Having published Just Keep Buying to rave reviews – not least our own – bestselling author Nick Maggiulli is back with The Wealth Ladder (alternative link to the US edition). Here Nick explains why he believes his Wealth Ladder concept is the ideal framework for tracking and improving your financial life.

When I was five years old my father taught me how to play chess. For fun, he’d invite his friends over and have them challenge me to a game. They were always shocked when I won.

Picture it. You’re 27 years old and a kindergartner just crushed your self-esteem with a single word – checkmate.

Jokes aside, I wasn’t a future chess prodigy. My father’s friends were simply terrible at the game.

I stopped playing chess a few years later when my parents split up and didn’t pick it up again until my junior year of high school. I found a renewed interest in the game after playing against a friend, and we decided to start a chess club. To improve my skills, I spent hours studying openings and the best ways to respond to them. My first five to ten moves in a game were often automatic, pulled from memory. My strategy worked and I got better.

But it wasn’t until I entered my first real chess competition that I learned an unforgettable lesson.

When amateurs learn chess, many of them do the same things I did. They memorize openings and hope that their opponent makes a mistake along the way. They win based on good initial positioning and by avoiding simple blunders.

But Victor, one of the star players at my first chess competition, was different. He didn’t play chess like an amateur. Sometimes Victor would start a game with a traditional opening and sometimes he wouldn’t. He’d accept a gambit (the sacrifice of a piece) with one opponent, but completely ignore it with another.

It was like he wasn’t playing the same game as the rest of us.

Here’s the puzzling part though – no matter how much I watched him play, I couldn’t figure out how he did it. I had no frame of reference for his decision making. You’d think that if I kept practicing, I’d eventually be able to compete with Victor, but you’d be wrong. I could not simply take my approach of going through chess openings, do it for hundreds of additional hours, and get to his skill level. My strategy plus time did not equal Victor.

No, what I really needed was to find a different way to play chess altogether.

This is the lesson Victor taught me: Sometimes effort alone doesn’t determine your results. How and where you apply that effort does.

Years later, I realised that the same thing is true when it comes to building wealth.

Thinking different

Having the wrong framework when trying to get ahead financially can leave you spinning your wheels with little to show for it.

Many people try to fix this by working more hours or following the latest financial advice, but they still don’t see a big change. Then they attribute their lack of success to their work ethic, their boss, or bad luck, when their problem has been their approach all along. They’re trying to memorize openings while the Victors of the world pass them by.

As Andy Grove, the former CEO of Intel, once said, “There are so many people working so hard and achieving so little.”

Their problem isn’t effort – it’s strategy.

But what if there was a better way? What if there was a new framework for understanding how to build wealth, one that actually worked? Not a get-rich-quick scheme or a one-size-fits-all solution to your money problems, but a new philosophy for thinking about money altogether. What if this system didn’t tell you what to do, but taught you how to think about your finances?

Telling people what to do works fine when they face the same problem again and again. But, this approach doesn’t work with money and wealth, where things are constantly in flux. Interest rates change, our careers change, and our desires change, so why should our strategy for building wealth stay the same?

It shouldn’t. Instead, a better approach would be to have a solid framework to rely upon throughout our long and varied lives.

That framework is what I call the Wealth Ladder.

Introducing the Wealth Ladder

If I gave you $100, would that change your life?

How about $100,000? What about $100 million?

Your answer will depend upon a variety of factors, but most importantly, how much money you have today. For most people, $100 million would fundamentally transform their lifestyle. But for someone like Jeff Bezos, $100 million wouldn’t even register. This simple observation has profound implications for understanding wealth, and how our view of it can change as we acquire more of it.

For the record, when I say ‘wealth’ I am referring to your net worth, or your assets minus your liabilities. That is everything you own (i.e., property, financial assets, cash, etc.) minus everything that you owe to others (i.e., mortgage, student loans, credit card debt, etc.).

The problem is, we’ve been looking at wealth in the wrong way. We’ve assumed that more wealth is better and that it can solve all our problems. We’ve also assumed that more wealth means more personal consumption.

Unfortunately, this is only true in the extremes.

The person with $100,000 can afford a lifestyle that is quite different from the person with only $1,000. However, the person with $500,000 lives nearly identically to the person with $400,000. Though these two people are separated by $100,000, they likely shop at similar stores, drive similar cars, and live in similar homes. In this sense, our enjoyment of wealth isn’t something that goes up with every additional dollar (or $1,000) we get, but something that increases in steps.

From this perspective, wealth isn’t a straight line, it’s a ladder. And each rung of this ladder corresponds with a wealth level that will impact nearly every facet of your financial life.

From how you spend money, to how you earn it and how you invest it, each level of the Wealth Ladder is unique.

What are these wealth levels?

