5 Levels of Wealth AND How To Achieve Them

21:33I want to caution all of my 20-somethings who are killing it out there in the income game. Just because you've started saving and investing doesn't mean you immediately get to skip steps and go to security. You're still more than likely in strategy. But for those of you who've started building some investment girth underneath you, that base of the triangle is really building up and working for you with your army of dollar bills. This means you're not sweating the small stuff anymore. This is where I'm hoping. You remember I loved when we were in the previous step of when we were talking about strategy.

22:06We said steps four through seven of the financial order operations. What I like about once you get to security, you're now in that step eight. That's right. You get to do things a little bit differently, Bo.

22:16Brian Preston:So let's talk about what security is and what it isn't. First of all, security, Brian already said this. You've been doing it for long enough that now you're beginning to see the dividends of your past work. You're not just trying to get a plan in place, but you've been executing that plan for a while, and you can see, man, that plan actually works. It's actually moved me to where I want to be. Well, you've reached that, and I know I struggle with it. The bullying point is to the point that now your assets, you've got that financial muscle memory because you're a financial mutant. and the money is working just as hard, if not even more than you are.

22:57That's what's always, I remember, you know, I've talked to, this is what nerdy stuff people talk about when you're in your 40s. I'm in my 50s now, but I can remember over the last decade, you're talking to some guys in your neighborhood at maybe a cookout or something, and especially after a good quarter of investments where the market's done really well, and you're like, holy cow, can you believe we've reached the milestone where I think my investment assets made more than I did with my labor, my back, my brain, my hands. That's a powerful component when you have your money working just as hard as you are.

23:29Brian Preston:And when you've done it for long enough and you do begin to get that girthy base that Brian talked about, you begin to recognize that now you're not going to be derailed by the unknown unknowns. We all know that there are going to be unknown unknowns that happen in our lives. But when we're in the security phase of wealth building, we recognize that's just part of the journey. That's just part of the process. And even if that thing happens, it's not going to derail me because I have a plan in place that I've been sticking to, and I can see the fruits of that labor. So let's – Beau got to do what we were talking about with security is.

24:03But what security is not is it's not income or net worth base. And what do I mean when we say that is that, look, everybody's different. is that there might be a teacher who is very good with their reasonable income, but because of a pension and because of their discipline, they don't need a huge net worth to be extremely successful. But then we have other people, and this is why I want to caution you, don't just say, hey, I just need to save$3 million. If I hit$3 million, it is going to be all of what I need financially. No, it's not. Your number needs to be tied to all your goals, your objectives, your mindset, and how you live your financial life.

24:43Brian Preston:And look, this is going to be a little bit of a hot take. So not only is it not income-based or net worth-based, in reality, the security level of wealth is not available to most young folks. Even if you are someone who's way ahead of the curve and you have a huge income and things are going great, if you haven't been executing your strategy for a while, there's a chance that you've not built up that base. Just because, okay, I've got stability covered and I've got strategy covered, does not mean that you're security. It takes time. It takes time building those assets, putting that foundation in place before you can actually say that you're this level.

25:18Well, and we've done some great mini shows on this, Bo, is that I show that in the, like I know in the one I did recently, the first 10 years that you save and invest, still the majority of your market value of your assets is your savings. That's right. It's what you put into that investment portfolio. It's your hard work. It's only in years 10 through 20 that you start seeing that separation of compounding growth where you actually get more growth than what you've initially contributed. And it's not until you get into that, and that's why we say this is something that kicks in in your late 30s, early 40s, and even beyond, is that when you start getting to a separation of two, three, four-fold from what you even put in as the corpus or the initial investment, that takes some time, guys.

26:03That's why we're not trying to put a lid on this for young people. We just want you to stay motivated and let compounding growth, because compounding growth doesn't work unless you stay consistent and actually let it do its magic secret sauce.

26:16Brian Preston:But again, word of caution, right? So it's not available to most young folks, but also security is not financial freedom or abundance. It is the middle ground. It's the middle ground between I'm at the strategy phase, I have a plan in place, and holy cow, I've completed my plan. It is that middle ground that you exist in. So how do you get there? Because what often ends up happening is at this stage, you feel like you finally have some breathing room. Early on, in the stability, things feel tight, and you feel like you have to watch every single penny. You feel like you have to keep an eye on every single dollar that's going out.

26:48Brian Preston:But when you do get into security, I do think this is where a lot of folks that have been doing it right, they get to loosen up, and they actually get to enjoy some of their dollars for the present day. And what does that look like? It means, look, this is step eight of the financial order of operations. I'm hoping that when you go out to eat now, you're not so puckered up about what you're doing. When you choose vacations— You get the guac. Yeah, you get the guac at Chipotle. When you go on vacations, you're not as panicked about how you're having to fund this trip. It is not sweating the small stuff.

