You’ve come to the right place if you want to know how wealthy you really are. There’s no guessing, nothing complicated, just black and white, objective indicators that will tell you exactly where you sit on the food chain. I’ve also labelled you with the appropriate animal which is an indication of where you fit on an evolutionary scale.
How Does it Work?
The numbers work in AUD, USD, CAD, EUR, and GBP so pick your local currency and slap your label on. Obviously we all live in different economies and the cost of living can vary greatly from one country and/or region to another, so use the numbers as a general guide.
The only numbers we’re interested in are passive income, minus any debt payments and expenses required to own your investments. So if you have one rental property earning $500 per week and your mortgage payments are $400 and your expenses are $50, then you’re actually only earning $50 per week, not $500.
Don’t try to fiddle with the numbers just to move yourself up in the rankings as you will only be cheating yourself. If you’re a cockroach then accept the fact that you’re a filthy cockroach and do something about it! We all have to start life as a single-celled organism, unless of course we were lucky enough to be born into wealth.
What Isn’t Wealth?
Almost anything you can see that makes you look rich does NOT count towards your wealth. Cars, Rolex watches, art, antiques, designer clothes, or even the house you live in.
All we care about is passive income from investments and the freedom to live life on our terms. A Rolex might be a nice watch but it doesn’t pay us any income. Sure it might go up in value if we’re lucky but while we’re hoping and praying for it to increase in value we still have living expenses to take care of.
Owning your own house is great too but it also doesn’t pay us an income, unless we decide to rent out rooms, but who wants strangers roaming around our house? The value in owning your own home is psychological and it frees up more cash flow to be directed towards your income producing investments. So if you already own your home then that’s fantastic, but if you don’t own one yet then you should probably think about an investment property first.
Your income from your job or business doesn’t count either. The employee making $100 per week is richer than the employee making $1000 per week if they have more investments paying them a passive income each year.
One last thing that we don’t count which probably knocks most people off the ladder is your government retirement fund or pension plan. Your 401K or superannuation or whatever it’s called in your country. The thing you can’t access until you’re nearly dead. It’s of no use to me now if I want to live on a beach in Thailand for 12 months as the government won’t give it to me until they have juiced me dry.
What Is Wealth?
There are five basic levels of wealth. I’m not talking about Warren Buffett wealth, but creation wealth. What I mean by that is you move from Survival mode where you spend the majority of your time working to pay the bills and put food on the table, to Creation mode where you have enough passive income to cover all of your bills and live a good life. You can choose to work or play, whenever and wherever you want.
So it’s not about mega-yachts and super-cars, we’re talking about something much more important: Freedom.
That doesn’t mean that we have to stop building wealth once we reach the Human level. In fact, by the time we have made it to level 5 we should have developed investing habits that will automatically increase our wealth for the rest of our lives, so by default we will continue to become richer but it will not take up as much time and energy as it did when we were moving through our previous levels.
Enough blah, blah. Lets see where you sit on the wealth ladder.
Wealth Level 1: Single-Celled Organism (Zero Passive Income)
Unless you have wealthy parents or parents who were wise enough to start a Freedom Fund for you when you were born then we all start our adult life as a single-celled organism or a unicellular organism. We’re at the complete mercy of the slave system and rely on our job or government handouts to sustain us. If something goes wrong with either of them then we’re screwed.
We have zero passive income and zero choices in life as it’s kind of necessary to pay rent and put food on the table. Most Single-celled organisms also have bad debt like car loans and maxed out credit cards as that’s just how they roll.
Don’t beat yourself up too much though if you find yourself on the same level as algae or bacteria as it’s where the majority of the population exists.
It’s also one of the easiest levels to evolve out of as you really only need to get started and own a few thousand dollars worth of dividend paying stocks!
All you have to do is open a brokerage account and buy something like an S&P 500 ETF (exchange traded fund) that seeks to mirror the results of the Standard & Poor’s 500 Index at the lowest possible cost. You’re probably starting with a small amount of money to invest as a unicellular organism so don’t worry too much about what ETF you buy, just buy one! It’s hard to go wrong with an S&P 500 ETF so start there until you find your feet.
Stop thinking and just DO IT! Buy an ETF so that you can say that you have started. You can do more research for your next purchase in 30 days time as this has to be a habit, forever and ever. Start with the minimum amount though as the point is to just start, but understand that this is something that you should repeat for the rest of your life and of course you’ll be more informed next month as you’ll be researching dividend stocks and index funds.
Obviously you’re not going to make the Forbes rich list while hanging around on this level but at least you’re now on your way to becoming a multi-celled organism. You’re evolving into something special..
Wealth Level 2: Cockroach ($100+ Passive Income Per Year)
I know it doesn’t feel like much of a step up as cockroaches are disgusting but hey, we’re evolving and each step brings us a little bit closer to enlightenment. Find comfort in the fact that cockroaches are resourceful little critters and they’ll probably outlive humanity if our psychotic rulers ever press the nuclear button.
The cockroach level of wealth is relatively easy to achieve as we’re only after $100 USD, EUR, GBP, AUD, CAD or an equivalent of your local currency. That’s $100 passive income per year from investments that pay you for simply sitting still.
If you have to work for the $100 then it doesn’t count. If Elon Musk sends you to the planet Mars for 12 months and then you return to Earth and find that your investments have paid you $100, then congratulations, you’re a cockroach. You can now look down on the unicellular organisms and feel superior to them.
The easiest and probably most logical way to achieve $100 in passive income would be through dividend paying stocks. There are plenty of good ETFs and companies out there paying 5% dividends per year. So if you had $2000 invested in such a company then you would receive $100 in dividends for the year and BOOM!, you’re an investing superstar! Just like that!.
