How Much You Should Spend at Every Wealth Level

0:00 Foreign. My name is Adam Grizzmian. Hello, Victor.

0:07 Hi, everyone.

0:08 Thanks for joining us. Once again today we're going to talk about the wealth letter. So this is something by Nick Maggioli in his book. We're gonna talk a little bit about this. But remember when we did a video recently about how someone could have a lot of money in their bank account or in their net worth.

0:25 Yep.

0:26 But still feel insecure. Right. So I want to like, carry on the discussion into this context. The wealth leather and how this author does it is that at each level of wealth that you get to, there are certain things that you should feel comfortable spending. So I think some of the reasons why sometimes people feel like they shouldn't spend is because of this thing that we discussed in the previous video. They feel secure enough no matter how much they have.

0:53 And. And then sometimes it goes the other way around. People don't have the money, but they spend like crazy. So this wealth letter kind of comes in and says at this level, you should be okay spending this amount, this amount and this amount, and so on. And we're going to share that and then we're going to share our opinions on this. And then maybe when you're watching this, you can think about whether how this applies to you.

1:11 So why don't we go straight into the wealth leather and the different rungs that it has.

1:16 So I think if you were to look into the wealth ladder. Actually I came across this article by dbs. Right. But I didn't know it was from a book called Wealth Ladder. After that, then I found out. Okay. But I think DBS did a chart over here. You can see the different points in terms of your net worth in USD. And for instance, let's say you are at the level one, which is less than 10,000, your net worth.

1:41 So usually these type of people, they do like paycheck to paycheck. They are very conscious about the every dollar that they are spending. Right. And usually this level people, they, some of them I think probably less in Singapore, but I think more in the US they tend to be more in debt. Right. For this stuff. Because in the US there's a lot of loans, student loans and everything. So I think this is built in terms of the context of the US Market.

2:07 Okay. But in general, I think the. The levels are quite interesting because I feel it fits into myself also.

2:16 Okay.

2:16 Right. So level two is between 10,000 to 100,000 USD, where you, what they call you have the grocery freedom. Right. You can buy whatever you want at the grocery Store without worrying about your finance. So, so you don't break the bank and all this. Right. Then when you reach level three, right, is they call it the restaurant restaurant freedom. Right. You, you, you, you eat whatever you want, right. You can choose which restaurant you want. Then finally level four is what you call travel freedom, where you can, you can just travel without worrying about your finance.

2:46 Okay. Then level five, of course is house freedom. You can buy any house, not really any house in Singapore, but I mean you can generally, you know, do your upgrades and all this and it's not stretched to your bank. Right. It's very comfortable for your upgrade and all this. And finally, usually at a higher level, level six people tends to do record philanthropic freedom. Right. That means you, you can use your money to like impact other people's life and all this.

3:11 Okay.

3:12 Yeah. So I think the, the, the, the thing about this is at different stage, right, we, you require to do different things, right. To reach different level. So as the ladder goes up higher, it gets harder and harder. Yeah. And I think I read along the way is that most people, right. Will start at level four. Yep, yep. Yeah.

3:31 Yeah. And I think one thing I want to point out is that this is based on liquid net worth.

3:35 Yeah.

3:35 So maybe some of you may have a net worth in 1 million, but it's stuck in your house.

3:39 Yeah.

3:40 You may not feel that, that freedom to spend because everything is stuck in your, in the bricks that you live in. So it points out is liquid net worth. And I really like what Level 6 is when it says what are prices? Right. So I don't think not, not many of us will reach that level. I think many of us will be happy at level four level, level five. So in your experience, is it true, like if you're at this certain level, you feel that it's, it's kind of like applies to you.

4:08 I think for me personally it really applies as I look at the table like, oh wow, this is very true because when I first started, I remember as a young fresh graduate, I don't really have a lot of money, right. Because as a student usually have a limited allowances and as I get my first job and then I start to stay save up. But at the time, during the first like initial years, I remember that I was like trying to save every penny that I can or I could at that point in time.