27:21It really is. But don't mishear us. What we're saying is that I don't want you to lose the component of discipline. No, not at all. Because you're still—it's just all your things that typically are on autopilot for scarcity. So that stuff is working for you behind the scenes so you can not sweat the small stuff. It's still not disconnected from that key component of discipline and how you live your life.

27:44Brian Preston:So if I'm at the level two of wealth, how do I get to level three? Well, you have to give it time. And giving it time means that you have a plan in place and you're sticking to that plan. And if you don't have a plan, let the food, Brian, you know the thing I've heard? Oh, yeah. Let the financial order of operations be your guide. We wanted to make this as easy as possible so that when a dollar comes into your possession, you can very clearly articulate what's the best use of my next dollar. And if you can stick to that plan for a while, you will move from the strategy phase into the security phase.

28:18And keep it out on the numbers. Look, what got you here needs to keep being the thing that creates success. I don't want you to be that person that reaches your 40s and you blow it up through consumption. You know, because by the way, your success is contingent. There's a direct correlation to what you spend to what you need to build in the long term. And if all of a sudden, you know, in your 20s and 30s, you're living a very reasonable life. But then in your 40s, you're like, hey, I heard the guys say I can live differently now. No, you still need to have some discipline there. You need to keep an eye on the numbers because your success is connected to the consumption as well as the saving and growth of your investments.

28:56Brian Preston:But also recognize that you don't need to get derailed trying to rush the process. Don't think, oh, I'll show these guys. You don't think I can be a security while I'm young? I'm going to go put all my money in XYZ stock or XYZ crypto. There's a process. There's a plan. There's a strategy. Stick to it. It's okay if it takes time to get there because it's supposed to take time to get there. That's what building wealth, the highest probability of building wealth, actually looks like. Yeah, I want to talk about a cautionary thing that I see when you reach level three for my financial mutants. Because look, there's a lot of good that comes from being disciplined and being a financial mutant.

29:38But it does, I want to warn you to be careful with your mindset. Is the things that got you and were so helpful in your 20s and 30s of being tight, living on less than you made, they can, if you're not aware of it, create a lot of anxiety as well as relationship stress. What I mean by that is that if you're sweating little tiny consumption decisions when you have a seven-figure portfolio, what are we doing here? This is why we tell you we work on not only the mathematics, but also the mindset. And if you're making your spouse give you every receipt for every transaction that it's creating strife and friction in the relationship, pay attention to that.

30:20If you're looking at every one of your investment accounts every day, look, I talk about this all the time with net worth. In the beginning, it makes sense just like a toddler or a baby is not potty trained, so you have to change diapers and stuff. You're going to have to update what's going on for your life financially because your life is just financially not mature enough to take care of itself. But if you're doing that same behavior when you're driving such a big force and you're doing net worth statements weekly or monthly and you're focusing on all these little things instead of letting your life grow with the success you've had, I think you might be missing out on some key components of the reward of being a financial mutant and building the security level.

31:02Brian Preston:Yeah, so what's the headline in the security level of wealth is to trust the process. You have a good plan in place, and that plan should be good no matter what life throws at you. So if you can just trust the process and implement the plan, then you're likely going to end up where you want to be. So what are some signs that you know you're doing it right? Well, now you're not only just thinking about, okay, how much am I saving today? How much am I saving for the future? What does financial independence look like? You're also thinking about, okay, what are some future expenses I have? What are those step eight things that I want to start thinking about?

31:37Brian Preston:Maybe that's college kids. My kid's going to college. Maybe that's upgrading lifestyle. Maybe that's buying that second home. Whatever that thing may be for you, now you're able to start putting some attention and some dollars to those things. And there's two big things. I resemble both of these, is that once you get over age 45, you can start paying down that, even that low interest debt. Because when you get into step nine of the financial order of operations, it's not all about just the arbitrage. It's going to be important. me and Bo have had a lot of debates about that, especially if you've got a mortgage that's sub 3%.

32:11But you are at the age, once you're 45 and older, it's also about kind of paying off the debt, de-risking your life for the long term, because you've made a lot of good decisions that first 20 plus years that you've been out there in the workforce. It's okay if you don't have to maximize anymore. You're taking a little bit off the table.

32:29Brian Preston:And then you also might begin to see a little bit of luxury in your life. Maybe this is when you upgrade the home. Maybe this is when you upgrade the house, upgrade the car, upgrade the vacation, whatever that thing may be for you, it's okay to begin doing that in the security phase so long as those ideas and decisions do not derail you from moving to the next level of wealth. Because once you pass through security, you hit the fourth level of wealth. And this is the one that, in our opinion, most people aspire and strive to achieve. And we call this the freedom level. And this is that point where you've actually reached the stage where your money now works even harder than you do.

