Episode 376: Climbing The Wealth Ladder

22:05And it's interesting because for those lower on the wealth ladder, they just don't have money to go and buy stocks. They don't have money to do all this stuff. And so it's very obvious, but as they do start to get money, you start to see, okay, they buy a home. And then after they buy a home, then they have a retirement account and then they start to own stocks and then maybe they even have a business. So it's kind of that progression of the wealth ladder and makes it very useful for those that are looking at these types of things. What do you think the key takeaway would be for the listeners from the data of shifting wealth composition?

22:34It's more income producing assets all the way up. I wrote about this in the first book in Just Keep Buying. I said, the continual purchase of a diverse set of income producing assets. I wrote that back in 2022, did not have this data yet. And looking at this data now, I'm even more convinced of that. There's one of the charts in the end of chapter three where I take all this together and I say, okay, look at just the percentage of income producing assets for each wealth level. And it just increases in every single one. Level two has more than level one. Level three has more than level two, et cetera, all the way up the wealth ladder.

23:04That's my main takeaway. The people that have the most wealth also tend to have most of their money. Not even just most, they have more money, obviously, but a higher percentage of their assets are in these types of asset classes that are income producing than those lower on the ladder. It's interesting. It kind of makes sense. A vehicle and a house are fixed, then a variation in value. Obviously, you can get really expensive houses, but someone with a medium or moderate level of wealth is probably not going to have a crazy expensive house. And so the rest of their assets are going to go into other stuff.

23:35And then you have the flywheel effect that you mentioned earlier with those income producing assets are going to increase in value over time. All makes sense. A big part of your book is going through the strategies of how you can get from one wealth level to the next. And that's probably the most interesting part of the book, which I think was the point. Can you talk about the strategies for moving from level one to level two? So the strategy in each level is going to be different because of obviously the starting point. The obvious strategy that most people would say in level one, level one, once again, you have less than$10 ,000 in wealth.

24:04You could even be in debt. It doesn't matter, just less than 10K net worth. And I think the solution there is to get to safety of some sort. Obviously, you're going to hear people say, get an emergency fund, financial safety. my more expanded way of thinking about safety is who do you have in your network? Do you have friends, do you have family that can help you out while you build that safety? And then you can help them out later, help other people out in your network. And I think that's really important because we always like to measure wealth in financial terms and like, hey, what's on your balance sheet?

24:34But there's a lot more wealth out there in terms of networks, friends, family, as I said, that can really help you get out of a dire financial situation. And so that's what I I would say to focus on. Of course, everyone knows, oh, I need to get an emergency fund. That's pretty out there. That's not a cutting edge idea. I think the thing that's a little bit different here is what are the other types of wealth I can rely on to get myself out of this? And this is a very common thing in the third world. There's this great book called Portfolios for the Poor. And these people are the best budgeters on the planet because they have so little that they have this network of borrowing they do.

25:08And okay, I owe this person money. And And they even do stuff that doesn't even make sense to someone. If you know mathematics, it wouldn't make any sense, but it actually makes a lot of sense behaviorally. For example, they will take out debt at maybe not a crazy interest rate because they know if they don't do that, they won't save money. And so they take out debt as a forced savings mechanism because if they just had a bunch of cash sitting there, they would just spend it all right away. There are behavioral tricks, and it's not everybody that does this, but there was just some shocking things.

25:36You read this, like, oh, that's very interesting. But just a lot of ways of thinking about budgeting and how you get to safety and using your network to do that. Where on the ladder does pursuing education become really important? From a financial perspective, it's definitely level one and probably most important in level two. Because by the time you're out of level one, you can kind of say, hey, you know, I have a base of safety and I can use that to now invest in myself. And this is not true, for example, of high schoolers going into college. A lot of these people don't have$10 ,000 in assets.

26:06I didn't either. But I think through my family, I've never been in level one, even though technically my net worth was below 10 ,000 when I graduated all through college. But through my family, I would say as a proxy, I was at least in level two. And some people are higher than that. So when I'm thinking about education, I'm saying like, hey, you're in a spot where you can take this risk. Even if my education didn't pay off, I still would have been fine. I could have come home, stayed with my family. I could have lived at home and got a job and done whatever. That's not true of a lot of people.