Wealth Level 3: Rat ($1,000+ Passive Income Per Year)
We’re making real progress now as we’ve made it to the animal kingdom. Admittedly in the form of dirty rat that lives in filth and rummages through the trash for food but at least we’re warm-blooded now.
The first two levels of wealth were pretty easy to progress through but now it starts to become more challenging. To achieve $1,000 per year in passive income you’ll need $20,000 worth of investments that pay out 5% in dividends or rent.
Not an impossible task but if you’ve only just recently evolved from a single-celled organism then you probably still have credit card debt and zero belief in your ability to save or invest money. When I was a cockroach I still had $20,000 in credit card debt and owed the government $5000 in taxes. So $20,000 worth of investments sounded like mission impossible.
But have faith as your habits will save you. Just keep chipping away at your debt and adding to your investments. Eventually your debt will disappear and you’ll be adding more to the investment pile.
It took me about 12 months to evolve from a cockroach to a rat and in that time I also eliminated all of my bad debt (credit card and the ruthless government). I’m not going to pretend it was easy becoming a rat though as it wasn’t.
Wealth Level 4: Dog ($1,000+ Passive Income Per Month)
Now we’re playing with the big boys. This is where things start to become really interesting as your snowball is increasing in size and your wealth starts to grow by itself. If all you did was simply reinvest your $1,000 per month, which is obviously $12,000 per year, then you would still end up wealthy eventually. So if you also continue to add as much of your income as possible then you start to see serious growth.
Most people don’t reach the dog level of wealth as they don’t stick around long enough. They find a thousand excuses to quit before this point and they never get to see how wonderful compounding really is. Your money is earning you money, your mindset is expanding, and your business or job income seems to magically improve at the same time.
Everything starts to come together and you begin to believe. Sure, you’re still sniffing the butts of other dogs and you randomly relieve yourself in public, but there are also moments when you feel godlike. Like freedom is at hand with limitless possibilities.
Wealth Level 5: Human Being ($1,000+ Passive Income Per Week)
FREEDOM! This is the pinnacle of the wealth levels but it’s just the start of your life as a free man or woman. You now have choices.
Some people actually enjoy their jobs and continue to work even though they don’t have to but they are in the driver’s seat. If they wake up one day and decide that they no longer enjoy their job as much and would rather spend a few years driving around Australia in a caravan then they can do that. Slaves don’t have this option available to them.
You may decide that you like lighting up your Cuban cigars with hundred dollar bills and continue using your time and energy to create as much money as you possibly can. It sounds boring to me but I respect and understand people who choose to do this more than those who remain obedient wage slaves their entire lives, just scraping by from week to week on the crumbs that the system throws at them.
It’s not for me to decide what is right or wrong once you achieve Freedom. That’s the whole point of working so hard to achieve it; to decide what YOU want to do with YOUR Freedom. Otherwise there would be no point sacrificing, growing, taking risks, and working so hard to achieve it.
For humanity’s sake though, I hope you start evolving again. We have been devolving for so long now that I’m expecting us to start growing tails and scales again sometime soon.
I’m a Free Human Being, Now What?
Very few people ever consciously set themselves free from slavery. Some get lucky with a lottery win, invent a new product, or inherit their wealth, but they’ll never appreciate it in the same way as someone who sits down one day and realizes how the system controls and abuses them, then does something about it.
I’ve seen a few people achieve freedom and then lose it again. One individual I know of retired early in Thailand with more than enough income to live very comfortably for the rest of his life but blew it all in less than five years. He lived like a king and drank like a fish and is now back home in Australia working six days per week as a builder.
Another person I knew had achieved financial freedom through dividend investing and sold all of his stocks to start a new business. The business failed, he lost his house, and he had no passive income to fall back on. Fortunately he’s almost a free man again but he went through a few very rough years of hard work and soul searching.
The point I’m trying to make is: Once you achieve Freedom, guard against it, protect it, and continue to grow it forever. There are plenty of people and organizations out there looking to take what you have built, not least of them is the system with taxes, inflation, and endless fees for this, that and the other. Landmines abound when you have more money than the average wage slave on the street. The wolves can smell it and they’ll fleece you in no time if you don’t protect yourself.
If $1,000 per week is enough to afford you a comfortable life then double it. The more cushion we can create, the more obstacles we can withstand. Recession, war, inflation, scammers, thieves, and insane politicians are all looming, all of the time.
Once our passive income is sorted we should also look to diversify into different asset classes. Continue growing our core investments, the things that set us free, but also look at alternatives.
I used good dividend paying stocks and a rental property to accumulate my wealth and I’m now looking into things like gold, silver, art, bonds, classic cars and other collectables. Not every investment has to pay me an income now that I have enough coming in to be free. I like luxury watches so I can now start to look at pieces that will hold their value and hopefully increase in value over time.
Technically I’m still not quite free if I measure myself against my own Wealth Levels list but I’m pretty damn close. I’m not quite making $1,000 per week in passive income but I’m earning enough to cover all of my living expenses and can choose to do Whatever I want, Wherever I want, Whenever I want. I’m still looking to increase my investments and I’m working just as hard as I was before I made it to this level of freedom. I enjoy what I do and I want to increase my passive income to $2,000 per week. Also, I don’t own my own home yet, so I still have some big financial goals to achieve.
Where are you on your journey?
Single-celled organism with zero income?
A Cockroach with a $100 per year passive income?
A Rat with a $1,000+ per year?
A Dog with a $1,000+ per month?
Or are you a Free Human Being with more than $1,000 per week in passive income?
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