When we think of the term wealth, it’s easy for our minds to jump to thoughts of luxury cars, massive houses, and extravagant holidays.
But there is no one-size-fits-all destination for achieving wealth and, indeed, many of us will have a journey that takes us through various stages of the wealth-building process.
There are several concepts out there on different levels of wealth including popular financial author Ramit Sethi’s seven levels of wealth, starting from base survival level all the way up to legacy planning. Each level has its own challenges or goals and knowing where you stand allows you to understand better and overcome the obstacles.
So, here are the levels of wealth, what they represent and how individuals can get from survival all the way through to legacy building.
#1 Survival
If you’re in survival mode, your income barely covers your essential expenses. You might be living from one pay cheque to the next, juggling bills, or carrying high-interest debt just to survive.
The focus at this stage is getting to know your finances like how much you earn and your debts and stop the bleeding of funds. That means building a simple budget, cutting unnecessary expenses, and looking for ways to increase income.
If you’re at this level, tools like debt consolidation, community support, or career coaching can help create some breathing room. For example, those in Singapore with significant unsecured, high-interest debt can consider the Debt Management Programme (DMP) to reduce their debt burden. Non-profit organisation and registered charity Credit Counselling Singapore (CCS) offers the Debt Management Programme, which facilitates debt repayment with major banks and credit card issuers in Singapore.
#2 Stability
Moving into a more stable phase, you’re able to pay your bills on time and even start chipping away at your debts.
You’re no longer in constant financial panic mode but you are still vulnerable to a degree. A sudden job loss or major medical bill could quickly knock you back into survival mode.
If you find it challenging to be consistent with saving, you can create a more systematic approach to managing your finances such as automating your bill payments and savings.
#3 Security
Being at the security stage means having consistent financial control. Your bills are covered, debts are manageable, and you’ve built a small emergency fund and even started investing.
This is when you begin to feel more confident and you’re not just surviving but thriving. What you should do at this stage is developing your emergency fund. The general rule of thumb is to have three to six months’ worth of expenses saved up. With security comes peace of mind. You don’t fear a malfunctioned aircond or a surprise dentist bill because you’ve got it covered.
It’s here where you may also start contributing to your CPF account more meaningfully and perhaps saving 10% of your take-home pay to invest through dollar cost averaging (DCA).
#4 Growth
When you’ve graduated to the growth stage, your investments are growing at consistent rate and you’re highly aware of where you stand in terms of your financial goals.
You keep track of your financial milestones like hitting your first S$100,000. You’ve put in the hard work and will continue to progress gradually and consistently.
For example, you can consider increasing your investments by 1% every year. You can also start reflecting on your finances more deeply and think about what you really want to use your money on in a meaningful way.
#5 Independence
Financial independence means you no longer have to rely on employment to cover your living expenses. Your income from investments, property, or passive sources is enough to sufficiently fund your lifestyle.
For some, this looks like early retirement. For others, it’s the ability to work only when they want to, and do something they love. Either way, you now have financial freedom.
Reaching independence normally requires long-term planning, discipline, the ability to resist lifestyle inflation, and a high savings rate. It can also bring enormous emotional rewards, such as freedom, confidence, and autonomy.
Take a step back and figure out what being wealthy means to you, whether it’s luxury travels or being involved in charity work. By clearly defining what being wealthy, you become more intentional with your goals and money management.
#6 Abundance
Once you’ve reached abundance, you now have surplus wealth that allows you to live generously and invest in larger goals.
You can fund your children’s education without worry, donate meaningfully to causes, start a business, or explore creative pursuits without financial constraints. Your wealth now supports both your needs and your purpose.
Your finances are well-managed with the assistance of financial planners or legal advisors. What you can do at this stage is further smoothening your financial journey like enhancing how you work with your financial planner. You may also want to start thinking about giving back whether it’s money or your knowledge.
#7 Legacy
The final stage of wealth is legacy. You’re thinking in decades long after you’re gone and not just years. Your financial decisions are now designed to last beyond your lifetime.
This is where estate planning, charitable foundations, and intergenerational wealth transfers come into play.
You want your wealth to serve your family, your community, and your values long after you’re gone.
Legacy isn’t just about how much you leave behind, but also the values you pass on. It’s where money becomes meaning and here you’ll be thinking about significant estate planning, building trusts and how you can pass on legacy wealth to the next generation.
How To Move Up The Wealth Ladder
Moving from one stage to the next may not be linear, just like life or our investment journey. Life happens when we’re too busy living it. This could mean job losses, medical emergencies, and extended market downturns.
What matters most is constructing a framework that helps you adapt and continue progressing up the wealth pyramid.
It’s important to practice good money habits so it’s key to track everything you spend in order to understand your income, expenses, assets, and liabilities. Beyond that, saving early and often will help you compound your wealth once you start investing it.
Remember that wealth-building takes decades and there’s no “get rich” shortcut up the pyramid. By continuing to learn and educate ourselves on everything from spending to investing, we can make better-informed decisions that will meaningfully help us on our wealth journey.
Read Also: Financial Stability, Financial Independence, And Financial Freedom – What’s The Difference?