26:35And so for those that aren't in that situation, you kind of have to get to some sense of financial safety before you can really start investing in your education a bit more. And that's unfortunate, but I think that's what's true. Now, once again, that's the financial side of education. I think education from a spiritual or personal growth side is important, regardless of your wealth level. If you just want to learn more, I think that's great. But if we're just talking, what's the financial payoff? It's the most important and definitely in level two, because that's, you're either early in your career or you just need skills to kind of get out of that level where you can really change the trajectory of your life.

27:05If you get a good paying job or something, that can get you into level three or level four. All you need is time now. So I think education is the thing to think about. And once again, education is a very broad term because I'm not just talking college degrees. You can go and there's blue collar work, there's trade schools, there's other types of skills out there, learn sales. I think of all the skills out there that are going to be valuable in the future, I think sales is still going to be one of the most valuable because AI is not going to be able to do it. I things like that. I really think people are going to buy from people.

27:36AI will do a lot of other research and other things that are really important, but I still think sales is going to be an incredibly valuable skill. And if you get very good at it, the sky's the limit. You can sell luxury real estate in New York City and make a killing doing that. Okay. So that was to get from level one to level two, we're talking about budgeting and social networks. Yeah. Safety. Safety, right. Okay. Then level two to level three, education. What does it take to get out of level three. I think that's where investing really starts to play a bigger role. Obviously, time is the big vector in all of this.

28:07With enough time, saving money, investing, et cetera, that gets you into level four, et cetera. It's not that investing is not important in level one or level two or anything like that, but the payoff and the impact is literally 10 times smaller. If you say, oh, I have$10 ,000 invested. Okay, let's say you have a 10 % year, that's a thousand bucks. I mean, that's not nothing, but now you have$100 ,000 invested and now that's 10 ,000. At some point, your portfolio starts to compete with you in terms of how much you can save. That is the big unlock. And especially by the time you're in level four and get deep into level four, it's probably going to start earning more than you.

28:41Kind of rebuilding yourself as like a financial asset equivalent. You can imagine like, okay, I'm trying to rebuild a worker that goes out and earns money for me. So in level two, that worker doesn't make that much money. Your spending is going to be far more important. Your income decisions, how you do your career is going to be more important. By the time you get to level three, that little financial asset equivalent is a bit bigger. And now it's probably maybe not making the same as you, but it's really helping. It's like having an assistant that's there earning you money. And then as you get deeper into level three, and especially into level four, that thing actually starts making more than you.

29:11And that's where the real unlock is. And so I really focused on investing in level three. It was why I wrote Just Keep Buying for the proverbial level two to level three household that wants to get deeper into level three or into level four. I fundamentally believe that's it. It takes a long time and you got to save and hustle away at that. But I think that is the way to do it. And there's a ton of data that shows it can be done. You talk in the book about having a side hustle. Would you worry about a side hustle distracting people from their main career? Oh, definitely. I probably should have mentioned that a bit more.

29:44It depends what your career is. In my case, my side hustle is I've been blogging on the internet for nine years. I know I've written a few books, et cetera. I did that because I had hit a cap in my job, my old job. There was no way I was going to earn more. I'd have to go get an MBA or a PhD. So I was capped out. So if you're in one of those positions where like, hey, I'm going to get 3 % to 4 % raises for the next 20 years unless I do something else, then that side hustle really isn't as much of a distraction. If you're in a career where like, oh, I could get a promotion and then this happens, that's a different story.

30:16So I think you have to really think about your situation. And I don't think a side hustle is necessary. I think for some people where maybe they're in an industry or position where like, hey, for me to get to that next level, to get a real big jump in pay or anything like that, it's just not going to happen or it's going to take much longer than I thought, then maybe a side hustle can make sense. I also enjoyed it too. I think there's also some personal enjoyment in side hustles because people do them because they love them, I'm guessing. That's not always the case, but in my case, that was true.

30:43And so when you're thinking about, should I do a side hustle? Yes. Think about, is this going to distract from my main career and could that send me off on the wrong path? And then also think about like, do I enjoy this thing? And that's another piece of it. Your side hustle, I think led you to change careers and go into something that has much bigger upside. I asked the question because I've never done a side hustle. The closest thing I've done is the content stuff, but I did that as part of my career. So we kind of took different paths to get to a very similar place, I think. Yeah, exactly. I was doing this on the side and then I got recruited to join a wealth management firm.

