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The Different Levels of Wealth Categorized and Explained

It is probably not a surprise to anyone that being “rich” is in the eye of the beholder.

It is a very individual definition based on one’s own needs, wants, and distance in between those elements.

It can be useful to have a framework, or a lens, through which to view different levels of accumulation and wealth.

This can make it much easier to relate to other situations as well as align your financial resources with your higher-level goals and horizons of focus.

Passive Income MD suggests one such framework, based in part of how one successful technology company founder views his own fortune.



Recently, I listened to an especially interesting episode of my one of my favorite podcasts, How I Built This. In it, the host interviewed Stewart Butterfield, the founder of Slack.

If you’re not familiar with Slack, it’s a collaboration and communication tool used by some of the largest, most well-known companies in the world. In fact, I personally use it to communicate with my team of business managers and virtual assistants at Passive Income MD and Curbside Real Estate.

It’s also one of the fastest-growing companies in history. Founded in 2013, it saw phenomenal growth and now has a valuation of over $7 billion. Not too shabby. In the podcast interview, Butterfield recounts a fantastically inspirational story of failure, pivoting, endurance, and success. It’s very motivating, but it’s not the reason I bring it up.

The real reason I was fascinated by the interview was that at the end of it, the host, Guy Raz, asked Butterfield one question about his newfound wealth. “Does that eliminate stress in your life?” Raz asks. “Does that mean that everything is set, everything is taken care of?”

Butterfield’s response was fascinating, and I had to play it back several times to get the full effect. He said that he believes there are three levels of wealth in the world, and knowing where you’re at depends on how you think.

Butterfield’s Three Levels of Wealth

Here are his three different levels, which are really three different mindsets relating to finances:

  1. I’m not stressed out about debt – meaning people no longer worry about their credit card bills or student loans.
  2. I don’t care what stuff costs in restaurants – meaning it doesn’t matter how much you spend on a meal.
  3. I don’t care what a vacation costs – the “ultimate level,” meaning you don’t care how expensive a hotel is or which flight you take.

Beyond the ultimate level, Butterfield said that additional wealth doesn’t really matter or make any other impact in his life. In fact, he says he aims to give almost all of it away, because he doesn’t think he’ll get additional happiness from spending it, and there’s a lot of suffering and inequality in the world.

These are powerful words. Not only that, but it’s so refreshing to hear someone distill the vast complexities of wealth and finance down to such simple terms.

Here I was thinking of wealth in terms of a specific number or a huge landmark, like reaching financial freedom from medicine. Of course that’s important, but when you think about it, what really matters about wealth is how it impacts the smaller things in your daily life.

Sometime after hearing the interview, it occurred to me that, in fact, there may be more than just the three levels Butterfield mentioned. But before I continue, I think it’s important to sidestep here and mention some studies that Butterfield briefly referenced as well.


Happiness, Wealth, and Income


The first study is titled “Happiness, income satiation and turning points around the world.” The study is a large analysis published in the journal Nature Human Behavior. They used data from the Gallup world poll which aggregated answers from 1.7 million people from over 150 countries.

The study found that the ideal income for individuals is $95,000 a year to achieve life satisfaction and between $60,000-$75,000 a year for emotional well-being. Of course, families with children would require more, but that didn’t factor into this particular study.

This and other studies in the past have shown that income above these amounts does not improve one’s life any further (i.e. make you happier). The problem with more money, in this situation, is that people simply tend to hop on the hedonic treadmill, spend more, and only cause more issues. As a wise man once said, “mo money, mo problems.” Another study, a survey conducted by Charles Schwab, asked 1,000 Americans from age 21 to 75 what level of personal net worth would make them feel “financially comfortable.” The answer was an average figure of around $1.4 million. If they had $2.4 million, they would consider themselves wealthy, and ultimately comfort = happiness.

It would seem that there is a strong correlation between wealth or income and (perceived, at least) happiness. Personally, I believe that the exact number depends on where you live.

For example, in northern California, you’re considered low-income in some areas if you make below $117,400, whereas, in other parts of the country, you would be living like royalty for that amount. That’s part of the concept beyond geographic arbitrage that my friend Physician on Fire loves to talk about. In short, it does matter where you live and how much you have when you’re there.

Five Levels of Wealth


So, instead of a distinct monetary amount, it’s nice to think of it in terms of real-life situations we can relate to. This takes into account the cost of living and really what your lifestyle is like.

Using these ideas as a framework, I’ll explain my version of the different levels of wealth adapted from Butterfield.


1. I’m not stressed about having a roof over my head or a basic meal.


Nothing in life matters if you don’t have these basic human needs. At this point, it’s all about survival. There are plenty who are below this line and unfortunately, it’s a problem to which our society hasn’t found a solution. However, it’s safe to say that physicians don’t have to worry about this.


2. I’m not stressed about debt.


As high-income professionals who have been through many years of education to get where we’re at, we’re no strangers to debt. According to the Association of American Medical Colleges (AAMC), as of 2017, the average medical student averaged $179,000 in debt. No doubt it’s higher today.

