The Wealth Ladder Framework

Reaching a million-dollar net worth is a significant achievement, but finance expert Nick Maggiulli argues it can be a “dangerously misleading” milestone, creating a false sense of security. He joins Michael to reveal why your next financial moves are far more crucial than your last. Drawing on extensive data, Nick uncovers the surprising realities of wealth accumulation, highlighting the critical role of business ownership, strategic decision-making, and long-term consistency. If you’re a business owner aiming for true financial independence, Nick offers a fresh perspective and a practical roadmap for the journey from $1 million to $10 million and beyond.

In this episode, you will learn about:

• Why a million-dollar net worth can be a misleading financial milestone.

• The six distinct levels of the “wealth ladder” and how financial strategies must adapt at each stage.

• The surprising math behind the journey from $1 million to $10 million for wage earners versus business owners.

• Why business equity and entrepreneurship are the primary drivers of extreme wealth.

• The “1% rule” framework for evaluating new income opportunities and prioritizing high-value clients.

• How to strategically approach selling your business, avoiding forced sales and planning backward from your idealized life.

• Key financial and business metrics to benchmark your progress on the wealth ladder.

• The immense power of compounding, consistency, and outlasting your peers in building wealth.

• How to navigate the AI era by identifying automation-resilient business opportunities.

• Understanding inflation and the “4% (or 5%) rule” for sustainable long-term financial security.

Welcome to the Consulting Success podcast. I’m your host Michael Zipursky, and in this podcast, we’re going to dive deep into the world of elite consultants where you’re going to learn the strategies, tactics and mindset to grow a highly profitable and successful consulting business.

Before we dive into today’s episode. Are you ready to grow and take your consulting business to the next level? Many of the clients that we work with started as podcast listeners just like you, and a consistent theme they have shared with us is that they wished they had reached out sooner about our Clarity Coaching Program rather than waiting for that perfect time. If you’re interested in learning more about how we help consultants just like you, we’re offering a free, no pressure growth session call. On this call, we’re going to dive deep into your goals, challenges and situation and outline a plan that is tailor made just for you. We will also help you identify where you may be making costly and time consuming mistakes to ensure you’re benefiting from the proven methods and strategies to grow your consulting business. 

So don’t wait years to find clarity. If you’re committed and serious about reaching a new level of success in your consulting business, go ahead and schedule your free growth session. Get in touch today. Just visit Consulting Success – Grow to book your free call today.

Nick Maggiulli is the creator of ‘Of Dollars And Data’ and COO at Ritholtz Wealth Management. He started blogging in 2017 as a New Year’s Resolution, combining his passion for personal finance with data-driven insights. This journey led to his role at Ritholtz and the release of his bestselling book, Just Keep Buying, which has sold over 100,000 copies globally, and his latest work, The Wealth Ladder. Nick’s work, featured in WSJ, CNBC, and Money, empowers you to make better financial decisions, act smarter, and live richer by understanding markets, managing risk, and increasing long-term wealth.

Connect with Nick Maggiulli

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Reaching a million-dollar net worth is a huge milestone for any business owner. But what if that milestone is dangerously misleading? It can create a false sense of security. And the reality is, even if you continue on the path of saving $100,000 a year, you are looking at another 28 years of grinding to reach real financial independence. My guest today is Nick Maggiulli, who has studied this exact problem. He is an expert who uses data to show why your next financial moves are more important than your last. So do not go anywhere, because he is about to give you a new roadmap for the journey from $1 million to $10 million and beyond. And it is probably not what you think. Hey, Nick, welcome.

Thanks for having me on. Appreciate it.

Yeah, I have been looking forward to this conversation. This is a different conversation in the sense that the Consulting Success podcast, we tend to interview and focus on successful consulting business owners or those who are working up the ranks to really grow their businesses. But you are not a consultant, you are an author. You are an expert in the world of finance. But the reason I want to have you on is because you have written several books on the topic of investments, of around wealth, and understanding finances. And as we will get a lot more into, you do not just share your opinions or perspectives only from what you see; you back it up with data. And that is what always stood out to me as I have read your work.

And I thought it would be important to have you on and to get your thoughts and what you are seeing in the environment and what you have observed with other professionals who are working to build businesses or to grow their wealth. Because the fact is, most people get into consulting or get into almost any business because they are after freedom. And whether they say it is related to income or not, I think we can all agree that there is an element of freedom that is in direct connection to having the money to enjoy that freedom or to create that level of freedom. So, with all that being said, let us start by talking about the wealth ladder. You have this concept; you have done a bunch of work on the wealth ladder as a roadmap for building net worth. Can you tell us and just explain what is the wealth ladder? And then for a consultant and a consulting business owner, how might they think about that framework in terms of being a high-income earner, or becoming one, or growing their wealth?

[02:36] – Wealth Ladder Levels

Yeah. So the wealth ladder is a new framework that basically says that you need to change your financial strategy over time as you build wealth. How you make income decisions, how you make investment decisions, how you make spending decisions can change. For this podcast, we will focus mostly on the income and investment decisions. I think for the most part, we can talk spending, but that is more personal finance now. But in terms of your audience, it is just saying, “Hey, the things you used to do for money at one point may not be the things you are going to do later.”

And so some of your listeners here have already done this transition naturally. When you first start a business, you are doing everything. And then at some point you are like, “Okay, I am going to hire someone to do that so I can buy back some of my time,” and you start slowly growing the business. You start moving certain things off your plate. And you are doing that naturally in a business. I am saying that same logic applies to your wealth and how you think about all sorts of things in your life. And so just take that logic of, “At some point, I should not be doing this thing anymore.” Just like you probably have certain clients you maybe would have taken on when you were smaller. And as you get bigger, you are like, “Actually, this is not as profitable or it is not really the best use of my time.” And so it is thinking about that within your personal finances, but it can be applied to many things.

The analogy I give in the intro is, “Just like a fitness instructor would give different advice to a morbidly obese person versus a well-trained athlete, the same thing is true of your financial advice.” And that is what the wealth ladder is trying to do, saying, “Hey, you are on one of these wealth levels.” There are six wealth levels on the ladder. I call them levels, not rungs, because I think rungs just do not sound as good. So it is all marketing stuff. I can talk through those levels and then we can get into that.