4:35 Right. So I would like be comparing prices at time when I go to groceries and I will look at like, but when I buy, I want to buy certain, like let's Say a shampoo, right. I will go into those shop that are around the corner. It's a lot cheaper. So usually it's like what dollar?

4:50 Those value stores?

4:51 Yeah, value stores. Yeah, yeah, yeah. And that's like on how I spend and I, I'm very conscious on like every dollar saving that I can do. Right. And at that level, I still remember that I was very hesitant to take taxi. So this is something that I always like. Every time I take taxi, I look at the meter, I was like jumping, right. Because I think relatively to the net worth that I was starting out at the point of time, it was a bit, you know, all this matter.

5:16 Yeah, right.

5:17 And as I work in the workforce for longer, the longer I work, the more money I save up and the more I invested also. And then of course I started to see myself maybe going to the restaurant more. Right. And even going to the supermarket when I do my shopping. I, I'm less concerned generally over time. Okay. So it's, it's something that when I look at it, it's like, oh, it's really quite applicable to I think, you know, Singapore context also.

5:44 Right. This category of spending, depending on your liquid net worth, I think is quite relevant as you move up the ladder.

5:50 Okay. So you feel that at level. I think. Can I confidently say that all of us at level four now, Can I say that? So at this point, definitely restaurant prices, I just almost eat whatever I want. But the thankful thing is I actually like hawker food. So I save a lot of money that way. I love my char kway tea or my chicken rice. It's not as if I go to a restaurant all the time.

6:13 I know some people do that. That's really expensive. But when I do go to a restaurant, I just order what I want. That's restaurant freedom, travel freedom. I think I still think about prices a little bit. Like definitely I love for certain flights, definitely business class, too long. I just cannot take it. This body at this age cannot do it anymore, 100%. But I still save it if I can. For example, I go to Japan, I will just fly zipper full flat, you know, you know, there's about.

6:43 It's quite reasonable. It's actually quite cheaper.

6:45 I think it's, it's not about the flight and all this. Like, it's when you go overseas, are you willing to spend? Yeah, right.

6:51 Oh yeah.

6:51 I, I personally, I see myself going overseas. I mean my wife and I, when in the early days we travel. Okay. This is the budget.

7:01 So every day you make sure you

7:02 stick it Stick to the budget and spend, you know. But I recently went to Shanghai or just.

7:08 Just pen only.

7:09 Just tap on it. I cannot even see. You know, it's just scanning and scanning and.

7:13 Yeah. You know, and it was okay. You didn't even feel.

7:15 It's okay. I didn't. Because I. I don't think you'll break a bank or something like that.

7:18 Right.

7:19 So I really feel it's quite true in terms of this level. But of course, I. After I look back, I feel it's more for like, if you progress slow and steady, this is supposed to be your level. Right. But if you are someone who's been doing business, I think immediately maybe from a small level, you will jump to

7:37 the higher level or you might have a windfall.

7:40 Yeah. So it really depends on what you're doing. But to me, I think this one covered like majority of the people, but not. All right. So we have to really take note about it.

7:51 Okay. Yeah. The other thing, I want to. The other thing, why? I mean, Victor was the one who shared the article. I thought it was a really good article. And then I wanted to share that because like I said the previous video, we're talking about how people have a lot of money, they're millions, and they are just reluctant to spend. But this kind of gives you a guide, like, hey, if you're at this level of net worth, it's okay.

8:07 Just spend on your restaurant choices. And if you're at this level of net worth, just travel. It's okay to spend. And I think it kind of tracks with our personal experience. You kind of feel like we didn't read this article years ago. We just kind of like built our net worth. And then we realized at this certain point, you actually don't really care about prices at those things.

8:28 Yeah. I think the most important thing is what this level is trying to show you is that you are spending right. Prudently according to the wealth that you have. Right. It's not like you level two, but you spend level four, level five. That's crazy. I mean, if you are at the bottom level and you spend up, that is crazy.

8:48 Yeah.

8:49 Okay. But of course there's cases where you're at the top level. Like my people that I know, but they are spending at level two.

8:55 Okay.

8:55 Right.

