Table of Contents

• It may not be our fault

• The Framework

  • The 5 Stages of Wealth

    • Survival

    • Stability

    • Surge

    • Sovereignty

    • Splendor

People overestimate their current financial status. It's human nature to avoid the bad. Even if you are doing good, how good are you actually doing?

I made the grave mistake of quitting my job when I hit my all-time high net worth. There was a problem: I thought I was close to retirement when, in reality, I wasn't even halfway there. I had to start back from zero—a bit below zero.

This led me to take a serious look at my finances. I asked myself:

• How do I determine the proper stages of my wealth?

• How do I know where I stand and where I am going next?

• How do I know how much I need to save for retirement?

I thought I was doing everything right. I worked at a high-paying job with RSUs and plenty of perks. I saved money and invested in properties. I started a mini Airbnb empire. Yet, in no time, I ended back at zero. It was time to figure out what went wrong so I would never repeat the mistake.

After talking to my friends about my situation, it was clear. I was one of many in this position. They all could tell me:

• Yearly Salary

• Rough Fixed Expenses

• Latest Large Purchase

But they couldn't tell me:

• Their Net Worth

• Stage of Wealth

• Track for Retirement

It may not be our fault

This stuff isn't taught in schools. We are taught to work at a job and retire, told to climb the work ladder for better-paying roles. What we do with the money or how we fund a good retirement is left unknown. 

Family doesn't help. The second you start doing well, they convince you to indulge more. Or ask to share the wealth instead of providing direction. Unless you were in the lucky few to come from money, the lessons on tracking and managing your wealth go missing.

Society demonizes money. Focusing on wealth creation is almost a sin for some. The journey to financial freedom wrapped in "get rich schemes" or shitty courses. I cannot count the number of times "financial YouTubers" get caught in scams.

Others see it as a lost cause. Climbing the wealth ladder is too hard to visualize. The steps are unclear, paralyzing.

Some group all well-off people as "rich" without any context on what stage of their wealth journey.

Spoiler: You can appear "rich" and still be in the Survival stage.

Not knowing where you are could lead to income creep and overspending. Or worse, leave you underestimating your financial stability.

Your wealth is important because it impacts every area of your life. We say, "Money cannot fix all problems." In reality, money can fix "money problems," and that list is massive.

Knowing where you are at in this stage of your life is vital to so many areas:

• It sets the stage for what action you will take tomorrow

• It frames future goals and planning

• It motivates you to stay on track

• Allows you to course-correct

Life is filled with ups and downs when it comes to your finances. Knowing where you stand in the wealth stages will:

• Help you ensure you are growing as you earn

• It will allow you to understand how to jump to the next stage

• Prevent you from doing back levels once you hit a new stage

The Framework

I set up the 5S system to help me remember. I call it the "5 Stages of Wealth." They are the stages/steps of your financial freedom journey. We don't all start at the same place but go down the same path.

The 5 Stages of Wealth

• Survival

• Stability

• Surge

• Sovereignty

• Splendor

The shape is a pyramid because it builds on each stage. You cannot be in the "Stability" stage without meeting your needs at the "Survival" stage. You cannot be at the "Sovereignty" stage without meeting "Survival," "Stability," and "Surge."

The only exception to the rule is if you hit a windfall, like a lottery or a vast inheritance. Even then, it's a way to speed you up the ladder. If you don't maintain the stages, you will return to "Survival."

Let's get into each stage.

Survival

Existence, Persistence

Most people go through this in one way or another. The stage starts when you are born, as a form of dependency, where your survival depends on your parents. They provide most of your resources.

As you grow, you take more ownership of your Survival. The goal here isn't investing or making passive income. It's about just getting by.

You may be living paycheck to paycheck. Some may be in debt with negative net worth. Insecurity plagues the mind. You may be dipping into savings to pay for expenses and stable enough to hold a job. There is no room to think outside the paycheck cycle.

It's a rough stage but an important one: the foundation.

Building healthy financial habits is critical:

• Make sure you have a solid budget

• Understand where your money is being wasted

• Ensuring you are not going into unnecessary debt

The goal is to stabilize and become self-reliant. To pay all bills on time and start creating opportunities. Priorities should be the basics:

• Food and Shelter

• Basic Utilities

• Transportation

• Insurance (health, auto, home, renters)

It's a foundational step that never goes away. You can advance to the next stage but must build on it. Ignoring your Survival stage is the quickest way to head down the pyramid.

Focusing on what you can control is critical in this stage. You shouldn't ignore your finances in favor of get-rich schemes or bogus investments. Trying to jump to the next stage is fine, but doing so by ignoring your Survival is a sure way to fail.

Stability

Balance, Security, Sanity, Enduring

Once you have Survival down, you jump to Stability next. At this point, you have no issues paying off your bills. You have excess funds that you allocate to more of life's pleasures. You tend to look at prices infrequently. You may have savings for large purchases like cars or downpayments for homes. You have a payoff plan for large debts like student loans.

Excess credit card debt cannot achieve Stability. Most people confuse the Survival stage with Stability. If you are paying off bills but going into debt each month, you are in Survival, not Stability.

Net worth should be positive. It's a break-even point. For some, getting to the stability stage will be a grind. Especially for those who mismanaged finances or fell into financial hardships. There is nothing wrong with not being here yet; it's a goal to hit.

