The Wealth Ladder – 11 Steps to Prosperity

The path to prosperity involves several steps. While most people start at the bottom of the wealth ladder, a few have the luxury of starting at a higher step. When setting goals to improve your personal financial situation, it can be beneficial to realistically assess which step you are currently on and adjust your lifestyle accordingly to climb the ladder more quickly.

Step 1: Over-indebted or Insolvent

Approximate annual income: Zero to social welfare level
Housing: Social housing, living with parents, or homeless
Assets: None. Debt and interest exceed monthly income
Vacation: Usually none. Sometimes a “working vacation”

At this level, you are at the bottom of the standard of living in the western world. Many people remain trapped at this level due to over-indebtedness and low income.

Your path to the next level: Reduce debts through personal bankruptcy or debt counseling, minimize living expenses, and try to increase income (e.g., re-enter the workforce, get a second job, etc.).

Step 2: Solvency

Approximate annual income: Minimum wage or slightly above
Housing: Small rental apartment or living with parents/relatives
Assets: None. All income goes towards servicing debt.
Vacation: Once a year with a low cost airline to a cheap resort.

An increasing portion of the population finds themselves at this level. Through hard work in a blue-collar or clerical job, or as a small business owner, just enough money comes in each month to cover all expenses, but no significant savings can be made.

Your path to the next level: Earn some additional money through a side job or expanding your business activities and save some of it for an emergency fund.

Step 3: Stable Financial Situation

Approximate annual income: Around $45,000 – $55,000 (gross) per year
Housing: Rental apartment, possibly a home owned on a mortgage
Assets: Small emergency fund of less than one year’s income, often in a savings account.
Vacation: Once a year package holiday to a neighboring country.

With a better job or more successful self-employment and some financial acumen to avoid spending the higher income immediately, you find yourself at this level with a small emergency fund set aside. This can cover unexpected repairs or income losses without immediately dropping back a level.

Your path to the next level: Acquire financial knowledge to better invest and expand the emergency fund. Use available leisure time to acquire new skills to advance in your job or expand your business.

Step 4: One Year of Savings

Approximate annual income: Around $45,000 – $65,000 (gross) per year
Housing: Rental apartment or owned on a mortgage
Assets: Emergency fund equivalent to one year’s salary or income, wisely invested (e.g., ETFs, stock savings plans). All expensive consumer debts are paid off or settled in the month they are incurred (e.g., credit card).
Vacation: Once a year package holiday to a neighboring country, occasional short trips or city breaks

Having an emergency fund equivalent to one year’s salary provides the security to experiment and try new investment forms. This builds financial education and strengthens options for exploring new income sources.

Your path to the next level: Continue to expand and better invest the emergency fund through financial education. Start investing some money in long-term investments. Use available leisure time to acquire new skills to advance in your job or expand your business.

Step 5: Five Years of Savings

Approximate annual income: Around $55,000 – $75,000 (gross) per year
Housing: Rental apartment or owned (possibly already paid off)
Assets: Emergency fund equivalent to one year’s salary, with an additional four years in long-term investments yielding higher returns. No consumer debt; the only debt is for your own property.
Vacation: Once a year vacation anywhere in the world, occasional short trips or city breaks

With the amount equivalent to four years’ salary in investments, you can gradually improve your lifestyle from the returns. The rest of the gains are reinvested.

Your path to the next level: Begin to involve an external wealth advisor, first internationalize investments. For business owners: hire employees to take over routine tasks.

Step 6: Financial Security

Approximate annual income: Around $75,000 – $129,000 (gross) per year
Housing: Rental apartment or owned (usually paid off)
Assets: The returns from your investments cover all basic annual survival costs (rent, utilities, groceries) entirely. No consumer debt; the only debt is for your own property.
Vacation: Two or three times a year to any place in the world, occasional short trips or city breaks, usually you are flying premium economy

At the level of financial security, you have a good overview of your investments, their returns, and the assurance that these cover your basic annual costs. Everything earned from your salary either enhances your lifestyle or is directly reinvested.

Your path to the next level: Intensify the use of a wealth advisor, further internationalize, create location-independent structures (if desired).

Step 7: Financial Independence

Approximate annual income: Around $95,000 – $225,000 (gross) per year
Housing: Rental apartment or owned
Assets: The returns from your investments cover all annual costs entirely. No consumer debt; your real property is usually paid off.
Vacation: Whenever desired, time rather than money determines the possibility of vacation. Occasionally a business class ticket is purchased.

Financial independence is the level where annual income becomes secondary as your own labor is no longer necessarily required.

Path to the next level: Income is no longer earned through work (except for enjoyment), but through intensive engagement with your wealth and its growth, further internationalization, expansion of location-independent structures.

Step 8: Financial Freedom

Approximate annual income: Over $300,000 (gross) per year
Housing: Rental apartment or owned, possibly a second residence
Assets: Net worth of over $5 million. The returns from your investments cover all annual costs entirely.
Vacation: Whenever desired, flying business class, sometimes first class.

At this level, your wealth becomes a magnet, attracting new money almost on its own. If you don’t overdo your personal lifestyle, you will never have to work again. Depending on the country, you might already be in the top 1% of earners/wealth holders.

Your path to the next level: Outsource wealth management to experts, invest in easily leverageable assets (preparing for an ELOC). Extensive use of international structures to reduce tax burden.

Step 9: Generational Wealth

Approximate annual income: Over $1.5 million (gross) per year
Housing: Multiple owned apartments/houses
Assets: Net worth of over $30 million.
Vacation: Whenever desired, flying business or first class, or renting a jet.

At this level, you are already in the top 0.1% of earners/wealth holders in your country and move in social circles where you can request to meet almost anyone in the world.

Your path to the next level: Wait. At this level, wealth grows so rapidly that reaching the top 0.01% is not far off. With entrepreneurial skills, investments in startups or interesting technologies can further accelerate wealth growth. Your focus is to plan the transition of wealth to the next generation.

Step 10: Super Wealth

Approximate annual income: Over $140 million (gross) per year
Housing: Multiple owned apartments/houses
Assets: Net worth of over $750 million.
Vacation: Buy the jet, the yacht, the helicopter, and the villa for vacations.

You are now among the top 0.001% of earners/wealth holders in your country. You move in social circles where most others knock on your door wanting to benefit from your assets or social standing. There is almost nothing that cannot be bought with money, and if a few million go missing, it is hardly noticeable.

Your path to the next level: Build a global corporation. This step from here to the next is probably the hardest on the entire ladder.

Step 11: Zuckerberg, Gates, Page, and Bezos

Approximate annual income: Over $500 million (gross) per year
Housing: Multiple owned apartments/houses/private islands
Assets: Net worth of over $1.5 billion.
Vacation: Don’t fly with the airline; buy the airline.

It’s lonely at the top, but one thing you don’t have to worry about anymore is running out of money. Whatever you want to do: it’s in the budget.

Your path to the next level: Money no longer matters. You engage with themes like immortality or space colonization.