31:17This is not technically through them, but yes, it does help bring in clients here and there. That's helpful in its own right, but it's just interesting that you have that alignment. And so it's nice to have that. And so yes, now there is more potential in my actual career than there was before, but I started this on that side path and now the side path veered into the main path somehow. How important is controlling spending in level three, either to get out of it or to even stay in it? The biggest expense for those in level three in general is their home. And you see that in the data in terms of their assets, of all the asset classes they own, their primary residence is the largest one.

31:52When I was looking at data on some of the mobility data in terms of, let's look at households that start in level three today, and then 10 years from now, they're still in level three and compare those households to those that start in level three and make it to level four. What were the differences? One of the biggest differences is those that made it to level four had higher income. So once again, income is one of the big things. But the other thing I saw was that the spending between these two groups was almost identical. So even though the people that made it to level four had more income, and so that obviously helped them save more, the people that didn't make it to level four spent almost as much as the people that did.

32:30There is a keeping up with the Joneses. So here's an example where like spending can matter. And I do start to see that in the data. But once again, if I had to pick, if I'm talking to the person that's in level three, and I think they're going to still be in level three in a decade, I'm not going to tell them to cut their spending. I'm going to tell them to grow their income because it's going to just make it so much easier because they grow their income. Their spending is not going to go up that much, at least based on the data I saw. Those that went from level three to level four did spend a little more than those that stayed in level three, but didn't spend that much more.

32:58They're spending almost the same amount of money, but they're making so much more. That's where the wedge is. It's in making more money. And so to some people, this is going to sound obvious, but at least in the United States and the financial media, this is not an obvious point because there are still so many people that beat the spending horse. Just keep on bringing this argument up over and over. And I'm not saying it doesn't matter for a small subset of people. It definitely does. But for the vast majority, it is the income that is the lever. Earning and investing is going to get you into level four.

33:27What does it take to get up to level five? Because the jumps in wealth started becoming really big. I call level four the no man's land of wealth, because once you're in level four, you don't need to get out of level four. You don't even need it. For some people, you don't even get a level three. In certain places in the world, especially in like Europe, because the social safety net is so much better. I think level three is the enough level in Europe, in the United States, where healthcare costs are much higher. I would say Canada is probably between, I would say Europe and the US in terms of how I would think about it.

33:53So you probably need to be level four, even in Canada to kind of really feel that financial independence and everything. Why say level four is the no man's land of wealth, because the stuff that got you in there is very unlikely to get you out. And I can just do some simple math, which I brought from the book that demonstrates this. Imagine today you have an investment portfolio. I'm just making it very simple. A million dollar investment portfolio, you've already done that, which is an accomplishment. So congrats on doing that, however long it took you to get there. It's earning 5 % a year. Let's assume this is inflation adjusted.

34:24And you're adding$100 ,000 a year. How long does it take you to get to 10 million? So how long does it take you to get from the beginning of level four to level five? The answer is 28 years. Take your financial calculator, run it yourself, you'll see. 28 years. So it's going to take you almost three decades of grinding it out, saving$100 ,000 after tax, a considerable amount of money, while earning 5 % a year after you've already made a million bucks. So you can see the math is not your friend once you're in level four. And even if you're like, well, Nick, I'm going to save even more. I'm going to save$300 ,000 a year.

34:57like an example, you're almost making probably$700 ,000 a year pre-tax. Even then it takes 17 years. Even with saving 300K a year, 5 % return starting with a million, you can see that standard nine to five jobs, save, invest in your 401k or your retirement account, whatever, and let the markets do the thing for you. It's not going to get you there without a very long time and grinding for a long time. So the better solution, if someone really wants to get into level five is what are those people that get into level five and how do they get there? Besides the celebrities, athletes, entertainers, put those people aside, let's assume you're not them.

35:33It's business owners. It's all entrepreneurs. And so you basically have to start a company and sell it for tens of millions of dollars and you have most of the equity. Or you join a company very early, it's like a startup and it sells for hundreds or millions or billions of dollars. And your net take ends up, you're an Nella in level five. That's why if you look at the data, the vast majority of those people have most of their money in business interests, and especially in level six, which is 100 million plus. It's just overwhelming what the data shows on that. And so I was just trying to emphasize that if you want to do that, that's the big decision.