So level one is less than $10,000 in net worth, and I use household net worth because that is what all the data is. So level one is less than $10,000; that is about 20% of U.S. households. Level two is $10,000 to $100,000; that is also about 20% of U.S. households. Level three is $100,000 to $1 million in wealth; that is about 40% of U.S. households. Level four is $1 million to $10 million in wealth; that is about 18% of U.S. households. And then the top 2% is $10 million to $100 million. And then $100 million-plus, and $100 million-plus has about 11,000 individuals in 2025. That is what the latest data shows, so there are not that many people in there. And so I put level four and five, or I am sorry, five and six together, because it is just such a small percentage of the population. But that is just a high-level. I wanted to come up with a framework that was useful. I know it is arbitrary: why do a log-10 scale? Because it is easy to memorize and it makes it very useful. But then the data does actually fit it quite well: 20%, 20%, 40%, and then almost another 20% in the last bucket, basically. So that is my way of thinking about it, and that is how I frame thinking about wealth and how you’re going to think about how decisions will change over time.

Why is that important? I understand the ladder, and it is surprising to me to hear that we have about 40%, or there is about 40% in the U.S., I think you mentioned, that are less than $100,000 in net worth, right? So we are not talking about income, we are talking about net worth. I mean, that shows there is a really big inequality or a gap there. But why would it be helpful for someone to understand that there are different levels and how should they frame their decisions differently, or what should they be thinking about? So let us just take the example of somebody who maybe has a million-dollars net worth today, but they are looking at where they want to get to, and they know that they want to reach $5 million or $10 million in net worth. What would change? Of course, they need to make more money. Of course, they need to save or invest beyond that. What have you seen is important, or where would the light bulb go off for somebody to think about things a little bit differently?

[06:24] – From $1M To $10M: The 28-Year Math

Yeah. So let’s use the example of someone with a million-dollar net worth and they want to get to $10 million. So if you are a typical wage earner, you have a 9-to-5 job. I am not talking about business owners, just real quick, we will come back to consulting owners in a second. But let us say you are a wage earner, a 9-to-5 job. If you hit a million dollars and you want to get to $10 million, let us say you save $100,000 a year after tax, by the way. So that is a considerable sum of money. And your wealth is growing at 5% a year, we will say inflation-adjusted, just to make the math easy. Even if you start with a million, save $100,000 a year, 5% a year, how long does it take you to get to $10 million? The answer is 28 years; it takes almost three decades.

And this is, once again, this is 28 years after you got to a million, which is not easy. No one just wakes up with a million dollars, right? So to get to a million probably took you a decade or two. So after getting to a million, you have to do another 28 years of this before you get to $10 million. So when you think about that, you are like, “Wow, that is a long time of grinding.” And saving $100,000 a year, that is not easy. You are like, “Well, Nick, I am going to make really high income. I am going to save $300,000 a year.” Even if you are saving $300,000 a year, start with a million, 5%, it takes you 17 years to get to $10 million. So to get to that level of wealth, it is very difficult to do that through a traditional salary job even if you have very high income. Most of the people that get past $10 million, besides celebrities, athletes, entertainers, most of those people are going to be business owners because they are having an exit of some sort that propels them past $10 million or gets them even deep into level four many times. And you are saying, “Well, I know doctors.” Well, yeah, a lot of doctors have their own practices, or lawyers have their own practices, etc., and so that is exactly the thinking here. And so I have a chart in the book, and this is in the third chapter, which talks about what percentage for each wealth level, what percentage of their assets are in which asset classes. And so I do not know if this is showing right now, but basically, I…

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I just pulled up on the screen what I thought was relevant to what you are saying, because, yeah, let us just talk. You could keep on that train of thought and explain what we are looking at on the screen right now. And also, some people will just be listening to this only in audio. So let us try and fill in the blanks for them so they have an idea of what is going on.

[08:37] – Why Owners Win: Business Equity Drives Extreme Wealth

Yeah. So this chart shows by wealth level across the x-axis, what is the percentage of assets in what is called “business interest.” This means your own private business, a business that you own. This is not stock ownership, this is not money in your retirement account. This is not your home or any side real estate. This is business interest. And so if you look, levels one to level three have 5% or less in a business. Level four has somewhere about less than 10%. Those in level five end up having something like almost 30%. And by the way, just a quick aside to memorize the levels: just remember level three is $100,000 to 1 million. And then to go up a level, multiply by 10; to go down, divide by 10. It just makes it easier so you can memorize it. So once again, level four (1 million to $10 million), they have about 10% of their assets in a business. But those in level five and six: level five is 30% of their assets. And by the time you are in level six, over half of your assets, so you are over $100 million-plus, those people, in general, have over half of their assets in some sort of business, an individual business, or a set of businesses. So you can imagine Elon Musk, he has probably 99% of his net worth in different businesses, combined.

So it goes to show. And by the way, I have many other charts that show how wealth is distributed and how it is invested across every wealth level. And what it shows is, in general, those higher on the wealth ladder own more income-producing assets: things like businesses, stocks, real estate, money in retirement accounts, etc. And so you can really see that in the data. But in this particular instance, you can see how people generate a lot of wealth. They have a lot of their own businesses. Now, does that mean that every person that owns a business is going to make it to level five? No, because obviously there is a high failure rate as well, so people will know that. Your listeners obviously know that. But it goes to show if there is a chance for most people, it is going to be through entrepreneurship of some sort, which in this case, it is consultants.

And for the record, I do not know if you know this, I actually did work in consulting for the first six years of my career, and I have actually billed over 10,000 hours, so I can say I am an expert at consulting. It was litigation consulting. It was, I did not have my own business. I was an analyst and senior analyst, etc., but I billed over 10,000 hours. So I know what it is like to work in a consulting firm. I have read Managing the Professional Services Firm by David Maister. I think that is the bible for running a consulting business. I am not as well-versed as everyone, but I read this thing, and I am like, “This is great.” So that is the book I recommend if anyone asks me about consulting.