• Level 1 (<$10,000)
• Level 2 ($10,000–$ 100,000)
• Level 3 ($100,000–$ 1 million)
• Level 4 ($1 million– $ 10 million)
• Level 5 ($10 million– $ 100 million)
• Level 6 ($100 million+)

The levels are separated by a factor of 10, because this corresponds with the increase in wealth needed to create a large lifestyle change.

Wealth around the world

You can see these wealth levels with their respective net worth ranges in the chart below.

For example, Level 1 is for those with a net worth less than $10,000, Level 2 is for those with a net worth of $10,000 to $100,000, and so on.

From this we can infer that each level up the Wealth Ladder is exponentially more difficult to reach than the one before it. This explains why the number of people around the world in each level tends to get smaller as we go further up the ladder.

For example, the following chart is a breakdown of the percentage of people in each wealth level around the world and in the United States as of 2023:

As you can see, the majority of people around the world fall in Levels 1-2, with increasingly smaller groups of people in each level above that.

There are roughly 1.5 billion adults in Level 1 (<$10k), but there are only about thirty thousand adults in Level 6 ($100M+). Given the amount of wealth concentrated in the United States, the distribution of people across the Wealth Ladder is shifted upward here. As a result, most households in the U.S. are in Level 3 ($100k-$1M), not Levels 1-2. Despite this upward shift, there are still far more households lower on the Wealth Ladder than higher. For example, there are 56 million U.S. households in Level 3, but only about 10,000 U.S. households in Level 6.

Since such immense fortunes are rare, some people have warped perceptions of wealth and what it means to do well financially.

If we map the different economic classes in the U.S. onto the Wealth Ladder, we can see this more clearly:

• Level 1. Lower class (<$10k)
• Level 2. Working class ($10k–$ 100k)
• Level 3. Middle class ($100k–$ 1M)
• Level 4. Upper middle class ($1M–$ 10M)
• Level 5. Upper class ($10M–$ 100M)
• Level 6. The superrich ($100M+)

From this perspective, you can begin to understand why some people with lots of money don’t feel rich – it’s because they’re looking at higher economic classes or Wealth Levels. People in Level 4 look at people in Levels 5-6 and say, “I’m not rich, they are rich.” Though people in Level 4 are millionaires, they can’t afford to live like the stereotypical rich person depicted in the media and popular culture. Those people, who are in Levels 5-6, can actually afford to fly in private jets and own supercars.

From this simple categorization of wealth into levels, we can also imagine how your financial strategy might change as you move up the Wealth Ladder

For example, the strategy to get you from Level 1 to Level 2 will be fundamentally different from the strategy to get you from Level 5 to Level 6.

How to climb the ladder

This categorisation of wealth into levels also explains why different financial experts give seemingly contradictory advice.

One may argue that budgeting is the key to financial success, while another claims that starting a business is more important. Who is right?

The Wealth Ladder teaches us that both of them are, they are just talking to people at different levels on the Wealth Ladder.

While budgeting can be useful for someone in Level 1 of the Wealth Ladder, it likely won’t make a difference for someone in Level 6. This would classify budgeting as Level 1 strategy. Similarly, starting and scaling a business could help someone in Level 6 build more wealth, but probably isn’t the right strategy for someone in Level 1. This would classify running a business as a higher- level strategy.

Just like a fitness coach would provide different diet and exercise advice to an obese person than to a well-trained athlete, the Wealth Ladder will provide different financial advice based on where you are on your financial journey.

In this way, the Wealth Ladder is a grand unifying framework that will fundamentally change how you think about wealth and how to build it.

Once you’ve grasped the concept of the Wealth Ladder, it will be difficult to look at your finances the same way again. As the saying goes, “Once you see it, you can’t unsee it.” Your shift in thinking will influence how you choose a career, how you take risks, and, ultimately, how you live your life. You’ll see that the difference between those who build wealth and those who don’t isn’t necessarily how hard they work. Rather, it’s what strategies they follow and where they focus their time and energy.

Thankfully, you won’t need to guess about where to focus yours. The Wealth Ladder already has the answer.

The Wealth Ladder works

Before we start climbing The Wealth Ladder, let me tell you a little bit about my story.

I grew up in a working-class family in Southern California. My mom was a loan processor. My dad bounced between jobs – limo driver, insurance agent, and more. They divorced when I was young and declared bankruptcy multiple times before I turned eighteen.

This unfortunate set of circumstances meant I had no financial role models. No road map. I had to figure out money on my own. I became the first in my family to graduate from college – and not just any college. I went to Stanford, an elite private school where I met people from different walks of life, many wildly different from my own.

From there, I started my career in litigation consulting, working alongside high-powered professionals across the business world. For a few years, I even played in a band with a handful of lawyers.