36:06Do you go out on your own, start a business? Or do you say, hey, you know what, I'm comfortable not doing that and just doing my thing here? Or you could even take your foot off the gas. That's another option that no one's thinking about, which is the whole coast fire idea. I've saved enough or if I stopped saving right now, I would be able to get to retirement. I just need to cover my current expenses. And so I think that's the big decision point. And I think a lot of people rationally say, hey, I'm not going to keep grinding just to build more wealth. It's not going to really improve my life.

36:34And they pull back. And I think that's the right thing to do for a lot of people. And I unfortunately don't think enough people do that. So someone finds themselves in level fours as the one to$10 million rung. What kinds of things knock people out of that? So we already talked about some of them earlier, divorce, personal things of that nature. If you're not diversified, some bad investments, you have most of your money in one thing. I have friends that have a lot of their money in tech. They're like in the queues or even a levered queue and they have 50 % of their assets in there and they're like, hey, it's going great.

37:08And it is going great for them. But if that turns, we saw what happened in 2022. If that had extended further, it would have been really bad. And I actually think the 2022 bear market was going to get much worse. Just this whole chat GPT happens at the end of 2022. And that's been the bull market ever since we're off to the races. And so if that doesn't happen in that way, who knows where tech valuations would be today. If I had to pick what are the two things in the US especially could be health issues, but those are rare and they happen, but they're rare. It's going to be health issues, divorce, and over concentration.

37:40How do you lose wealth? How does that even happen? You're not going to be spending down necessarily. That could happen if you're in retirement. So there is that class of people who are kind of level four and they pull down. But if you actually look at the retirement data, most retirees do not spend down their portfolios. They just don't do it. They spend their income, they spend up to what their investments return, but they just don't withdraw. One in seven retirees actually pull out and actually have a portfolio. We talk so much about the 4 % rule and no one uses it, sadly. But that's at least the data I've seen.

38:08I've looked at data that a large percentage of people use the 4 % rule. There's a Canadian paper showing the same thing. Retirees in Canada spend way less than they could. I knew you'd have a paper, Ben. The fact that the Canadians and the Americans think the same on this is like, yep, that's probably true then. And I get it. You're worried. I don't want to spend all my money. A lot of people aren't well-versed in the 4 % rule and know all that. They're like, I'm going to spend it and there's going to be a market crash and then I'm going to go through. I talked to a lot of retirees and they're like, I have nothing I want to spend on.

38:41They don't want to fly private. All these things that you're like, oh, spend it on this or that, they don't want to do. They don't want to get and travel to the other side of the world and be on a 10-hour flight or something. They just can't be bothered with a lot of this stuff. And so I think they're very content and they just don't want to spend money. And so it's really hard to be like, oh, spend more. They don't want to. I think a lot of it's the separation of income and capital too, where people will spend their dividends, but they just don't want to spend their capital. Even if that's wrong, we can tell them, hey, that's wrong.

39:07You could spend more, but people don't want to hear that. Live off the income is such a great line. And so never touch the principle, basically. Yeah, exactly. What are the downsides of reaching level five when you start to get into that more extreme wealth? I'll bucket level five and six together. You have to think about all the different ways that your life will change. Not just, okay, yes, I have more money. I have to manage it. There could be the stress of managing the wealth. That's financial in some ways, but the loss of possible trust. If you meet someone and they know you're wealthy. It also depends how if this is stealth wealth or not.

39:39If you're known as being wealthy, I think it changes it a little bit or people could like look you up and realize how wealthy you are. You'll never know, does this person like me for me? Are they just after me for my money? This is where like old friends are really important because they liked you when hopefully you weren't in level five, et cetera. So you got along with them then, which is great. And so I think that's one thing. Family dynamics change a bit more. Maybe there's an expectation because you have so much money. Maybe if you're like low in level four, no one's like, oh my gosh, you have all this money and you're rich and you can do all this stuff.

40:07But if you're in level five or even deeper into level five, you could do tons of stuff with your money. There's the social almost pressure or maybe expectation, or what are you doing with that money? Or maybe you should be donating or this or that. So there's a lot of these things that happen, even your own motivation. When you're level four, you're like, okay, at least I can still grind to do more. But by the time you're deep into level five, you have so much money, you would probably never consume it. it really changes your motivation to work, all sorts of things. So I talk about all these in the book and the different ways that these can impact you.