[11:05] – Best ROI: Invest In Your Own Business

There we go. So if I were just to summarize what you are sharing here, it is that if someone really wants to grow their net worth and their wealth, doing that just as a 9-to-5 job – unless you have a whole bunch of stock in a rapidly growing company – really, a key way to grow your wealth is through a business. And it is also by accumulating assets over time. And I think what I always say to clients when I talk about their business and how to think about investing in their business is that my belief is that investing in your business is actually the best investment that you can make. Now, I do not know if, from the wealth management side of things, you view that a little bit differently when I say that. I say that because you can control a lot more in your business than you can in any other investments that you may put money into. The stock market, whatever it might be, you cannot control that. Historically, right, it goes up, which is great, and why I and so many other people do invest in equities and so forth. But the ability to invest in a business, it is amazing what that can do because the value of, let’s say, landing one new client or multiple new clients is really so significant compared to what you might put in. And I think this graph here, or this chart, really helps to see that if you want to grow your wealth, you need to be thinking about investing into your business or having a business or growing a business. Is that an accurate summary of what you have seen?

Yeah, yeah, no, I completely agree with what you are saying. Obviously, there are risk considerations to discuss here, but outside of that, you’re right. You do have more control over this thing. And if you want a chance of building really great wealth, I think you have to be a business owner. That is just what the data shows. And of course, what if someone is an athlete or something? Besides that rare, very small percentage of people, I always like to look at base rates, and all that means a base rate is like, what is the typical person in this role? How does their life turn out? So if it is like, “Okay, most people that try to be athletes do not end up making it. Most people that try to make big businesses do not make it either.” But I think the success rate is much higher for business owners than trying to make it to, say, the NFL or the NBA or something. And so because of that, the base rate’s higher. So assuming you can actually go out there and try and get to a certain point with your business, you are probably more likely to succeed in that endeavor than all the other endeavors that got people to, let us say, level five.

What is the most common mistake that you see people making when they are trying to climb the different wealth ladders or when they are moving from one stage to the next? What comes up often as a mistake?

[13:52] – Level-Specific Pitfalls: Build Safety and Plan Post-Exit

This is kind of the premise of the book. It really depends where you start. I think people in level one, the mistake they are making is they are probably not getting to a sense of safety. They need to build that safety. And if they- the longer they delay that safety, the higher the probability of them getting into an endless cycle of debt and possible bankruptcy, and they just can never get ahead. You can imagine a scenario where even something is, for most people, like, “Oh, a flat tire. Oh, that sucks.” For someone in level three or level four, “Okay, you just go get it repaired and you move on with your life.” For someone in level one, they could end up not getting to work, they lose their job. You can just imagine the chain reaction that happens that just changes the course of their life over something as simple as a flat tire, which should not change the course of your life whatsoever. So I think it is something to think about.

But it is really just like, “Where do we start?” then determines what types of things to look out for. And so I think if you are, let us say most of your audience is level three, level four, or are going to be level three, level four after they exit their business, etc. the types of things there is like, how are you investing that money? And so like, obviously there is risk, which I have already talked about. But let us say you do sell your business right now. You left the business. Maybe you got 50% cash, maybe you have an earn-out, maybe all cash, whatever. What do you do with that money after now? Because that is, you might have had this big success, you got out of it now, but now what do you do with that money after? And how do you invest that money? Because that decision, if you are not really familiar with investing because you put all your money into your business, now the question is like you are kind of in uncharted territory. You have your whole life savings, basically. You need to invest that. How do you do that? And so do you end up hiring a financial advisor? Do you go at it alone and hope you can deal with any sort of volatility that you would not have necessarily experienced in your business? So I think those are the types of questions I would think through in this.

I just pulled up on the screen the 1% rule that you have as well in the book. I do not know if this is the right time to speak on that. I do want to come back to what you were just talking about in terms of as people increase their disposable income or their overall wealth, how to start evaluating that in terms of decisions for the future of their business or their career. But is there anything you want to say about the 1% rule? Because I think this obviously is directly connected to the levels. Do you want to just make any comments on this?

[16:09] – The 1 Percent Rule: Say ‘No’ To Low-Value Offers

Yeah, yeah. So the idea behind the 1% rule is you take your net worth and then you just multiply by 1%. You take 1% of it, right? Divide by 100, and whatever that number is, that is like a proxy for a limit of what you should consider for future income opportunities. So for example, if you are like, “Oh, should I bring on this new client?” The idea is like, what is the lifetime customer value of that client? And if that number is below the 1% rule, then you really need to be like, “Do I really want to bring this client on? Is it worth it for this type of…” Or even, it may not even be a lifetime customer value. You can just say like, “Okay, what are the fees I am going to charge on this client, or through the end of this project?” So if you are in level four and like, “Oh, this client will get me $1,000 in total and it is going to take however many hours it is going to take,” it is like, is, of course there is a time element here. If I am being honest, time matters. But all else being equal, if I am in level four, I probably, if someone is only going to pay me $1,000, that is not going to really move the needle for me, right? Especially if I am like, let us say you have $5 million, $1,000 in extra revenue is useless. You need to have $10,000, $50,000. You need to really start getting bigger clients that can move the needle.

Let me jump in for a moment here to clarify. So I think this is actually a really powerful framework for people because as you become more successful, you start to have more options. And I think it becomes more important to get comfortable with saying ‘no’ than just saying ‘yes’. In the early days, you kind of, by default, and by definition, you are going to say ‘yes’ to a lot more things because you do not yet know what is going to work. And you also just need more swings at bat, right? More chances of hitting that home run, if you will, or at least getting to first or second or third base. But what you are saying here: so let us say level three, somebody whose net worth is between $100,000 and $1 million, for them, if you are thinking about whether you should take on a project, if it delivers between $1,000 to $10,000 in value, it might be worthwhile for you to take on. So let’s say you get offered something, a speaking opportunity, and they are going to pay you $5,000 at a local association. Well, that might be worth it, right? And not to mention the follow-on opportunities of additional leads you might generate there. But let’s say if you are at level four and someone says, “Hey, can you come and give this talk?” Or somebody wants to work with you, but they are only able to pay $2,000. But you are at level four, meaning that your net worth is between $1 million to $10 million, is it worthwhile from a financial perspective to say yes to somebody that is going to pay you $2,000? And this framework says, “Well, generally you would want to think about that 1%.” So that is between $10,000 and $100,000 in value. So this could really be very helpful in evaluating what to say ‘yes’ to and what to say ‘no’ to. Are there any applications or examples of how you have seen people bring this into their real lives or in their profession?