At this stage, you should be able to set aside money for unexpected expenses (emergency funds) and have funds for large purchases. You should also be starting to save for retirement.

The best advice here is to be careful with income creep. The trap of letting your Survival stage expenses grow. Careful when:

• Buying a first home

• Eating out all the time

• Subscription services

• Buying a more expensive car

• Taking expensive vacations in debt

We all desire to appear well off. We play the status game at the expense of our future. It's a dangerous game that can put us back in the Survival stage.

Most people make it to this stage and feel accomplished. Yet, it's a hidden trap for those who struggle with Survival for too long. It's not the finish line. The next stage is where the growth happens.

If we get stuck in Stability, we will doubt why we work. It's a great feeling to make it to this stage. Without a higher purpose, it is hard to maintain. We succumb to increasing spending to feel something.

The goal here is to increase your income and maintain low survival expenses. Create payoff plans for more significant debts. Keep fun money in check. Start creating a path for the next stage.

Surge

Growth, Prosperity, Rise

The next stage is Surge. Here, the fun happens. It's where money works for you. Creativity and opportunity meet. It's the path to long-term wealth.

The path to being accomplished at this stage varies from person to person:

• Some go the real estate route

• Others, investment portfolio building

• Most start or buy a business

The path can be endless with creativity.

As before, you must have Survival and Stability before you make it to the Surge stage. It doesn't mean you cannot invest in previous stages. It doesn't mean you shouldn't work on a side hustle to increase income. In fact, you should do it to help fast-track you here.

This stage focuses on investing in yourself and your money-producing assets. At this stage, you have little to no debt, only low-interest debts like homes. Your mind should be free of insecurity so you can pursue more creative, profitable pursuits.

Your retirement should be maxed out every year to hit your goals. You can splurge on items within reason. Large purchases will be made with cash, not debt. Excess income should be funneled into the incoming producing asset of your choice.

The goal is to build long-term wealth while ensuring your Survival and Stability goals are met. At this stage, you cannot fall behind in negative net worth. Be careful with status spending.

This stage can last a long time—10-30 years—depending on your effort to increase income. The more you save and invest, the faster you can move to the next stage.

Sovereignty

Independence, Flexibility, Immunity, Liberty

This stage is where most people want to be when they retire. At this point, all Survival, Stability, and Surge goals are met. You can pay for everything you need and want and set aside plenty each month.

You can skip work for extended mental breaks or just not work. Your financial future is secured, and you are no longer tied to "working for a living." Net worth is in the millions, and you have no more crippling debt. An investment property mortgage or two.

This stage is also known as self-ownership. Some label it F.I.R.E. (Financial Independence, Retire Early), and many variations exist.

• Lean FIRE = 1m - 2m

• Traditional FIRE = 2m - 5m

• Fat FIRE = 5m - 10m

(* Assuming 5% returns per year. The figure can vary depending on inflation)

The amount required for each range varies depending on what you need to live off passive income. Or interest from accumulated investments. The desired lifestyle at this stage is essential. Some choose to retire early and decrease lifestyle spending to maintain autonomy.

Most will not reach this stage until later in life, if at all. The goal for most people is to have enough saved up to live life on their terms. The ultimate purist of passions without restraints.

It doesn't have to be a reality at 75 years old. It can be much sooner if you hit your milestone early. If you take life seriously and plan actionable steps along the way. I'm not saying save every penny you make. Find creative ways to speed up the process. Start a side hustle that turns into a business that turns into an empire.

Splendor

Abundance, Prosperity, Wealth, Luxury

Few will reach this stage. It is the point of ultimate freedom, reserved for the 1% of the 1%. It's where you have more money than you could ever spend. Some call it generation wealth, old money. You splurge on convenience and time-saving endeavors. All answers are correct.

At this stage, you are not concerned with what you spend your money on because you won't run out. You focus on legacy planning, ensuring the money left when you die is properly leveraged. Philanthropy is maxed out.

You do things because you can. It's no longer about money. It's about impacting the world. Think of the billionaire making a dent through investments. You are the pinnacle of status—not because you have it, but because you can have it a million times over.

There is only one path here: extraordinary value.

Building an empire, a monolith of a successful company, changing the world, and impacting humans at a core level.

Wealth exceeding 100 million. There is no cap at this stage.

There is no written guide to getting to this stage. Only stories of those who have done it exist. Learn from the greats.

You don't need to hit this stage to be considered successful. Some even see it as greed. The truth is that it's a lifestyle—a preference to be at the top.

I created this post because I was wrong about my stage, which led to bad decisions. Now, you have a framework to avoid my mistakes. Figure out where you are and plan to achieve your desired stage.

It's not a linear trajectory. The first couple of stages can be challenging to achieve for most. It varies depending on education, circumstance, background, experience, ambition, and hardships.

Here is a visualization of a possible wealth journey:

There is a snowball mechanic to it all. The compounding nature of wealth is powerful. It's the only way to achieve the higher stages without getting lucky.

Once you reach Surge, don't go backward. Make a motivated effort to get to the next stage of Sovereignty. Increase your income and watch your spending. The reward is the freedom to do what you want when you want.

Advanced from Survival mode. There is more to life than working and dying. Use this as motivation to achieve a life that you can enjoy.