In fact, we took a recent poll in our Facebook group, Passive Income Docs, and almost 25% of physicians in the group had more than $250,000 in debt.

That’s a mountain of debt to work your way out of when starting. Yes, it helps to refinance their student loans, and as the White Coat Investor always preaches, most should focus on getting rid of that debt within the first 5 years. That way they will be able to climb out of this level onto the next.

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3. I don’t care what stuff costs in restaurants.


Do you base your restaurant choice on what food you feel like eating or is it based on a budget constraint? And once you’re there, does the price next to the item dictate what you order?

I completely understand this level because my wife and I are somewhat foodies. After having children, we can barely make it out past 10 pm without being tired, so going out and having a nice dinner either by ourselves or with friends is a valuable treat.

So we choose where we go based on the restaurant or what we feel like eating, not so much what it costs. And when we go, we try to eat their signature and popular dishes. We pay for the experience, and it’s worth it for us. This doesn’t mean we’re eating fancy every night, because we all know that the price of the food doesn’t always correlate with how good the food is or how many Michelin stars it has.

Reaching this level doesn’t mean going out and spending hundreds a week eating out, but when you’ve reached the point where the cost of your meal doesn’t factor into your decision to eat it, you can move to the next level.


4. I don’t care what a vacation costs.


I don’t think this means you’re obligated to stay at the nicest hotels and always fly first class. It’s just that you can do whatever you want, depending on the experience you’re looking for. All of this comes down to choice.

If we’re traveling with children, we’re looking for a hotel with the best amenities for children. If you’re traveling to Europe, you may want to eat at places that provide an authentic experience. When you’re able to choose places because of the experiences they’ll provide, rather than the expense, you know you’re here.

Of course, let’s face it, if you had the choice to fly first or business and money wasn’t an object, you’d do it every time. I’m not there personally, but I realize it’s all in the experience you want.


5. I am giving away a majority of my wealth over my lifetime.


In his interview, Butterfield talked about the previous level as the ultimate level. But I believe that this is truly the ultimate level.

I was blown away when I first heard about the Giving Pledge. According to their site, “The Giving Pledge is a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to giving back.”

It was started by none other than Warren Buffett and the pair Bill and Melinda Gates. It includes pledges by notables such as Mark Zuckerberg, Michael Bloomberg, Richard Branson, and George Lucas.

Giving is a great thing, but let’s be honest, it’s not always easy. That’s why I’m so inspired and motivated by movements like the Giving Pledge. If you can, take a look through the site. I hope it motivates you as well. It’s something that everyone can integrate in a small way at every level along the way.

I may never qualify as someone who never worries what a vacation costs, or honestly feel financially comfortable enough to give most of my wealth away. But why not aspire to it? All I know is that I’m taking my own journey one passive income venture at a time.



Where are you on these levels and do you see yourself reaching the top level?


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7 thoughts on “The Different Levels of Wealth Categorized and Explained”

  1. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  2. I am thinking about this generationally.

    1: Looking through ancestry.com, I can see that my great grandparents and the generations before them lived at level 1 their whole lives. Hustling and working any job from childhood to grave, living in multi-generation rented homes, just to keep a roof over their heads.

    2: Both sets of my grandparents were born into level 1 in the early 1900s – shelter insecurity – but made it firmly to level 2 by the 1960s. Both sets made it all the way to owning a small home and paying it off. They were secure in housing but fearful of debt but they never, ever ate out. They had experienced shelter insecurity and were never going to risk going back to it.

    3: Both my parents were born into shelter security and lived in control of any debts. They had a mortgage but it did not dominate them. They could afford to eat out but they rarely did. They could afford to vacation but they were careful about where and when.

    4: There is no Level 4 yet! My husband and I were born into the cost-conscious vacation level. There may have been a time when we were child free tech workers that we lived like wannabe 4s, but we had not actually accumulated enough wealth to sustain that when the kids came along. And I doubt that we will ever get back there.

    • This is one of the best explanations of the progression of intergenerational wealth that I’ve ever read. Few people truly understand the importance of each generation building a wealth platform from which the next generation will spring. Thank you for sharing.

  3. Notice that the higher the different levels, the finer the line. What I’m finding out, it just doesn’t take much to get to terminal velocity if one’s expectations are kept somewhat realistic.

  4. I like this practical approach to wealth. It also aligns with some of the literature around income level and satiation points. I reviewed that recently along with other research around income and happiness. I think that one big error that we can make is deviating from this pragmatic approach to a comparison one. Comparison is human nature and as our wealth rises, many of us hob-nob with increasingly wealthy people and move the bar.

    Thanks for sharing this great pragmatic framework. It is a good alternative to redirect us from our natural tendency to compare.

    • I see all the stress around college funding as being dragged back below “ 2. I’m not stressed about debt.”

      When our kids were born we were not stressed about the mortgage, and we carried no credit card debt or car loans.

      But how we were going to save enough to pay for college? That was a huge stress all the time until it was ‘done’. We were not always on schedule to have the money saved in time. There were no sports scholarships, academic excellence or rich family members. We saw it as our responsibility to somehow save that money and we were back under “threat of future debt” stress until it was saved.


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