Yeah, I think you hit the nail on the head here. This is not perfect; it is just another tool in your toolkit. Because let’s say you love speaking. You are like, “Oh, two grand. Yeah, I will take it. I love speaking. I do not care. I just love doing it.” Or maybe I am only going to get paid two grand now, but I know I am going to get maybe three to five clients and that is going to bring more. And so it is not just- you can’t just use a number, but it is just another thing there. You can say like, “Yeah, actually $2,000 is not enough.” So there are a lot of other things to evaluate, but I think the point of this rule is it is just another tool in your toolkit, another evaluation method when you are thinking about income opportunities, bringing on clients, the types of clients you want to bring on, how you use your time. And so that is- I have tried to come up with something that gets at that.

And this is exactly how I have used this thing. So I am using this now where I will, I try not to do speaking things below a certain amount, below 1% of my net worth, and it is not going to really move the needle. Now, of course, if it is really easy or it is a friend or something, I might just do them a favor for something cheaper or whatever. That is not a big deal. But there are obviously exceptions to this rule. But it helps you realize, “Hey, I used to do that for money and I do not do that stuff for money anymore.” And this is true of anyone building a consulting business. At some point, you are going to want to hire other consultants. Obviously, you are going to hire more. That is the whole point of the business. And they are going to be the ones serving clients, and you are the one managing the team or doing other things when you are running the business. And so thinking about that and how you structure that, this is exactly like, “Oh, I do not do that work anymore. I can hire someone to do that and I do this other work which is higher value.” And so that is the premise. It is built into the wealth ladder and there is a natural progression as your wealth goes up.

[20:29] – Should You Sell? Avoid Forced Sales and Design Backward

Right. That makes a lot of sense. All right, so let me stop sharing that for a moment. You brought up before we just talked with the 1% rule, I guess, the situation of someone who, let’s say, has been building a successful business; they are generating good income from that business, and then they start wondering, “Should I sell this business?” If they sell the business, however, in most cases they are going to have a bunch of tax that they are going to owe. Then they need to do something with the money that they have left over after paying taxes from that business. What have you seen, and how do you, I guess, counsel or what would you suggest that people think through when they are deciding between, “Hey, I have something that is working right now,” but maybe they have lost some of the passion or the interest, or maybe they are saying this could be an opportune time to sell this business, but if they are not clear on what they actually want to do next, what are the factors that you think people should consider or if there is a framework that you find helpful in evaluating the future of whether to keep building a business or whether to sell a business? What have you seen there? How do you think through that?

Yeah, there are a lot of factors to consider. Let’s just start with the financial ones briefly and then we will get into the psychological ones, which I think are equally, if not more important. The financial one: don’t be a forced seller. If you are like, “Oh, I have to sell my business now,” that is the worst thing you can do because it is going to come across in how you talk to people, that desperation. People are going to realize that and they are going to- the best time to sell your business is when you do not need to sell it. That is really the truth. If you can say, “Hey, I am not ready to sell,” go out there and just start talking to people. Just see what the market is like. Go through the process, understand how you feel when people give you an offer. Go through that even when you have no intention of selling. Because that is going to get you used to it. You are going to have contacts, you are going to have people you can contact in the future. And then maybe one day you call them up again and say, “Hey, I am actually thinking about selling this time.” And maybe they will. But then they might say, “Oh, well, now I am going to discount” or something. So you have to think about how you go through this process. And I think the best time to sell your business is when you do not need to. Because if you need to be a forced seller, it is just the worst that could happen. You do not want to be like, “Oh, well, business dried up now I want to sell my business.” No, it is the worst thing you can do. So that is the thing I would say on the financial side.

In terms of the psychological things, yeah, you have to think about what life you want and then back out from there. So like, “Hey, I want a life where I can do X, Y, and Z.” It is like, “Okay, can you do that while owning a business or having a minority share in the business?” Or, “Can you do that maybe after selling the business and then investing it?” And obviously, you have to do a little bit of research on understanding how much income you could generate once you have sold the business for a reasonable amount and reinvested that in a diversified portfolio, etc. But those are the issues you are thinking about. I always say, “Solve backward.” Find your idealized life and how you imagine it happening. Okay, let us move backward from that on how much money I might need, etc., for it to grant me that freedom. And then let’s see, what do I need to sell my business for, and then how would I allocate that money afterward to get to that lifestyle?

What I have observed with many clients over the years who have grown their businesses to pretty considerable levels beyond where they maybe even initially thought they would be able to reach is that the things that they are thinking they would like to do in the future when they sell the business or when they get to that next level, very often they can actually do them much sooner than they think. And it is just figuring out, “Well, what needs to change?” Or, “Do you need to delegate better?” “Do you have to have better systems?” “Maybe you just need to go for it and see what happens.” But this idea of putting things off. So I like what you are saying for people to get very clear about what does that meaningful life look like for you? What does success ultimately look like? What are the things you want to do? And then just explore, “Are there ways to do them sooner?” Or, “What would things be like in terms of if you did not have the business in the future?” So another thing that this kind of brings up for me, Nick, for consultants who are thinking about their finances: the business is growing, maybe they are making more money. But as their business grows, they might also start seeing their profit margin as a percentage decreasing because maybe they are adding more team members or they have more expenses. But if someone is wondering, “Am I on the right path? Am I going in the right direction?” How would you suggest they think through that? What should they be considering? What should they be looking at to just know if they are directionally going the right way? Or how can they potentially catch themselves from making bigger mistakes or taking the wrong path and later learning that they could have done something differently?