8:56 Yeah.

8:56 So. So I mean from the top and going down to the level to spend at the bottom. Okay. But from the bottom level, you try to spend at the top level. That's crazy.

9:06 Maybe it just give example like Warren Buffett. Right. I think we all know that he's a multi billionaire world richest man or second richest depending on which year you're looking at. Warren Buffett. I think he's been living in the same house I 10 years ago I went to Omaha and I visited his house and this is exactly the same house that he's been living in for a long time. Even though he's like multi billionaire, he could afford a mansion or whatever or in Singapore context we call it gcb.

9:32 He still live in the same house. Right.

9:33 And I don't see Ferrari, I only see one truck over there.

9:35 Yeah, I think he drove a Japanese car also.

9:39 Right.

9:40 So he's at definitely at level six. But he spent like what, level three? Level two? Level three, maybe.

9:48 I don't think he spent level two. I think probably he's around level four, I think.

9:52 Yeah.

9:53 Or level three.

9:54 Level four, yeah, yeah, yeah. But the way he's lifestyle, the way that he spread out the message and the way he leaves, I think to me it's quite frugal. He's still eating his burger every day

10:02 and there's nothing wrong with that. Is it your choice? And like Victor said, if you're at this level of net worth and you spend below it, that's fine. But I think the other way around, if your net worth is like 100,000 and you're spending like business class all the time. Yeah, it's quite scary actually. Very scary. So I think this is a very good guide for anyone trying to give you like a ballpark figure of how you should, how do you know, free up your spending.

10:27 Yeah, but I, I also want to be a point is I think, I mean I first saw this was on Reddit, right. And I was reading through Ready and actually there's a com on this article. Then after that I read through the comment already. I think there's one person that says very true is this Reddit comment. Say that the logic is there, but it's very general and everyone has their own ladder. So at the end of the day you really have your own ladder.

10:55 Right. So then he put a line says by right, I should care, I should care about vacation and restaurant less, but I'm a cheapskate.

11:05 I think, I think that's the point. I mean it's okay, you follow the ladder, but if you're going from high to low. Yeah, okay. Yeah, but if you apply that, it's your ladder and I'm going to spend, I'm here and I'm going to spend there. Yeah, not a good recipe for Success. But any drawbacks for this wealth ladder? Like, it's like certain things you need consider if you want to use this.

11:25 I think it's really depending on your age also, right? So if, let's say you have 1 million and you are 60 years old or 70 years old, right? So the things you spend is very different also, right? So it's really age dependent. But I think this one is when they build it, right? It's built according as you progress in

11:48 age, you're supposed to go higher.

11:50 Yes, Correct. Right, Right. So let's say if you are like 60 or 70 years old, right? I mean, yes, you have the restaurant freedom. But you may not want to do that because by 60 or 70 years old you want to eat a bit less or eat a bit more healthy and do more home cooked food. So it's really depending on the stage you are in also, right? But I'm saying that it's is more like along the.

12:12 Like you maybe you start from 20s, then you see your letters. Where are you now?

12:15 I think it's a good point because if you have 1 million liquid net worth at 60, you might feel it's not enough for retirement. But you have 1 million net worth liquid at 30, you feel like, wow, I'm on top of the world.

12:26 Yeah.

12:26 I already have 1 million at 30, I can probably grow it to 2, 3, 4, 5. I still have active income. Yeah, I'm going to spend a bit more. But at 60, 70, it's like, oh, I don't think I should be more careful with my spending.

12:37 Yeah.

12:37 So it really depends on your station in life as well. One million is very different at different ages, Correct.

12:43 I mean again, if I give the same 1 million to a 20 years old, right? As much as you say by right, if you go by the normal working route, the net worth should be according to the level and your age, right? If you can, if you know, if you work and all this, right? So let's say usually at level, level three, right? Where you have restaurant freedom. Okay. So this one don't happens in 20s, right?

