjoyed the work we did and got paid well, I don’t know what more you can ask for out of a career, right? And so of course that doesn’t mean that your first job you’re going to get is going to check all the boxes. But the goal is to eventually get to do work that does check those boxes, right? So those three boxes are, what are you good at? What are you interested in? What will people pay you for? In terms of first jobs, like where do I start? I say you got to focus on what people pay you for, because that’s what’s required to live. Like you need money to survive. So all else equal, like as much as I would be like, hey, just do what you’re interested in.
Like if it’s not paying the bills, it’s probably not the right way to start with. So once you get that covered, what’s the next highest-priority thing I would focus on is focus on what you’re good at, because I feel like if you’re doing something someone’s going to pay you for and you happen to be good at it, if you get a lot of praise for being good at something, you’ll actually start to like it. And I think this is also my thing with—we talked about writing a little bit earlier where I didn’t used to like writing, now I do it’s because I was decent at it, but I was always writing about other people’s stuff. It’s just, as I started to write about my own thing, I started to get more interested in it. I got interested in it from the praise I got from others who read my work. And that really allowed me to start loving it. So it’s something that I wasn’t interested in. And now that I’m very much interested in. So if I have to focus you, it’s like, do the pay stuff and then do what you’re good at. And then hopefully that’ll either lead to interest in that thing.
If it doesn’t, maybe you can save up enough money through all the pay over the years to then do something you’re interested in that you can possibly get paid for eventually. So there’s a lot of ways to get there. That’s just my recommended path, but you don’t have to follow that. Like I was in consulting for a long time. I was doing something I was getting paid for and I was decent at, but at the same time I was interested in finance, and I was doing that on the side. So that’s another option. If you do love something, keep it as a hobby and just keep doing it. And maybe one day you’ll be able to monetize and change your career. That’s another option as well.
Arnott: So in the level four section, you discuss how big investment losses have the potential to do serious damage. What are some of the best ways to avoid that risk? Not just in level four, but also at other levels.
Maggiulli: I think it’s just really hard to know which investments are going to do well and poorly ahead of time. And so the best solution is the simplest, which is diversify. Like being diversified just means that no single investment can wipe you out. And not just diversify, like, oh, I own 20 different tech stocks. Am I diversified? Technically you are, but they’re not as diversified as you could be. You still have sector bias. So I mean diversified across asset classes, sectors, and so on. That’s why I think survival is the most important part of investing. Just staying in the game, earning a long-term market return will do more for you than just about anything else financially. So my thing I always tell people is stay diversified. I know it’s like, well, Nick, how am I going to get to level six if I’m diversified? It’s very difficult to get there. It’s like, OK, well, that’s true. It’s very difficult to get to level five, level six while being completely diversified.
I’ll be the first to say that. But usually those people that do that are undiversified in their business interests, but that doesn’t mean that your portfolio, everything outside of the business you own, doesn’t have to be diversified. So I still think diversification is a prudent approach even in that scenario. Even if you’re trying to build a business, that’s going to end up being worth a lot of money one day.
Benz: Many people who are in that level four with net worths in the $1 million to $10 million range think that their investment portfolios should get more complicated as they’ve amassed more wealth. And of course, the industry sells into this mindset that if you have a lot of money, you should be doing something pretty complicated with your portfolio. Can you talk about that?
Maggiulli: So I understand this argument from a diversification perspective based on what I literally just said in one of the prior questions. It’s like, well, I’m trying to get more diversification. The issue I have with that is many of these more complex investment products tend to have higher fees and other sorts of restrictions, whether that’s illiquidity, and so on. That makes them less than ideal for building long-term wealth. So I’m generally neutral on these products overall. I’m not against them, but I’m not for them. And I understand why they exist. I understand why they can be valuable. And especially now that I’m actually in the wealth management space, I think I understand them more than before, but I don’t think they’re necessary to build and maintain wealth in any one of these levels. And one of the reasons why I say that is how often is it, I’m not saying this has never happened, but most of the people that own these products, they got wealthy doing one thing, aka probably had a business, they sold the business for a lot of money, and then they bought the private investments. It’s very rare, the case that they bought the private investments when they didn’t have a lot of money and then all of a sudden that’s the reason they’re rich.
I’m not saying it’s never happened, it does happen, but it’s very rare. So I think the causality is a little bit backward. Most of the people that own private investments probably got rich doing something else, and now they own private investments versus, oh, I bought a bunch of private investments and that’s the reason I’m wealthy today. So that’s another thing to keep in mind, is which way is the causality with these products? And who’s really making the money. The fees are great here. So I know there’s a lot of people that work in private equity that do very well, but they’re doing well because they have the carry and all the other fees associated with working in that industry.
Arnott: You talk about how a lot of people find themselves perpetually stuck in level four, with net worths between $1 million and $10 million and you argue that really the only way to ascend beyond that level is through business ownership. But for someone who is not comfortable taking the type of risk that you would need to be comfortable with to start your own business, are there other ways to breakthrough and get into level five?