I think you have to benchmark. And so this is one of those things where I am not an expert in terms of consulting businesses and sizing and profit margins, etc. It is like, “What does it look like as you transition from one type of firm to another?” And I do have some experience in this. I am the CEO of Ritholtz Wealth Management, so I have some experience on the wealth management side. So I have an idea of, “Okay, here is what happens to margins as you grow or as you are growing very quickly.” Let us, for example, we have a media arm. So we have, I think it is five or six employees now that we hire on the media side. And we do have some revenue coming from the media stuff. But the RIA, the actual financial firm, subsidizes that because that is our growth engine. That is how we have grown so much. So that is a very weird thing. If we did not have the media arm, we would have better margins.

So you always have to control for your specific situation, how you market your business, etc. But I think the thing to think about is what tends to happen as these firms get bigger. Just really do the research. Go out there. If you have to pay for data on this stuff, do it because it can be very worth it in terms of understanding it, the business expenses as well, understand what does that transition look like and what you should expect to see. And if your business is not reflecting that, is there a reason why, and is there something you can adjust for? Because sometimes it is like, “Well, I have a much bigger marketing engine, so of course my margins are lower.” And that is fine. If you have a higher growth rate than average, maybe that trade-off is worth it. And you have to think about those types of things.

[27:55] – Benchmarks That Matter: Income By Wealth Level and Firm Metrics

And what about from a wealth management, or just wealth building perspective? Are there certain things, or is there even data that would support, like if somebody looked at that, they would be able to say, “Yes, okay, based on that, I think I am doing the right things.” Like, “I am saving 10% of my monthly income” or “My investments on average are going up by this amount.” Are there any principles or data points that you would encourage people to think about or to get comfortable with that would help them to know whether they are going in the right direction in terms of building their wealth?

Yeah. So I think once again, going back to finding benchmarks and comparable data. So in terms of actual wealth, in the book The Wealth Ladder, I walk through a lot of this stuff. So in chapter two, I talk about income. For example, let me get the actual page number here in the book. This is in the second chapter, which is “Earning up the Wealth Ladder”. Give me one second here. So on page 25, there is a table which shows the median U.S. household income within each wealth level. And so, for example, level three, the median income is about $83,000 a year. In level four, the median income is about $200,000 a year. In level five, which is $10 million to $100 million, the median income is about $724,000 a year. So I am just covering those. That is going to cover basically everyone listening to this. So if you are saying like, “Well, am I on the right track?” Is your income from your business kind of in that range? And if you are like, “Oh yeah, I am making over $200,000 a year.” You are great. Then you are on the path to get toward level four, even whether you sell your business or you just keep earning the income.

You said $200,000 per year in income is the household-

-median

average of people at level three?

Oh no, $200,000 is level four – 1 to 10 million.

And I thought you said $400,000 and $700,000.

No. So I apologize. It was $83,000 in level three, which is $100,000 to $1 million in net worth. It was around $200,000. It is $196,000. I just say $200,000 for rounding. It is around $200,000 for level four, which is $1 million to $10 million. And then level five, which is $10 million to $100 million, is $724,000 a year. So if you took all the people in level four and you put all their incomes and you took the middle income, it is roughly $200,000. So if you are making more than that, you are obviously doing well and that is great and you just need more time.

So a lot of this thing, too, which I talk about in the book and in the tenth chapter, is all about mobility: how long does it take to climb the wealth ladder? I look at these snapshots, etc. I follow the same households over time. And the thing is, age is a big thing here. There are a lot of people who are in level two right now, but they are young, they are in their twenties, and they just started and it is not because they have done anything wrong. They just need time, they need a few decades to get into level three, level four, etc. But in terms of, “Am I on the right track?” How is your income tracking relative to other households? Look at that. And then in addition to that, I have in chapter 10, there is actually data that shows if you are in your thirties, forties, fifties, etc., and it says what wealth level, where the distribution of wealth is. So for example, less than 1% of households in level four ($1 million to $10 million) are in their twenties. It is very low. It is only 5% in their thirties. And it is about 15% of those in their forties. So it is a small percentage, it goes up from there. The median age in level four is actually 62. So if you took all the people in $1 million to $10 million, put them in a room, 62 is the middle age, basically.

So just something to think about. And so that is some good wealth benchmarking data, if you could. I do not have this data for consulting firms, but if there was a wealth ladder for consulting firms, that is the type of stuff you want to benchmark. It is like, what is the size of my business? How is it comparable? How is my revenue per employee, profit per employee? You know all these metrics, right? Go through all those things and see.

[31:36] – Compounding Wins: Consistency, Content, and Outlasting Peers

Yeah, I mean, you just brought up something that I think is incredibly important both for building wealth and also just for being successful in business and probably also long-term fulfillment, which is time. Time, doing what you are doing and being consistent. Of course, everyone wants to make more money as soon as possible, but the reality is, anytime someone has done, if anyone who is joining us right now has had a financial plan done, or looked at some investment projections, it goes slowly up, but then after enough time, that compounding really kicks off, and you start to really go up and to the right pretty considerably. But if people do not have patience, if they are buying and selling too quickly, or they start and stop in their business and they are not consistent with it, it feels like the benefits of compounding, it is like you are not allowing that to happen. And so I think that is actually really important when we talk about building wealth and just increasing your success in so many aspects of business and life. You need to be committed to something and really put in the time because that is where the good things start happening. But if you are not patient and if you are not persistent and consistent, then you probably will not get the full value or be able to climb that ladder as much as you want. So I do not know if you have any thoughts to add to that.