Now, I work at Ritholtz Wealth Management, a firm that manages more than $5 billion in assets for thousands of clients. I’m also a financial writer and author of the bestselling book Just Keep Buying.

Because of these experiences, I’ve seen wealth from every angle. I’ve met people at every level of The Wealth Ladder. I’ve also analyzed an enormous amount of financial data – everything from the Survey of Consumer Finances (run by the Federal Reserve) to the University of Michigan’s Panel Study of Income Dynamics, and more. These datasets contain financial information on tens of thousands of US households over the span of five decades.

The Wealth Ladder distills what I’ve learned from this research along with my own journey with money.

Time to step up

Most importantly, I’ve built life-changing wealth – for myself, my family, and for thousands of people around the world – because of it.

The Wealth Ladder is the framework I’ve developed to help you do the same. And while I’m not at the highest wealth level, I know many who are. Some are my mentors. Some were colleagues. Some I’ve met online. I’ve seen the benefits of great wealth – but also its pitfalls.

My book is both a guide and a warning. It’s about how to build wealth – and knowing when enough is enough.

My goal? To help you climb The Wealth Ladder in a way that actually improves your life.

The only question left is: Are you ready to climb it?

Obviously the first step on this ladder is to grab your own copy of Nick’s book – which is available in UK as well as US editions. On that score, I’m curious… how do you think Nick’s Wealth Ladder levels map to the UK? Are our rungs closer together? Share your thoughts below. You could also let us know where you’ve reached – and whether you’re done climbing!

What caught my eye this week.

Once again we have disappointing economic data in the UK. And once again, the elephant in the room is missing from media chatter.

The Bank of England was split on its decision to cut rates by 0.25% to 4% this week – it had to vote twice to reach a verdict – with stubborn inflation making cutting rates riskier than it should be.

This despite a UK economy that is barely growing.

It’s not stagflation – not yet – but it’s a close cousin. No wonder there’s fewer people accusing me and others of talking Britain down these days.

I mean, it says something when a Coinbase ad mocking UK PLC – and our dumb acceptance of our lot – goes viral not because we’re outraged, but because we see the truths:

Now, it doesn’t seem like this ad was really banned, as some claimed.

And if it was steered off-air by the regulators, it’ll be for disclosure reasons, not because of Stalinist diktats from on high.

All the same, given that almost nobody else dares to speak of the economic ill that continues to grind in our gears, I’m sympathetic to the notion (not the reality) that ‘they’ are suppressing the truth.

Leave it out

Despite this near-blackout on Brexit, at least the public has woken up to its mistake.

A new poll for The Sunday Times showed only 29% would vote Leave again.

And no wonder!

Reminder: not only is the UK economy growing nowhere, but the government is said to face a £41bn fiscal ‘black hole’ which means taxes will have to rise again.

From the BBC…

NIESR said the shortfall in the government’s budget was in part due to weakening growth over the past few months, resulting in a lower tax take and higher government borrowing.

But the reversal of welfare cuts, which were originally designed to save £5.5bn a year by 2030, had also had an impact, it said.

…which is all true, no doubt. But the UK economy wasn’t born yesterday.

I know some are bored of me repeating it, but multiple independent estimates say that a ‘Remain economy’ would be at least £100bn bigger.

And that missing GDP equates to around £40bn of lost taxes.

So – once more with feeling – this £41bn black hole is basically due to Brexit.

My diagnosis: the State carried on with its pre-Brexit cruise control spending, but the economy to pay for it has leaked too much air from the tyres.

Sure things would be rough regardless. Covid happened. Ukraine. Trump and his trade wars.

But we lowered our baseline growth in 2016, and that all just made it worse.

A lot of little decisions add up

Counterfactuals and shades of grey seem hard for some people to understand.

So to give just one example, yes, the City of London has expanded after Brexit.

But it would expanded more quickly without it.

How do I know? Because the banks have told us so – and the wonks have backed it up with research.

Goldman Sachs’ CEO said this week that London’s position was “fragile”, noting:

“London continues to be an important financial centre. But because of Brexit, because of the way the world’s evolving, the talent that was more centred here is more mobile.

“We as a firm have many more people on the continent.”

EY’s Brexit tracker reported this week (paywall) that the five biggest investment banks have added 11,000 jobs in the EU in the five years since Brexit.

Most of those would have instead been high-paying and tax-generating jobs in London in a Remain timeline – simply because there would have been no reason for anything to change.

From the same article (my bold):

Michael Mainelli, the former Lord Mayor of the City of London who leads consultancy Z/Yen, estimates that 40,000 financial services roles have moved from London to the EU because of Brexit.

Meanwhile, the number of people employed in the City has grown since the 2016 Brexit referendum by around 130,000 to reach 678,000 at the end of 2024.