Maggiulli: So you can either once again start your own business or get equity in a business that grows to a much bigger business. So you can be an early startup employer. I like the example I think of as like early Nvidia employees, they didn’t start the business. But with the recent surge in Nvidia stock price in the last few years, their equity became worth millions of dollars. Same thing’s true of early start up employees that get acquired, they maybe employee five, six, 10, whatever, and just because they were there early they got even a small piece of equity on a really decent-sized business you can make a lot of money. So either way the key is to have equity, you have to have ownership. So whether you have a lot of equity in a decent-sized business that you sell or just a little bit of equity in a very huge business, it makes no difference to me. The key is just have business ownership because that’s how, if you are trying to get out of level four, that’s probably the way you are going to do it. Of course, you can be in level four and just save and invest and do it until you’re 90 and I guarantee you’ll probably get out of level four. But for someone in any reasonable timescale, it’s just, it’s very difficult to get out of there without a large business exit of some sort.
Benz: In the context of very wealthy people, you discuss some of the nonfinancial stressors that can come into play. You note that having a lot of wealth can affect relationships, family dynamics and stress, for example. Can you talk about that? Because I think many people assume that if they amass wealth at that level, like over $10 million, all of their cares will evaporate. But you point to the fact that that’s not necessarily true.
Maggiulli: Yeah, yeah. The biggest misconception about extreme wealth is that it solves all your problems. In fact, the only problems it solves are money problems, by definition. While there are many money-solvable problems, I guess we could say in the world, money can’t solve everything. You can’t write your children a check so that they love you. You can’t buy a new cardiovascular system to get into good health. There are certain things you can do that you can have a better relationship with your children. You can have a probably slightly healthier, if you have more wealth, I agree. But you get the point. There’s only so much that money can buy at this point. There’s a limit to money’s usefulness. Unfortunately, some people just don’t realize that until it’s a bit late. You can neglect certain parts of your life to make money, but if you do it for too long, you’ll come to find that that’s all you have. It’s just money.
It’s not a good place to be in. I’m always trying to emphasize, as you move up the wealth ladder, remember we talked about different wealth levels amplify different things. When you’re on level five and level six, it’s all the nonmonetary parts of your life that are amplified. Your relationships are even more important. Of course, they’re always important in your life, but they’re even more important in level five and level six because you can’t buy them. There’s nothing you can do to change that. You can have all this money; it’s not going to change a thing. If anything, it just shows money matters so much less that all the other things that aren’t money are the things to focus on.
Arnott: You also discussed some of the newer research that has emerged about the connection between money and happiness. Can you talk a little bit more about what those findings are and what we can learn from them?
Maggiulli: Yes. The original money and happiness paper, which I believe was Daniel Kahneman and Angus Deaton, that’s the one that I think most people on this podcast probably heard is that money doesn’t buy happiness above, I think it was like $75,000 a year in income. Everyone’s heard that once you have over 75K a year, it doesn’t buy any more happiness. Unfortunately, a guy named Matthew Killingsworth came out and they looked into the data some more and they found that that conclusion wasn’t completely accurate. The more recent research found that more money does buy more happiness if you’re already happy. This was true for incomes above $75,000 a year and they even looked at wealth and this was even more true for people with lots of wealth. I think the conclusion from the original paper wasn’t, they weren’t measuring more happiness, they were measuring more unhappiness. So basically, once you have up to $75,000 a year, as you got more money, it generally prevented unhappiness. After $75,000 a year, it did nothing. You could still be unhappy and have a lot of money.
That’s what the original research shows because their measure wasn’t perfect. But in the new research, the main conclusion is if you’re poor, more money can buy more happiness. If you’re happy, more money can buy more happiness. But if you aren’t poor and you aren’t happy, more money is not going to do anything. So that’s kind of the main thing. So if you’re like, hey, I don’t have a lot of money, more money will probably make you happier. And if you’re already happy and you have money, more money will probably still make you happier. But if you’re not in those two categories, it’s not going to do a thing. So I think that’s the big change in terms of the happiness research is money does buy happiness if you’re already happy.
Benz: Presumably you’ve ascended the wealth ladder during your career. You don’t have to tell us where you are on it. But what have been some of your main takeaways as you’ve done so?
Maggiulli: Yeah, sorry, it’s in the book. So I don’t want to give it away. Maybe I’ll leave it as a spoiler. It’s in the book. I talk about this. But ironically, building wealth has really taught me the importance of all the nonfinancial aspects of life. It’s easy to focus on money when you don’t have a lot of it, when you grew up in a family that maybe didn’t have a lot of it. But once you do, everything else becomes far more important, valuable. Once you have some money, and the reason why is, once again, as I just discussed. Like you can’t buy it. You can’t buy true friendship, true love, great health, all these things require work somewhere in your life. And the sooner you realize that the more you can take your foot off the gas as you kind of succeed financially. That’s kind of how I like to think about it. So yeah, I mean, that’s the big takeaway for me.