Yeah, I think a lot of this is just outlasting other people because they are not willing to do it. That is it. You know, I have been writing online now for almost nine years. It will be nine years at the end of this year, and I do not know many other bloggers that started when I was writing. I am still writing. And all the ones I do know are very successful because they have been doing it for so long, obviously they’re still doing it because they’ve had some success. Maybe there is a piece of that as well. There is survivorship bias, obviously, but even controlling for that, it is like, I do not know many people that are like, “Oh my gosh, they were trying to write for five years and just nothing happened with it.” I literally do not know a single person that has done, you know, and I am saying there probably are people out there like that, but I do not know any of them, unfortunately. And so I have never heard of them. They have never reached out to me and said, “Hey, I have been blogging for five years and it has never taken off.” I have never seen it. So that is the thing: it does take time. For my first three years writing, I did not make any money on that, right? I was at my job and everything, but I did not make any money doing that. And then you start getting web ads, you start doing- writing books, you start doing all these other things. And you can really see the growth of that over time. It just takes time. And sometimes, even when things do not look good, the next year, or you can have a really good year, and then margins move up more than you thought, and now you are like, “Wow, this is actually very profitable.”

So let me ask you, Nick, because this is actually a question I had down. So I am glad that you are already bringing this up. If you think about the success that you have had in terms of the notoriety, the authority, the exposure, the career advancement, the wealth that you are building, how much of that do you trace back or connect to writing?

My total. If I had to- I do not have any exact percentage. I am trying to think in terms of my- My first- But. Okay, I do not have an exact percentage of my total. I would say it is maybe a little less than half. Actually, no, let me think real quick, one second, actually. So I actually do know this, so I apologize. I just needed to think about it for a second. So roughly 25% of my net worth right now I can attribute to the profits I have generated from my business. And the other 75% has come from me working since 2012.

The work that you have done, do you think you would be in the role that you are in, the CEO of Ritholtz Wealth Management, if you were not writing?

I mean, I would not be at Ritholtz, but I could still do that job without the writing. So to answer your question, yes. I mean, it would not have been at Ritholtz because they found me through the writing. That is how I got my foot in the door and kind of did a lot of stuff. But the work I do at Ritholtz has nothing to do with my writing. I obviously, we are a wealth management firm, so my book and stuff does help bring in some clients and stuff like that. That is an ancillary benefit. But that is not the reason they hired me. They liked that I did that as well. And so it was a perfect fit. I am a content creator, I am also helping the business grow. And so, when I joined the firm, we had under a billion dollars. We had about $800 million in assets, and now we are at $6.5 billion. So I have seen the firm, and this is since 2018, I have seen the firm go up over 6x, which is kind of crazy. But it has been a wild ride to get there. And it is just watching that growth and seeing, and, yeah, margins were not as good early on, but you will see things grow, things happen more. You have to just keep at it. Everyone works so hard at the firm. The partners have done such a great job, and now we have a large, profitable, very well-doing firm. And so that is. We have been very fortunate, but it just takes a long time, right? It takes a long time to get there.

So I guess, yeah, the reason I was bringing this up is I am thinking about your brand and what you are known for. And my sense, and definitely correct me if I am wrong on this, is I would attribute a lot of that to the writing that you did, right, and that you still do today. And I guess what I was wondering is how long did it take? I know you said it took three years for you to start making money from your writing, but how long did it take before you actually got to the point where you felt like, “My writing is starting to work,” and “I think that this will create some success for me”? It is like reaching that tipping point where you saw results, you saw a response, you knew that you were on the right path.

It was the end of my first year. I kind of knew that this could be a thing. Now, of course, I was not trying to monetize it then, and because I was looking at all the monetization schemes and they just did not seem like enough money. So I am like, “I am not going to do this.” I do not want to spend all this time on something that was not going to generate enough income. I waited until my audience got big enough, so to speak. I had enough page views, etc., where I was like, “Okay, now it makes sense to turn the thing on.” I did not want to do it before, and I wanted to get to a sufficient size. And this happens all the time where someone has a freemium model and then maybe they start charging for stuff later. And so that is the same thing I did where I was like, “No, I am giving this away for free. I just want to build my brand. I want to become a better writer.” I am a much better writer today. I read some of my old blog posts and I am like, “Oh, I would rewrite sentences,” because I would not write like that today. So it is interesting to see that.

[37:55] – Persevering in Finding Your Way to Get Your Ideas Out There

How often were you publishing?

Once a week for almost nine years now. So I am on post like 460-something, maybe almost 470.

You published every week, four times a month, for about a year. And until that 12-month mark, give or take, you felt you were not sure where this would lead. And I am wondering, why did you keep going? Because so often, and just to connect this to the world of consulting, so often, what you did is what I think a lot of consultants should be doing, which is leaning a lot more into content. Finding a channel does not have to be writing. It can be videos, it can be podcasting, it can be whatever. But finding a channel where you can demonstrate your expertise, where you can share your opinions, where you can essentially put your stake in the ground and say, “I want to be known for this.” But people try. They jump on LinkedIn, they do blog posts. They do whatever. They give it a shot for a few weeks or a few months. They cannot attribute growth in their business or any growth. They are not seeing the fruits of their labors, if you will. And then they stop and they say, “It did not work for me.” I am wondering, did you ever feel that way? And if so, what kept you going?

So that first year was definitely the hardest year because you do not know, right? There is that uncertainty. I had moments of, like, “Oh, wow. People really like this post. Great.” It went like. I do not want to say viral. Nothing I have done has gone that viral. So. But there are little things where I would put something out. I am like, “Oh, that got like 20 likes.” That is incredible. That is an amazing thing. For me, that was a ton of likes. Now, you know, if I got 20 likes now on a post, that post is bad. Right? So all I am saying is that was happening. I am like, “Okay, that is kind of cool.” But you are going to have- And then I had moments of silence. I had moments of, like, 20. I am like, “That is enough to know I have something. Let me just keep going.” So I had little moments of success, but nothing big. By the end of the first year, I got to meet a lot of people I looked up to in the space, and they are like, “Oh, I love what you are doing.” And that gave me the confidence, like, “I am going to keep going, period.” I do not care how long. I do not obsess. It is like I get a new shot on goal every week. And so I do not obsess over whether this week’s blog post did not do as well as last week’s blog post. I do not care. I keep writing because I am trying to put out good stuff. I am trying to help people. I really am. I do love writing. I love doing this stuff. So that is what it is about for me.