40:39Now, I know what some people are going to say, it's first world problems, world's tiniest violin, who cares about this stuff? But I do believe more wealth can actually ruin people's lives. I know some people will like, oh yeah, I'll agree with that. But inside they're like, I don't actually agree with that. But I really believe there's a lot of people out there that more wealth that actually made them worse off than if they never had that wealth. I believe it. We did a whole episode, episode 145 of this podcast with Jennifer Risher, who wrote a book about exactly that, about the challenges of extreme wealth and all the ways it can affect social dynamics.

41:09It's a real problem. It's a funny thing to call a problem. I think people are quick to criticize calling it a problem, but it's a real thing. There's a different type of struggle that people in those situations have. How much do you think people's lifestyle changes when they go, say, from level four to five or even five to six? I think it's more of a personality thing than that's going to determine if there's going to be a lifestyle change. There's certain types of people that it doesn't matter what's in their bank account. They will just never spend that much money to like, let's say, fly private.

41:39Five grand an hour, 10 grand an hour. They're just not going to pay that. I think there's others who will say, OK, what happens when you start to get into level five? That's where you can start to fly private. There's actually a guy named Preston Holland. He's the private check guy on Twitter, and he has a really good date on this. There was a Money Wise episode where he's talking about the middle of the bell curve for where people really start to fly private a lot is about $20 million in wealth or$2 million in annual income. These are very far right tail, exceptional people in terms of either wealth or income.

42:08And so that's where we start to see it. They start to show up at around$10 million in wealth, but they really are showing up the most at 20 million bucks. So that's the kind of consumption change that can happen. Once you get into 100 million, now you can start talking about yachts and all sorts of other things. Obviously, it depends on the size of the yacht, et cetera. There's no way to stop your consumption if you really want to go all out. You can start buying companies. You can really start impacting people's lives in a much bigger way. That's the big difference is, especially those in level five, if you had a business or you sold a business, you had the ability to influence a lot of people's lives that you had the business with.

42:43So I think that's another thing to think about. not just consumption, but how your money can impact society just through the decisions you make. How long does it typically take people to reach each rung on the wealth ladder? It really depends. I have some data in chapter 10, which looks at this. Because I don't have an annual snapshot, I can't be like, okay, it takes 4.7 years or something. I have them in five-year snapshots. And because of that, I can say, okay, what percentage of people started in one level and then got to another level over time? For example, on page 153, there's a matrix, which shows the starting wealth level on each one of the rows and then the ending wealth level along the columns.

43:20So you can imagine is like a matrix. 46 % of people that are in level one will still be in level one 10 years later. 30 % will have made it to level two. 22 % will have made it to level three, et cetera. And so you can look at this little matrix here and do it over a 10 year period. And I have it over a 20 year period as well. And you can see what percentage of people, so you can say, Hey, I'm in this level today. What's the probability I'm going to be in that level. And it only goes to level five because we just didn't have any level six people in the data and they're very hard to find. But either way, you can run the math and run the numbers and say, okay, this is the rough percentage of the chance I'm going to be here in 10 or 20 years.

43:56And I think over a 10-year period, it's going to be about 24 % of people will have moved up at least one level. Over a 20-year period, it's going to be about 34%, I think, something like that. Roughly a fourth will move up over a decade and a third will move up over two decades. So that's the thinking. So if you're like, okay, well, where am I at today? It's probably going to take at least 10 to 20 years to move up a considerable number of levels. So it does take time. And unfortunately, there's no shortcut to that. And I think the whole point of that chapter was to really show that idea and say, hey, look, it does take a long time.

44:30And here's the data showing that. And so there's all these get rich quick things out there, obviously, that we've all heard about. But I really wanted to show people, this does take more time than you think. And here's the data to prove that. despite what your favorite Instagram influencer, whoever says, the data shows it takes more time than most people think. I think you showed a pretty clear relationship between age and wealth too. The people in each bucket just tend to be older than those in the bucket below them. So the median age in each wealth level is as follows. Now, once again, if we just said, what's the median age in the United States, that should be like the level one age because all else equal, everyone in theory starts in level one.

45:07That's like the base level. So the median age in level one is 42, which is probably close to what the median age in the whole United States is. In level two, it's 44. In level three, it's 54. By level four, once again, which is$1 to$10 million in wealth, it's 62. Level five is 64. And level six is 66. So as you can see, it's monotonic. It's always increasing. each level, the median age goes up, but you really see the biggest jump from two to three, which is 44 to 54, and then three to four, which is 54 to 62. And so let's just imagine a hypothetical median person. So if you're in level two at 44, it takes you roughly 10 years to get to level three.