And it took me some time to get there. But now that I’m there, it’s like, I value money less than I did when I was younger, because I didn’t have any of it. Now that I have some of it, I can be like, hey, I don’t need to worry as much about these types of things. I can focus on spending more time with my family, not having to work all the time and telling my wife, oh, I got to write this thing tonight. I got to do this. And I never spent time with her. It’s like, no, I can chill out a little bit. Things are going to be fine. I don’t need to have that extra dollar. Like that’s not as important as enjoying life.
Arnott: So in addition to your day job, as Christine mentioned before, you are active in posting on your blog Of Dollars and Data where you’re normally publishing about once a week. And I’m curious, what are some of your must-reads or must-listen-tos in the realm of personal finance and investing?
Maggiulli: So I have a lot of different stuff over the years. I have a Popular Post page, which has like a bunch of different things that people have liked over the years. I have this one blog post called “Even God Couldn’t Be Dollar-Cost Averaging,” which went into my first book, Just Keep Buying. But yeah, I’ve been blogging for almost nine years now. I blog once a week. And so I just put a lot of stuff out there. I have a lot of different, I mean, it’s hard to because I’ve been doing it for so long. I have like 450 posts. If you give me a subcategory, I can narrow it down, but it’s really hard to be like pick this one or that one thing. I think that Just Keep Buying stuff obviously has done well. That’s why it did decently well as a book and everything. But yeah, I would say that’s the stuff is like thinking about market-timing and all those types of things and how little those things actually matter. And the most important thing is just to be consistent and just keep investing over time and just focus on raising your income and keep investing. And I think you’ll do fine.
Benz: How about external influences? Are there any people who you read consistently or any podcasts that are always in your feed? What are your favorites?
Maggiulli: So I read a bit, and I really think it depends on, I read more than I listen. I’m just a visual learner. And so I think if I had to say like, it depends where you are on the wealth ladder for what types of things are like must-reads, right? So if you’re just getting started, like you’re level one, I would recommend Tiffany Aliche, Get Good With Money. It’s a great book for people starting out, great for budgeting. That’s the perfect thing there. But now if you’re like, hey, I’m in level four and $1 to $10 million, I really want to get out of level four, I want to get to level five, and so on, then I’m like, OK, look at The Millionaire Fastlane by MJ DeMarco. He has a very different take on that. If you’re like, oh, I want to just keep building my wealth through investing, I’m going to recommend, The Intelligent Asset Allocator by William Bernstein.
If you’re like, oh, I’m near retirement, what should I do? I’m going to plug your book, Christine, How to Retire. So everything’s based on like what are we talking about? What are we looking at? And I think that because the world of personal finance investing is so wide and there are so many different things, and so it really does depend where you are. And it’s kind of one of the reasons why I wrote this book. Because like, hey, if you’re here, these things will be more helpful. And if you’re here, these might be more helpful. And it’s not that you can’t read across. I don’t think there’s anything wrong with if you’re in level one reading a business book. But I think the risk is it’s just so much higher to starting a business when you’re at basically zero, then if you have some money saved away, and there’s a lot of data on this as well, in terms of like the most successful entrepreneurs generally have more experience, have more money or a little bit older, like all the things that make it easier to start a business, they have those.
And I think because it’s in the data, it shows that it’s probably better for you to follow the same path. I’m not saying you can’t start a business when you’re young, but I think most of the people that have done it successfully have waited a little bit, have waited until they’re 40, 50, and so on, before they did it. And that’s when they end up being more successful.
Arnott: What’s your take on the whole FIRE movement, financial independence, retire early?
Maggiulli: Yeah, so I love the FI part, of FIRE, the financial independence part. I think it’s a worthy goal, you get to live life in your own terms, and so on. I’m a little skeptical of the RE, retire early, part. And I think it’s just because based on the research, people I talk to everything, it’s just people need some sort of purpose. And I think it’s just difficult for many people to find that purpose outside of work. I’m not saying it’s impossible, but I think, I don’t know, I don’t have an exact number. Let’s say 70% of people need some sort of vocational purpose. It doesn’t necessarily need to be a nine to five. It doesn’t need to make you a ton of money or anything, but I think you need to feel like you’re contributing to society in some way. And so the RE part, if you do the retire early without thinking about that, I think it can lead to an existential crisis. And so that’s the thing, I know that we all glorify, oh, wouldn’t it be awesome if I could just be on a beach all day with mai thais. And I think that’s fun for a few weeks. And then you’re like, OK, why am I doing this? What’s the purpose? And it can get really dark from there if you don’t know what you’re going to do next. So that’s my only kind of pushback on that.
Benz: Well, Nick, congratulations on The Wealth Ladder. Thank you so much for taking time out of your schedule to be with us today.
Maggiulli: Anytime. No, I appreciate you guys so much. Thank you, Amy and Christine, for having me on. I really appreciate it.
Arnott: Thanks again, Nick.
Maggiulli: Thank you.
Benz: Thank you for joining us on The Long View. If you could please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts. You can follow me on social media @Christine_Benz on X. Or at Christine Benz on LinkedIn.
Arnott: And at Amy Arnott on LinkedIn.
Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week. Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at thelongview@morningstar.com. Until next time, thanks for joining us.
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