“The City of London has been growing and continues to do so,” he said.

“I remain bullish on London, but proportionately it is likely to have done better if it wasn’t for Brexit.”

Is the penny starting to drop at the back?

It’s not all or nothing.

It’s not depression or boom time.

It’s just a bit worse, year after year, which is more than sufficient to add up to the 4% hit to GDP that the OBR and others have estimated – and to create a £41bn headache for Rachel Reeves.

Dealing with it

Before anyone comments, yes the US-UK trade deal is slightly better than the EU’s.

The trouble is we sell almost twice as much in goods and services to the EU. Europe remains our lynchpin trading partner by far.

What’s more, the EU (and the world) will very likely get a new deal soon after Trump leaves office and economic sanity returns to the White House.

Whereas we’re stuck with our economically-damaging exile from the EU for at least a generation. (Sorry Ed Davey.)

An overnight crisis ten years in the making

Read the right-wing press – even a few sensible commentators who I know read this blog – and it’s implied that the UK’s travails are all Rachel Reeves’ fault.

As if we were all lounging in the sunlit uplands this time last year. Having our cake and eating it.

Look, I agree that Labour has done nothing much in its first year to improve matters.

Labour’s planning reforms should have helped, but so far we’re building fewer homes. And its better relations with the EU are welcome, but Starmer’s new deal was far from an Undo button.

Meanwhile the hike in employer’s National Insurance is hammering small UK firms, especially those in the service economy. I’m an investor in a few, and they all say it’s been another kick in the teeth.

And let’s not even mention Labour’s welfare reform farrago.

The only tough decision this government has stuck to so far is its foolish election pledge on income tax.

Nevertheless, pinning the UK’s malaise on Labour is rank hypocrisy. Not only do these elements shirk their responsibility for our national blunder, they seeks to stick everything on a one-year old administration.

He who smelt of it dealt it

Why do I still bring up all this ancient history?

Firstly because it’s not ancient. As I explained, we’re living with the consequences. Yet that obvious truth is absent from the prevailing narrative, and it infuriates me.

Secondly, because if we don’t know how we got here then we’ll potentially double-down to make things even worse and vote for Farage and Reform. Whereas that man should be unelectable for what he’s already done to our economy.

But I don’t really need to prove my point. The economy today looks pretty much how I said it would nine years ago, after we voted Leave – a bit worse than otherwise every year, which adds up. And obviously nothing fixed by leaving the EU.

Circumstantial evidence perhaps, but pretty on the nose.

In contrast the other side should have everything to explain. Because Britain in 2025 does not look anything like the nonsense they promised us in 2016.

It should feature in every economic analysis. Yet you barely hear a peep about it.

“Move on!” they cry.

British beef

Okay, so where does all this leave us as investors and savers?

Well, interest rates kept higher for longer for starters. The UK struggled with inflation for decades before it joined the EU, perhaps due to its small size and reliance on foreign trade. Like others, I see signs this disease may be re-emerging.

As for UK assets, it’s obviously incredibly tricky to judge – presuming you’re the naughty type who likes to speculate.

All things being equal the pound will be higher given higher rate expectations versus other currencies, but inflation can work against that.

Same with conventional gilts. Perhaps more reason to overweight mid-duration index-linked gilts in our safety cushions?

As for equities, UK companies continue to get taken out by foreign predators, mostly US. (If the fund manager who disputed my prediction of this in our comments a couple of years ago would like to update us, please feel free…)

So despite all the gloom, I remain very overweight the UK market.

Many UK companies still look reasonably priced, especially versus the US. And the liquidation of the LSE is a catalyst to unlocking their value.

Which is good for shareholders, even if it’s a sorry state of affairs for the LSE – and for the UK more widely.

Pips squeak

Presumably some taxes will have to rise, too. For good or ill more borrowing seems to be off the table.

I think Labour’s income tax pledge is foolish not because I love higher taxes from this level, but because I think endless speculation about where they can pinch and pilfer around the margins is more damaging than just a straight hike.

But really we’re taxed enough already by my lights. There are no good options, and I wouldn’t be surprised to see things get worse if more rich people flee.

There’s been a lot of debate and debunking as to what extent this exodus is actually happening, but I do judge something is going on. The collapse in London prime property prices is surely one eagle-sized canary in the coal mine.

Also before anyone waves a copy of Socialist Worker at me, understand this really matters for the welfare state that most of us – and Labour – care about.

Not only do the rich drive a lot of economy activity, but a mere 3% of taxpayers represent a huge chunk of income tax receipts:

Source: Four.Zero

Finally, it usually is darkest before the dawn and we’ve been in a fix for a decade.

Perhaps if something breaks soon it’ll be a wake-up call that could yet see off even worse in four years time.

Have a great weekend.

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