45:47And then from level three to level four, it takes another eight years. I know that's not exactly how this works statistically, but the median ages are about that far apart. You can assume that it's going to take you 20 years to go from level two to level four, all else equal. It's another way of thinking about this, but it's something that you could in theory use. What do you think those data say about the importance of time and just staying in the game to accumulate wealth? I wanted to show the data in a way that set the right expectations because this is a long journey. It really does take a lot of time.

46:17People that go up more than two levels within a short period of time, it's very rare. And the only people I know that have done it are those that had a business and they sold it and up being in level six. And so maybe they would have started in level two or three and they end up in level six, working in that business for half a decade, a decade at least, if not longer. And so thinking through that, I just want people to know how long this actually takes so that when they are on their journey, they have to realize it's going to take time as well. What does the typical millionaire household look like?

46:45So I actually pulled some data for you guys outside of just the book. Some of this was in the book, but I pulled a little bit extra just so we can walk through it all. So the median age, When we say millionaire household, I'm just looking at level four, which is one to 10 million. Technically, I would have to include level five and six, but let's just say level four to make this a little bit easier. Median age is 62. The median household income in that bracket is about $200 ,000. The median net worth is actually 2 million. What does that tell you? Okay, even though level four is one to 10 million, half of those people have less than 2 million.

47:17The other half are 2 million to 10. So you can think, obviously, home equity is a big piece of that. What's the median liquid net worth in there. So drop home equity, drop retirement. It's about 700K. So about 33 % of their net worth is liquid. So if you're in level four right now, you can be like, okay, how much of my net worth is liquid? I don't want to say on average, but the median household, median liquid net worth in there is about$700 ,000. In terms of their asset breakdown, the median millionaire is going to have about 32 % on average in their primary residence, about 24 % in their retirement accounts, 12 % in stocks outside of their retirement accounts.

47:52in stocks and mutual funds, about 9 % in other types of real estate, 9 % in business interests. Of course, this is on average, there's gonna be a lot of households with zero, a lot of households with a considerable amount in business interests, 6 % in cash, 6 % in something else. So a very small percentage in some other non-asset that I haven't listed here, and then 3 % in their car. On a$2 million household, which is the median net worth, 3 % in vehicles means your vehicles are worth about 60K or something. So that's kind of the breakdown of what a typical millionaire household in the US looks like.

48:24And once again, you're going to have people on all sides of that. 5 % of households in their 30s are in level four. So it's a very small percentage, about 15 % of those in their 40s are in level four. And once again, this is in chapter 10. So just thinking through this data of what is the typical millionaire household look like, it's someone who's a little bit older, they're on the verge of retirement, they're probably going to start pulling from those retirement assets, their household income is about 200K a year. Super interesting just to hear how the data breaks down and what that typical millionaire household looks like.

48:54How do you think people should think about enough in quotation marks when it comes to financial wealth? This is the whole premise of the FIRE movement. What is your enough in figuring out what you need for financial independence? I think that's why level four is, if I have all the levels I think about, not just because I'm in level four, but because I think this is where people have these philosophical debates because you start to get to a point where even the typical person spending by the time you're in level four, depending like where you are in level four, you'll have enough income to live a decent life.

49:25Where that is exactly is going to vary person to person, but it's usually going to be somewhere in the, let's say, 2 million to$5 million range for like most people. So you start getting in there and you start to think that's enough to like live a pretty decent life just off the income of a portfolio of let's say that size, thinking through that is really the big decision you have to make in level four. Where is that enough? Every person that I say is going to be different. I think it's going to be somewhere in level four for most people in the US and especially Canada. I think in Europe, it's probably a bit lower because the social safety net's higher.

49:57Healthcare costs aren't as exorbitant as they are in the United States, et cetera. So it's up to you really. But if I have to pick what is the enough level, it's going to be level four and probably just a mid-level four to maybe later half if you really want to be conservative. I don't think you need to get to level five. What other types of wealth do you think people should focus on building? So I took this framework from Sahil Bloom, who came out with a book called Five Types of Wealth. One of them is obviously financial. And so the other types would include social, time, mental, and physical.