So for those people, yeah, I only did it for three weeks and did not see many results. You are not going to probably see many results in three weeks, if I am being honest. But you have to kind to love it too. So you have to find, if it is agony to do it, do not do it. You have to find the thing you naturally like to do. Find whatever content medium it is, try different things, and like, “Oh, this is actually not too hard. It maybe does not take as much time, or I really enjoy it, or it is a good pace.” Just start that and just see where you can go with it and then give it time. But I think it is fine to give up on things. I think quitting is good sometimes. So it is okay to be like, “Oh, maybe content is not my thing.” Hire someone that can do content then. Or find someone, maybe not doing that with showing expertise, because then are they the face of the business or you? So maybe not that, but maybe they can help you do content. Who knows? Think through how you might want to do that. There are just more options than you think. It is not just like, “Oh, you have to be a content creator.” I do not think that is the only solution for business owners.

Yeah, no, it is a good point. If somebody does not enjoy writing, find a platform that you do enjoy, or let’s say you are just good at talking, right? Record your audio, have somebody get it transcribed, have somebody edit it and work on it, you know, to get your content out. The main idea, or the main thing, is to get your ideas out there into the world and your opinion so that people actually know what you stand for.

[41:20] – Key Elements to Building Wealth

You spend a lot of time looking at data and thinking about finances and thinking about wealth. What are one or two things that you continue to bring up? So when you are meeting somebody for the first time, or you are at an event, right, you are having a coffee, whatever, are there a couple of data points that you think would be really relevant for consultants to understand when it comes to money or wealth building? And maybe even from the perspective of the general consensus is A, but you know by looking at the data, C or D is actually the key.

I do not have that for consultants. I would have to probably think about it.

I mean, it doesn’t have to be just for consultants, but just for a business owner in general.

Yeah, yeah.

Anything that kind of stands out for you.

I mean, for business owners in general, I would say the main thing, if you want to get to extreme wealth, you have to own a business. So that is kind of maybe obvious to a business owner at this point. But most people are like, “Oh, how do they get there?” If you just look at the base rates, once again, it is going to be a business owner. So that is the thing I think about. The other thing, I just focus a lot on income because income is like the driving engine behind most wealth. That is the most positively correlated thing in personal finance: income and wealth. It is very rare to have high wealth and low income, or high income and low wealth. So one or the other, they are always paired together in general. The lowest wealth households with high income have more wealth than the lowest income households with high wealth. So it is very interesting. I have a matrix of this that makes more sense. I am sorry if that is a little unclear. But basically, they are correlated very, very much so. And because of that, it is something to keep in mind. It is like, “Okay, I need to focus on building income.” And so as a consultant, it is like, how do you grow? And you do not want to go overboard on growth either. You want to get to a spot where you are feeling comfortable. And then the question is, once you get to a point where you can build a lifestyle business off this, the next question is, and I think this is a bigger philosophical discussion, “Do I want to grow this so it is massive and I have a big exit, or do I want to just keep this as a lifestyle business and keep my stress low and enjoy my life?” And those are two very different questions. A great book I read recently, called Company of One by Paul Jarvis, where he talks about this a lot. And I think it is a great framework to think through. You need to get to a point where you can have the lifestyle business. But the next question is, do you want to keep growing and get to the point where you have a really big business and you can really generate a lot of wealth, but usually there is sacrifice needed?

Yeah, I think that is a really important topic and one that I have been hearing from people a lot more recently, which is interesting because it is happening with people in slightly different industries, not only consulting, and it is with people at different company sizes who are just rethinking what do they really want, right? Where if you would have asked them this question a couple of years ago it was, “No, I want to build something really big.” And now it is, “Well, do I really want to do that? Is that, you know, is there a better way to go about this?” And to me, what is most important about that is that there is no one way to do it, right? It is just understanding what are the different paths that are available and then, as you said, what are the pros and cons of each in general and what then lines up best for you as an individual, right? And what you really want, and then just becoming comfortable with that. So I was going to ask you as well, right now, obviously everyone is talking about AI. There is a lot of change in the world with governments and wars and I mean, just, it is a very uncertain time or a time of rapid change. I think we could agree on. Does your approach or your thinking about wealth building in this era of AI and rapid change, has it changed compared to maybe how you thought about wealth and investments and money if I was to ask you this question five years ago or even two or three years ago?

[45:11] – Navigate The AI Era: Pick Automation-Resilient Opportunities

I think it has sector-level impacts. What I mean by that, for example, if you are like, “Oh, I want to start a business where I train people to be junior software developers,” that is not a business you want to be in right now because AI can replace that, right? So you do not want to go into maybe a training for a junior-level software developer, right? If you want to, “Okay, I am going to train you to be a deep AI researcher,” and you have a really high-end type of business, that might make sense. But the other one, doing one-off sessions and stuff like that, I think that is changing a little bit.

But to quick questions or quick things, going back to what you said previously, I think if I had to reframe what is the big thing for business owners, and I thought about it a little bit more. You talk about this: “Okay, people are asking what should I be doing now?” Like, “Should I keep growing? Do I even want that?” I think this tends to happen in level four. That is the $1 million to $10 million range. And that is where people get to their, what is sometimes called “Coast FIRE,” where it is like, “Hey, I have saved up enough, or I have a business big enough that if I sell it, I can be okay, and I can kind of reach financial independence or have enough money where I can maybe just dabble on the side. I can maybe consult for consulting business owners and make just a little bit of income enough to get me to retirement.” So I think that is the big decision point for a lot of people. It is like, “Hey, I have gotten to a point where I need to decide, do I want to keep growing or do I want to take my foot off the gas?” And so that is the thing I think about a lot, especially for those that are getting kind of borderline into level four, deeper into level four, because that is the kind of thinking there. But I just wanted to put that as a quick aside.