13:09 It usually happened at the later age. But if you're at 20 years old, you have your 1 million, right? As much as you want to follow this somehow because you are at 20s, I may not. You may. Some people may not have the right capacity to maintain the thing. Maybe at 20 I got 1 million, I will spend a bit more, I go travel even more, I go, what? So by the time you go until later, partial stage, right?

13:31 Instead of building your ladder up you may go, you may go down, you

13:34 go down, you know.

13:35 Right. So, so it's also to be conscious where you are and maintain the, the spending. So let's say you're at level three, right? And you are 20 years old, right. You should not be, you still can travel, but may not be the freedom that, that you want. Right? But then again, it's very hard to say because now I can say it very easily. But when you are, when I'm 20 years old, I also don't know. I also was like looking at flashy cars, material things.

14:05 So it's very different the mindset also. So it's very hard to say. I can say here because I've been through it, but the person at 20 years old may not have been through that.

14:14 Personally, before I come across this wealth ladder, I follow this rule called the rule of 0.1% and 0.01%. Okay, so this rule, I'm not sure whether who come up with it, but there's a rule this is like quite popular in like a personal finance space. Basically if your net worth is certain amount, right. And the thing that you want to spend on is not more than 0.1% of their net worth. Okay, let's say if you, let's say if you are worth let's say 100 million and you are thinking very hard whether you should splurge on a five star hotel that will cost you maybe $1,000.

14:54 So a lot of time people will think very long, should I spend, should I not? Should I spend? And sometimes after they spend, they feel very guilty. And by following this rule, it's sort of like telling you that don't feel guilty about it because it's only just 0.1% of your net worth and you should splurge it once in a while because if you really want it and you want to reward yourself for working so hard, you, you can just follow, stick to this rule.

15:15 But if your net worth is just $10,000, of course that $1,000 weekend hotel, maybe at like San Regis or Capella, okay. It's going to cause you a bomb, just a big part of your wealth. Okay, so this is a world, this is the, the rule that sometimes I follow and I just calculated, of course the 0.01% is more like daily rule limit that you should set for yourself. Okay, so let's say we are worth $100,000, right?

15:42 I think it's okay to eat at the restaurant 10, $15 nowadays. Yeah. So, but you don't feel guilty About.

15:53 I mean, go to the food court. Yeah, yeah.

15:55 Usually if you are still below. According to this rule, if you are below $100,000 net worth, then of course go to food court more often. Once you exit above that, then you can start to go to restaurant.

16:05 Yeah.

16:06 Right. So this is actually very close to like wealth ladder Safe.

16:10 Right.

16:10 And you don't want to feel guilty about it because sometimes when I in the past, you know, when I used to spend on certain things, am I overspending it? You know, I think I feel guilty sometimes.

16:19 Right.

16:21 So by replying this to actually just a fraction of my net worth, then I shouldn't feel guilty. I shouldn't like spend so much time just to.

16:28 Yeah, yeah.

16:29 Think about this.

16:30 I think a lot of people spend so much time learning how to safe and all this like, I think also important to learn how to spend also. Right. I mean, at the end of the day, the money, you cannot bring it to the afterlife. Right. So what's the point of having so much money but you don't spend? Right. So. So you really have to really learn how to spend. I think I also starting to learn how to spend money now.

16:54 Okay.

16:54 Yeah.

16:55 So I think your, your wife is helping you with that. I mean, you have a lot of money. It's great. It's like you reach a new high school, it's just a high score, but along the way you should enjoy the

17:08 journey, the bits and pieces of life.

17:10 Yeah. Yeah. So anyway. Yeah. You want to share something?

17:13 Yeah. So I. I always like, feel that sometimes, of course, like, you know, when I have kids, I bring my kids to, to travel. It's gonna cause a bigger bomb.

17:21 Yeah.

17:21 Because you are not just. Not just me and my wife. But it's like multiplied by four. Right. And. But the thing here is that it's not just about like spending actually. So the memories they're going to create, all of that trip when they are like two years old, four years old, it's going to stay. I'm not letting them travel, spoiling them. But I'm more like I'm creating memories for myself when I'm old enough. And I remember those days while they were traveling.

17:50 They were so cute.

17:52 So those are the memories.

