Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall?

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Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall?

The

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, which The Harris Poll conducted for the National Foundation for Credit Counseling, found that 53% of people felt like they were encountering financial setbacks regardless of what they did.

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According to money expert Ramit Sethi, feeling trapped in a financial situation isn’t uncommon, but you can start getting yourself out once you realize where you are and know where to put your focus.

In a

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, Sethi detailed these seven levels of wealth and provided clear steps on how to make it to the next level. Consider your finances to see where you fall.

You’re in this lowest stage if you struggle to pay everyday bills, feel terrified about handling unexpected expenses and don’t know much about your

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. You’re also lacking stability and peace.

Sethi recommended starting with a close look at your finances, including calculating your gross income and identifying all debts and expenses. You’ll also want to determine your housing expenses and figure out your monthly savings and

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contributions, which Sethi encouraged making even if you can only dedicate a small amount.

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Next, you should reconsider and get rid of any money beliefs that could be keeping you stuck in survival mode. After that, work on making more money to get more margin.

When you reach this level, you’re probably still in a bit of a financial pinch and unsure about

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, but you’re not struggling to survive or running out of cash for bills. Sethi also mentioned that still having debt and facing difficulties saving regularly are possibilities.

His advice for this stage included having a “conscious spending plan” and automating your savings and monthly payments, which he said was essential for leaving this stage. He also suggested stashing away 5% of your after-tax income into investment and savings accounts, which is a small amount that can eventually add up to a large amount of wealth.

Next, focus on working out better rates on any high-interest debt. That saved interest can go toward investments and savings. Finally, Sethi said you need to know your main “money dial,” which he described as the main thing you’d like to spend money on without guilt.

Security means you have some peace and confidence about your financial future. Some signs include awareness of your spending and income, no or manageable debt, regular investment contributions and an emergency fund.

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Sethi recommended continuing to put money in your

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until it has three to six months of your typical expenses. He also suggested doubling your investment rate to 10% of your after-tax income and identifying your crossover point, which is when the money you’re making from investments is more than your monthly expenses.

“It could take you 15 years or 20 years from now, but when you know that target, it shows you how quickly you are moving towards your goals,” Sethi explained.

This is the first stage that Sethi said is rarer for people to reach. You’re here when you see consistent investment growth, have key dates for your wealth targets and have a strategic mindset.

Sethi recommended investing 1% more each year to keep up your growth. So, if you’re starting at 10%, you’d be at 15% in five years. He also mentioned trying an investment calculator to see how your wealth would grow over time.

Plus, look at your money dials again to make sure you’re spending intentionally and consider how your money beliefs are now different.

Once you’re financially free, you can finally take risks and do things you want to do, like no longer work at all, travel the world or pursue your dream business idea. This is also when you can look years out when making financial decisions.

Sethi said to consider what kind of life you want from the freedom you have. That way, you can make the right decisions to get there. He also recommended choosing the amount of money you can spend on things without worrying about it. You can be flexible about that number as your wealth grows.

“The point is to consciously shift your mindset from scarcity to freedom,” Sethi explained.

This is a major milestone where you’re making stable money, enjoying investment growth and using your wealth in ways that make your life satisfying. Sethi said it’s also a time when you work with financial professionals and give to others.

Since you’ve got the money and flexibility, Sethi recommended choosing areas in your budget where you can spend without any questions. He also suggested focusing more on helping others, which doesn’t always have to involve money. A

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article noted that generosity can even reward you with better health.

You’ve reached the top when you’re completely financially independent and shift your focus to using your wealth to benefit other people and do big things.

Sethi suggested thinking about what you’d like your legacy to be. For example, maybe you decide to regularly dedicate money to a charity that helps your community. Other moves Sethi addressed are formally planning your estate, passing down knowledge and being around like-minded people.

“This is where money becomes a highly influential tool to build something truly meaningful,” he added.

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