[46:47] – Inflation, Withdrawal Rules, And Long-Term Security

But yeah, I mean, so let me ask you on that because I think historically, if you do a financial plan, or the idea of you get to a certain net worth, or a certain amount of investments, and then you could look at, “Well, how many years do you have,” based on your age, that you need that, and you take the, let’s call it, a 5% or 6% average annual return, you take 2.5% inflation, give or take, and you can then see like, “Well, how many years are you good for?” And “How much can you pull from your investments or from your business or personal accounts or whatever?” Is there any danger or any change to that kind of framework or model, given that we are in a world now where there is a lot of talk about inflation increasing and about the dollar? So specifically, let’s say the U.S. Dollar, although I am in Canada and I think the Canadian dollar also has a very high likelihood of being devalued. So if the dollars that we earn are decreasing in value and the inflation rate over the long term might increase, given that there is more money going to have to be injected into the system. Debt levels across the world are increasing. Does that change how you think about people kind of going through in their financial plans and a danger of maybe stopping to work too early? Is there any kind of conversations you have had or any thought that you have given to this in terms of the data and just your own experience?

So inflation is destructive no matter how you look at it, and I think the 2% inflation target is a great way because a little bit of inflation is better than deflation. I think there is plenty of data to show that. So I think everyone is in agreement there. But you are right, we do not want inflation to get too hot because then that really distorts certain types of behaviors. It makes people kind of take even more risk because like, “Hey, if I am not going to save cash, I am going to just invest it all the time.” And so you can see valuations go up. There are all sorts of things like hyperinflation. I mean, I do not think hyperinflation is going to happen, but that is a risk that has happened in certain economies, like where their currency is just devalued very rapidly. So thinking through that, you are like, “Yeah, maybe some people might want to work a little bit longer, etc.”

There are ways to think through this. I think the 4% rule is just the simplest and easiest way to do this. And the guy who came up with that, Bill Bengen, he just came out with a new book where he is basically promoting the 5% rule now. He is like, “The 4% rule, with the data we had then, if you include all the data through today, it looks like the 5% rule would have actually worked.” Or he goes up to about 4.7%. So he is-

And can you just explain that for everybody? For those that are not familiar.

The 4% rule, how the original research worked, and he did this in the early nineties, was you take your portfolio, let us say you have $1 million, you pull out 4% in the first year. So let us say $40,000, and that is your spending in the first year, and then you adjust that for inflation. So let us say at the end of the year, you go to the BLS site and it says, “Oh, $40,000 is now worth $44,000 or $42,000,” whatever it is. Then the next year you pull out $42,000. And you do that every year. And he did this for a 30-year period. And basically, if you had done it through any 30-year period in U.S. history, and this is a 50/50 U.S. stock-bond portfolio. So you had half your money in stocks, half in bonds, and you pulled this money out of this account every year for 30 years and followed this system, after 30 years, you would have made it to the end without running out of money. And no matter when you started, whether you started right before the high inflation of the seventies, whether before rates peaked, before the great financial crisis, no matter what, you would have made it through your retirement. Actually not GFC, because technically we have not had 30 years since then. But you get the point, like through the Great Depression, even this worked. So my point is that is what the data shows.

And so now he is saying 4% was the old one. It was actually 4.15%. Now he says you can go up to 4.7% if you include small-cap stocks and a few other things in your portfolio. So he is basically almost arguing the 5% rule is like a 98% chance of success historically. And so he is arguing you can pull even more. I mean, just to be conservative, let’s just stay with the 4% rule. If you are worried about inflation, you are worried about all these things. And this includes inflation adjustments. So if you are like, “Well, Nick, are we not worried about inflation?” Well, all the historical data included all these periods that had higher inflation. Now, if we are entering an inflationary regime that is unlike any before, like we are getting much higher inflation, obviously, we do not know because history can only do so much. But I am not as worried about that for the long run. Obviously it is a worry in the next few years, but how does it solve itself? I am not sure, but I do not think necessarily like, I think the debt can go much higher before things really start to unwind. Because I mean, look at Japan. Japan is not in the best scenario, but their debt-to-GDP is much, much higher than the U.S., and they control their own currency as well. So it is just something else to think about.

So just to clarify that for everyone, you are saying it is not just taking the 4% rule of say, $1 million, $40,000 per year, you are saying in year one it would be $40,000, but year two it would be $40,000 plus whatever the inflation rate is. So you take out $42,500 if it was 2.5%, and then again year three, you would look at, if it is 2.5% again, you take out another $42,500. So it is just whatever the inflation rate is currently at that time, that is what you would take out above the 4%.

Yeah, so you take the 4% in year one. That is now an amount. That is just a fixed amount. After one year, if the inflation rate was, I am just going to make the inflation rate just to make the math easy, let us say the inflation rate was 10% the next year. You would pull out $44,000 because 10% of $40,000 is $4,000. So the next year you pull $44,000. If the inflation rate again is 10% the next year, you are pulling out $48,400 or something or another $4,400 on top of the $44,000. You just keep doing that. I mean, obviously, I am not assuming we are having 10% inflation. But you get the point, right? You adjust it. And he did this. He adjusted it every single year for 30 years. And obviously, if there is deflation, you pull less. So that did happen in the Great Depression, but once again, that is rare and it is not supposed to happen too often. So that is kind of.- you do that, you follow the inflation rules and you would have. It is called the “safe max” or the highest. How much could you pull out across all periods and still not run out of money? And that is the percentage he found was 4%.

[53:03] – Where To Follow Nick And Access ‘Of Dollars And Data’

There we go. All right, Nick, well, I appreciate you coming on. I know there is so much more that people can learn from you. And so I want to encourage everyone to check out your blog, your writing, your work. What is the best URL, the best place for them to go to access that?

My blog is at OfDollarsandData.com. You can also reach out to me on Twitter at https://x.com/dollarsanddata or on Instagram at https://www.instagram.com/nickmaggiulli/ or LinkedIn at https://www.linkedin.com/in/nickmaggiulli/. And I answer every DM, so feel free to send me a DM if you want me to dig into something; or I’ve probably written a blog post about it that I can send you. But I truly appreciate your time and thank you so much for having me on.

Important Links:

Nick Maggiulli LinkedIn
Nick Maggiulli Twitter/X
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Ritholtz Wealth Management
David Maister’s Managing the Professional Service Firm
Paul Jarvis’ Company of One
Bill Bengen’s A Richer Retirement
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