33:08Yeah, this is financial independence. This is, like I said, this is what most people are aspiring to is you do what you want, when you want, how you want. And that's what we really think that this is where a lot of you, when people ask you, especially if you're in your 20s and 30s, what are you striving for by your saving and investing? You're looking for freedom.

33:27Brian Preston:Yeah, you now have the ability to not just pay for your current self, but you also have the ability to pay for your future self without having to work anymore. Your past working self, your past building self has done all the hard work to provide for today as well as provide for tomorrow. And let's talk about what freedom is not, because I'll resemble this, is that I want you to, look, I want you to have financial independence. I want you to have enough money in the bank to where your future is kind of locked in. But you don't have to necessarily stop working if you don't want to. I mean, I hope you guys will continue to let me create content for another 20 years.

34:04So I don't want you, it's financial freedom. It doesn't give you options. It doesn't mean that we have to put you in a box and say, hey, now you're gonna sit on a beach for the next 30 years.

34:13Brian Preston:It's also not - You can do that too, by the way. That you can, but you don't have to. And financial freedom is not something that's easy or it's not something that's obtained overnight. If it were easy, everybody would do it. And we know that a lot of folks don't ever actually achieve this because it takes time and it takes discipline and it takes hard work. But if you're willing to put those things in, you can make it to financial freedom, but it's not gonna be something that happens tomorrow and that's okay, it's not supposed to be. Well, I wanna talk about, because I feel like I'm the cautionary tale here of reminding people on the mindset stuff is that there's a big difference between financial mutant and a financial miser.

34:53If you're undercutting your experiences, I mean, because you don't get to take this money with you guys. So this is something that if you're sacrificing, because here's the thing I see all the time is people, when you're making a great income, you're like, man, I don't want to take a vacation or take time off because you realize if I worked or billed during that period, do you know how much more money I could make more money? What does it matter? Yes, when your bill rate is hundreds of dollars an hour, it's still, at the end of the time, this is where it's not what you have on the net worth statement.

35:25It's about the blossoming memories is that you're also building your life to create relationships, to create happiness, and owning your time and doing things on your terms.

35:35Brian Preston:I think the headline when you get to financial freedom, when you get to financial independence, is you recognize money is not a goal, it's a tool. And what you've done is you've now filled up your toolbox. You've filled up your tool belt, and you're now at the place where you can begin to use your money to accomplish all those goals that you had in life, whether that is creating memories or buying back time or creating experiences or supporting your loved ones, whatever that thing may be, at this stage, you recognize money is a tool that allows you to do that. So how will you know that you've done it right?

36:10Brian Preston:How will you know that in financial freedom, you're where you're supposed to be? Well, the first thing you've likely done is that you've stress tested your plan. You've said, okay, I saved up. I knew what my number was. I got to my number, and I know that no matter what the market throws at me, no matter what the economy throws at me, no matter what unknown unknowns come my way, I know that I have a high probability of success for my army of dollar bills to provide for me for the remainder of my life. Well, and look, we always try to give you a roadmap or something to look at. Go check out our Money Guy Guide to Retirement.

36:45If you go to moneyguy.com slash resources, we're going to give you some things that you need to be thinking about and working on. And then I want to just tell everybody from a cautionary standpoint, the way you do the key things that got you here probably will start evolving as you've had this level of success and financial freedom. You know, when you retire, when you go from working to now you're living off these assets, your cash reserves is going to change. The way you give to charities is likely with success is going to change. Don't sleep on the fact that you are entering a new phase of life.

37:17So a lot of the things you need to be doing in your financial life will change.

37:21Brian Preston:So we've already acknowledged that financial freedom is the level of wealth that most people aspire to. And we read the books and check out the blog articles. That's the thing that people point to. But we actually think there's a level of wealth one step above that. Even once you pass financial freedom, there's a higher level of wealth. And we call this level, level five, abundance? Yeah, you're beyond money. I mean, just because this is why I don't think many people will reach the abundance phase is because so many Americans can't even get to financial independence. So a lot of you are like, well, why even have this fifth level?

37:57And I'll just lay it out for you is that I think this is what you should aspire to with your money is because this means that you're not just focusing on do what I want when I want and how I want. You're actually focusing on the mindset of knowing who you are, on what you value, what brings you purpose. And guys, a lot of you, you're watching this and you're maybe in stage one, you're in stage two on those different levels. And you're like, well, how does this abundance apply to me? I want you to recognize you can apply these same things. You need to, on your journey through the five levels of wealth, you need to be focusing on who you are, meaning what do you get value out of in this world?