17:53 I record everything.

17:53 Yeah, man. Can I share it with everyone? Basically, when we travel with Rusman, he's got drones and cameras. When we travel with him, we get documented, we can remember stuff. But he really does a fantastic job at capturing the memories for his family. Primarily because I hope you're not capturing photos of me no, no, no. And then he actually edits the video.

18:12 Correct. Correct.

18:13 And we get to see those videos as well.

18:14 He's my free videographer.

18:16 Yeah, yeah, yeah. So when. If Audrey is with us, she's not working.

18:20 He's working, I'm working.

18:22 Yeah. And. But yeah, it's like just creating memories.

18:26 Memories when there were like two, three. It's very different.

18:29 Every year is different.

18:30 And to be honest, our till date, I still watch back some of the videos that Usman make. I mean, it's very happy memory.

18:38 A lot of times I think life is not just about like spending. I feel guilty about it. It's more creating memories with your loved one. I think that's how I feel about it. And this rule, this wealth ladder and the rule of 0.1% or 0.0 or 1% could kind of like help you with spending. Right. Without feeling I think and also regret

18:58 without spending too much because there's a limit to it. Yeah. So yeah. Like the wealth leather and there's like 0.1% rule gives. Gives you a cap of what you should be comfortable with based on where you are. And I think I like the wealth leather one because it just kind of like tells me, okay, at this restaurants I shouldn't care so much.

19:15 Yeah.

19:15 You know, and maybe travel I'll care a little bit, but actually it's fine.

19:18 Yeah.

19:18 You know, of course I can't afford any home and I'm not at that level yet.

19:22 Yeah.

19:22 Yeah.

19:22 But yeah, it really tracks with.

19:24 Yeah.

19:25 My personal experience.

19:26 Yeah. Also there's one thing that is written in the book that I think is very interesting is that they say that if you want to go up the ladders, you cannot be just working. You need people who are above ladders, like the money tend to work for them. Right. Especially if you want to go to 4, 5, 6 up the ladder. Most people start at 4. Right. But in order to. From 4 to 5 to jump.

19:50 Right. Most people is either they do a lot on investment or they do. They are business owner. Right. Investment can be securities or properties and business owner. So that's. This is the playbook already. That's. There's no other playbook. Unless you one day you buy total

20:06 or maybe your extreme high flyer.

20:08 Yeah.

20:09 You get paid millions.

20:10 Yeah. But that's not. But business based on. I think.

20:12 Yeah.

20:13 Most average market. Yeah. Mass market. Yeah.

20:15 Yeah.

20:16 So you really have to. If you want to move out the ladder, you really have to invest because

20:21 you cannot trade your time for money.

20:23 Correct. There's a limit yeah. And it's very consistent among the 456. Yeah.

20:27 Okay. So, yeah, we just want to share this with you. I think it's a very, very useful guideline. Yeah. Especially if you're wondering, how much should I spend? Should I spend as much? Am I spending too much? I think this is a very quick way, just give you a ballpark figure of what you should care about. Yeah. Things that, you know, you say, oh, maybe this is this I'm spending too much or I'm spending too little.

20:44 You can adjust it. But like I said, everyone has your own leather. It's up to you. Still best if you're not spending too much.

20:51 Right.

20:51 So there's a wealth leather. Do check it out. We'll put it in the links in the description so that you can read about it. And then if you want to, maybe you want to buy the book. But I think this is very, very useful. Yeah.

21:01 Yeah.

21:01 Okay. So with that, my name is Adam Rusman. Victor, thanks for joining us. Any questions or you want to share your opinion or experience with this and whether it tracks with your personal experience, Put that in the comment section. Maybe you agree, disagree. We'd love to hear from you and

21:13 let us know which level you are and what kind of spending you are at. Yeah, so I think most Singaporeans should be like maybe four or five, then

21:19 they are spending maybe one level six will share and then like make friends with you. Okay. So yeah, share, share your experiences. If you like this round table, please hit the like button. It will help us so much. And of course, subscribe to our channel. Many more round tables coming up and we'll see you again.