As mentioned in my previous review of the book, the full name of Getting Rich is “The Complete Idiot’s Guild to Getting Rich“. But also as I mentioned before, don’t be fooled by the title! It’s a good book!!!
Today, I’m going to talk about a portion of the book that I identified with and which influenced the way I approached my financial habits with respect to wealth creation! The most powerful portion of the book for me was “The Five Levels of Wealth” (also called Waschka’s Wealth Levels).
Before reading these levels, let me explain the book’s definition of TSG.
Target Savings Goal (TSG) is simply the amount invested yearly, so that after so many number of years of continual contributions, your investment nest egg will last (an hopefully outlast) you when you retire (or for some other goal).
The Five Levels of Wealth
-
Wealth Level 1
You are able to maintain your standard of living and at the same time, save enough money to achieve your Target Savings Goal (TSG), the annual amount you need to save to meet your needs at retirement. -
Wealth Level 2
Your portfolio is large enough to produce, on its own, a total return each year equal to your TSG, as well as keep up with the inflation. -
Wealth Level 3
Your portfolio produces a total return large enough to cover your desired lifestyle and inflation. -
Wealth Level 4
You have accumulated enough assets to produce a total return sufficient enough to substantially increase your current and future lifestyle while at the same time keeping up with inflation. -
Wealth Level 5
You have accumulated enough assets to produce a total return well beyond what you would ever spend. You now have the option not to work, raise your standard of living, and bestow large charitable gifts.
Some level (especially Level 2) has sub levels within them. Currently I am withing Level 2, my got is Level 3! Anything above Level 3 is just gravy 🙂
Wealth level 2 is special because it has sublevels until you get to Wealth Level 3!
Thanks for listening to me take a small trip down memory lane…
-MR
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I like the wealth level idea. This explains why some people are comfortable retiring extremely early (because they are okay with wealth level 2), but others may be more conservative and opt to work until they reach level 3.
I normally don’t read book reviews, but this was interesting.
This book, and “The Millionaire Next Door”, really helped shape my thoughts on becoming a millionaire. Originally, I think it was possible, but then after reading both books, I started believing!
Hope and Believe are powerful tools, now I just need to get there 🙂
I don’t normally read book reviews either Sandy!
I don’t know where I am at because I don’t know what rate of return to expect to see if my portfolio would return enough to meet my TSG. Not to mention I plan on being a traveling fool in retirement, so my expenses are gonna be high!!
Therefore, I am probably a 1!
I’m thinking you are higher than 1, it’s all based on simple math 🙂
I’m still in Level 2 (there are multiple stages here)… But hopefully in 10 (erh 9) years I’ll make it to level 3!
Oh wait, I misunderstood the post. I thought my portfolio needed to generate enough to meet my annual expenses in retirement!
I guess I am a 2…
Yeah, those are short Level descriptions above, the book goes into much greater details about each level…
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Interesting concept, the Levels of Wealth. I like this approach.
That 5th level would be amazing, wouldn’t it?
I think I’m in Level 2…maybe. Depends on time horizon. Maybe I’m more on the border of 1 and 2, based on personal expectations.
Yes! Level 5 would be very incredible! So incredible I couldn’t even imagine being there! I’m sure it would be awesome!
I’m definitely in level 2 (although when the market crashed in 2008, I was almost back to level 1).
The only problem I see is my current TSG won’t be my TSG when I retire from the rat race. Right now my TSG is pretty big, but later it’ll be a lot smaller.
Anyway, I think I’m around 2.
Actually the TSG is based on the future value of your Savings Goal, the author did this job correctly 🙂
I left that bit out because it’s a bit more complex, but authors do a good job of simplifying it in the book…
Interesting concept on the wealth levels. Wealth level 5 would be really nice to achieve. I’d always like my money (or any other asset) working hard for me.
But, I’m still in level 1 and I still have a long way to go to get to 5.
I honestly don’t believe I’ll ever make it to wealth level 5 (Gates and Buffett hang out at this levle).
I’d be more than happy with wealth level 3 or 4…
For the last 10 years, I have found discussion of the levels of wealth quite intriguing. I haven’t heard/read it described quite this way before. This is good stuff, and I think level 5 is achievable.
This book combined with “The millionaire next door” really made be believe that it’s possible to become financially independent some day.
So in many ways the 2 books gave me hope and a generic set of instructions to follow! I’m doing good, not great but good 🙂
Interesting about levels… Made me think that I am not even at first level yet… When I get rid of my debt then I definitely will be at level 1. Hey, I will make it my 2011 goal!
It took me a few years to finally be saving my TSG. Without a decent income level (at least the median income), it’s hard to save that money for the TSG…
Borrow the book from the library and see what you think. 🙂
Other than the TSG, it’s written in a very readable fashion which I think is great…
Almost everyone has the chance to be rich as long as you spend less than what you have earn, earn more than you spend, live within your means, saving money and investing for business and at the end you will be able to achieve your goals.