The Different Levels of Wealth Explained in Simple Terms


levels of wealthRecently, 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.

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 valued 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 the 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?






  1. I like the 5 levels of wealth breakdown better. I believe I am at level 4 already (although I have never flown business or first class so if that is part of the criteria than I haven’t made it fully into that level).

    I have read those studies as well regarding maximum happiness at around 95K/yr. When I first started planning for early retirement and using the 4% rule I had figured I needed $5 million (or $200k/yr). After I paid off my mortgage and student loans and became debt free I actually dropped down annual drawdown goal and now have it settled at $125k/yr which I think could provide a wonderful lifestyle especially since I am in a LCOL area.

  2. We’re at Number 4. While we may pay attention to what groceries cost at the store or food costs in a restaurant, when we go on vacation, we specifically don’t pay attention to the price. We want to relax and take a break from carefully managing our money, and vacation is the place we do it.

    That being said, I think that you can be someone who has a high income and doesn’t really pay attention to how much you spend on anything, and even if you don’t go into debt, you never accumulate net worth. You’ll just have to work forever, because you’ve never managed to save enough to retire.

    I know plenty of frugal people who still sweat the small stuff, even though they no longer need to. That’s because they understand the concept of trade-offs. If they pay careful attention to not spending too much at the store, then they’ll have more to give, take vacations, or invest. Maybe they don’t need to shop at Aldi anymore now that they’re worth $5M, but they still do, because they understand the power of those trade-offs so acutely.

  3. That is an interesting concept. For my wife and me, we have more money than we’ll ever spend. We’ve already given away a significant portion of our net worth and will give the rest to our kids. I’m earning more than we spend even in retirement with my hobby part time consulting. But I still see buying business class tickets as wasteful when the economy seats are plenty big enough for us and we still check menu prices before we order. I don’t know how you switch off being naturally frugal just because you have wealth. I’m not sure I would even want to learn to spend that much money, we live extremely full lives now and want for nothing.

  4. Great concept. I still look at prices and shop at Target. I have yet to fly business/first class either. I am considering a level 5 move. I have started thinking about just giving my house to my niece and buying a new smaller one for myself. I have not done this but am considering it.

  5. Nice post. Reminiscent of Maslow’s hierarchy of needs, and similar to something that I touched on in a formative post on my own blog. Breaking up this journey into manageable chunks is so important. I’m unsurprisingly squarely in level 1, and there’s value in remembering that so many people in the world aren’t even there.

Comments are closed.