50:28And I think these are ones that are easily overlooked simply because they're harder to measure. You can go open your brokerage account, you can open your bank account see a number. You have a scoreboard, so to speak, that you could use if you really wanted to compare yourself, all this type of stuff. You can't do that as easily with your social relationships. It's not just like the number of friendships, you had the depth of them. I don't have a social scorecard. You can say, oh, maybe my health can be looked at or something. But even then, you don't track that. Maybe you see that once a year.

50:56It's not the same. So because of the measurement issue, I think it's very easy to overly focus on financial wealth, especially those that have done so well financially. Oh, I'm doing well at this thing. This is what I do better than everyone else. And so you overly focus on it. The sacrifices, you end up messing up other parts of your life as a result. So you maybe don't spend as much time with your kids. You neglect your health. You suck up all your time. You're like, I want to make more money. So you take every meeting, you say yes to everything. And next thing you know, you don't have time to do a lot of things you want to do.

51:23And so thinking about these other types of wealth, which is the main thrust of part three of the book, is where I start to really open this up. We start very broad talking about the wealth ladder. I get very specific talking about each level in part two. And then part three is like, okay, what does this actually matter for? And what are the bigger issues you need to think through as you're, quote, building wealth in your life? And so those are the four I would focus on is time, social, mental, and physical. Good framework. How do you hope that individuals and financial advisors who read this book should use it to improve their decision-making?

51:56Most financial advisors, I don't want to say this across the board, but I think the typical clientele is going to be somewhere in that level four bracket, maybe high level three, low level four. And that is where as an advisor, you can really empower your client to think about these types of decisions. Okay, we have this level of income, you have this much net worth, here's your house, etc. What do you actually want to do in the future? Do you want to start a business? Do you want to have a coast fire scenario where you pull back? Now, I know advisors are going to be incentivized to tell them to keep working, keep adding funds, give an AUM fee, especially.

52:28Everything's incentivized to keep adding more to the system. I understand that. At the same time, there is this fiduciary responsibility you could have of, hey, we also need to think about what's the thing that's going to make the client most fulfilled as well. And sometimes that may not necessarily mean maximizing their well. For advisors in particular, it's the level three, level four types of conversations that are going to really help people. It's not that the level one and two conversations won't be helpful. That could help other people and their clients' lives, but it's just thinking about it more holistically.

52:58And for me, it's what is that framework and what's the decision we're talking about with the typical client? And it's going to be someone who's high net worth, and they're having some sort of debates about what to do tax-wise, what to do with their job, whether they want to move, planning for their children, et cetera. These are all the types of decisions that roll into that level four bucket. We have a twist on our final question for you, Nick. How did writing this book affect how you think about success in your own life? I'm in level four. And so many of the decision points I was thinking about personally were a lot of the decision points I was writing about in the book.

53:36The same things that are happening to those people in level four, I'm thinking about those things. Do I go all in on writing? Do I like stop working a corporate job? I thought about that. Do I stop writing and just do the corporate job and chill out and not have to worry about this anymore? Do I want to coast fire? Do I want to start my own business? These are all the things I've thought about. I think the bigger question that I eventually realized after when I was doing all this writing and thinking about success, I define success as a living life on your own terms, whatever that means. And so I'm still thinking through what does that mean?

54:08I think that's the bigger question for most people. It's not even just like, okay, if living life on your own terms is my definition of success, then what are the terms that I actually want? And what are the liabilities I want to take on? I've had people say, oh, Nick, you should start a podcast. You should start clue, but there's a lot of work that goes into it. You guys know this. I write once a week and don't get me wrong. As hard as that is, it's relatively easy relative to putting together a podcast, editing, coming up with questions, finding guests. I think there's just so much more work involved.

54:37And so there's liabilities to success that I think a lot of people don't think about. And I'm trying to figure out what are the liabilities I'm comfortable with. And writing one blog post a week for me and an occasional book is just enough liability to keep me happy. I'm still debating what are the things I would consider putting on my plate because something else has to come off the plate as a result. And so I'm trying to figure out that balance personally. Great answer. Great to have you on again, Nick. Great to see you. Congratulations on a phenomenal book. I appreciate it. It's always great chatting with you guys and Cameron.

55:06I know we go way back discussing the Ritholtz of Canada, as I called you guys back in the day. So it's been very fun going back and forth with you guys over the years and obviously been watching you on the YouTube channel and everything. It's so cool. So definitely a fan over here in the States. Awesome. Thanks, Nick.

55:48Thank you.

56:04Thank you.

56:31Thank you.

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