38:41What are the things that you get purpose when you're actually doing these things? That way you can file mentally away, this is what gives me purpose and makes me feel like this is the why that makes things important. Now, what you're missing is the treasure, the capital that puts you in the abundance, but it doesn't mean that you can't go ahead and lock this stuff in from a mindset standpoint.

39:02Brian Preston:Another thing that abundance is, is it's having enough. Abundance is that level where you realize it's not about moving the goalposts. It's not about having the bigger account, the bigger house, the bigger car, the whatever that may be. You've recognized that money is a tool and it allows you to accomplish the goals in life that you have and enough is enough. But even saying that, abundance is not a specific dollar amount. Some people will reach the abundance level of wealth at a million dollars and some people might get to 10 million dollars and they might not actually be at the abundance level.

39:37Brian Preston:And it's not about hitting checkboxes. It's not just about accomplishing specific financial goals. I want this net worth or I want this, whatever that thing may be. It's more about really getting into the core of who you are and what your purpose is and how you can use your dollars and use your wealth to accomplish that purpose. Yeah. And I feel like we've worked this out in a unique way where the timing always lands on me with these mindset things. I'm in this kind of phase now of my life. And what gives me purpose is, like we had three new employees start on Monday and they were even in our live recording this morning.

40:17I love, I think of how many houses were bought last year, how many babies were born. I mean, there's a lot of things that I feel like in this phase that it's beyond the money of, that I need to do this for myself. It's now gotten into what the name is so aptly named with abundance, and it's allowed me really to tap into the why. And I want to encourage you guys because owning your time, knowing what brings you value and what gives you purpose is going to be very, very important from a mindset standpoint. Like I said, I know a lot of you might not reach or be in the abundance stage now, but that doesn't mean that you can't start aspiring to understand these things about yourself so you can maximize this tool of money to make sure you can control what it is and what it's not.

40:59And that probably leads to a great point of saying, and this is the key takeaway to level five is begin with the end in mind.

41:07Brian Preston:Yeah. If you can have that approach, even if you're not at the abundance level of wealth, maybe you're still at the very beginning, level one, level two, level three, that's okay. You can now apply this headline. What is the life that you want to live? What do you want your future self to look like? What do you want to say if you could fast forward 50 years in the future and look back? If you can approach the way you make your financial decisions with that mindset, you're going to set yourself up with a much higher probability of being able to get to the abundance level of wealth. So what are some signs that you're doing it right?

41:41Brian Preston:How will you know if you are at this level? Well, you now have a sense of contentment and satisfaction. You recognize, man, this has been, from a financial standpoint, a life well lived, and I'm happy with where I'm at right now. Well, I like that you get to focus on what you love and what you want to do. So much in your early life is you're kind of forced to do things because you have to go work. Somebody tells you what you have to use your time to do. I like when you reach this abundance, you do things on your terms. And so you can say no. You can allocate your time. You can allocate your money in ways that make you happy.

42:19And it allows you to kind of prioritize and do the things that let you wake up in the morning and put your foot out of bed and feel like you're making the world a better place.

42:28Brian Preston:Yeah, true wealth is the freedom to focus on what truly matters. You have to define what that means for you. And one of the things you can do is we hope that you use these five levels to assess, okay, where am I at today? Where do I ultimately want to be in the future? And what steps should I be taking to move from my current level of wealth into the next level? I love the shows. Like when we do the milestones that have all the math tied into it, I love that. but it is important, Bo, that I'm glad we get to do shows like the five levels of wealth so we can really put a big lean into the mindset.

43:02Because guys, you do need to be taking this self-assessment of where am I at in this journey because every stage is going to have kind of a sweetness as well as struggles that you'll have. And that's why it's important. Begin with the end in mind of doing the work, taking an active role in your financial life. And a lot of you guys, once you reach that level four, even three, four, and five, you're going to say, these guys gave me so much free advice. I didn't prepare to have this much level of success because even though this was simple things that created this success, it's not going to be necessarily uncomplicated because your tax returns are going to get complicated.

43:42Your retirement decisions are going to get complicated. And guess what? We're going to leave the porch light on for you. And hopefully you're going to remember who planted all those seeds and nuggets of knowledge to help you be the better version of yourself financially. And that's where we'll hope that you'll consider taking the relationship to the next level and becoming a client of Abound Wealth. Guys, I'm your host, Brian. Joined by Bo. The rest of the Money Guy team. Money Guy team, out.

44:08Brian Preston:The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice.

44:38Brian Preston:All investments involve a degree of risk, including the risk of loss.