How to build wealth one rung at a time The author of a new book shares a framework for creating and living a wealthy life.

Kerry Hannon · Senior Columnist Sun, Aug 3, 2025, 11:30 PM 6 min read

Building wealth is not all scrimping and sacrificing while adhering to a steady investing strategy. It’s knowing what to do at each step on the ladder of wealth that sets you up for success.

Nick Maggiulli, chief operating officer and data scientist at Ritholtz Wealth Management, has a new book, "The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life,” that lays it all out in clear, concise, and actionable steps.

Here are edited excerpts of our conversation:

Kerry Hannon: How do you define the wealth ladder?

Nick Maggiulli: The wealth ladder is a new framework for thinking about building wealth and how you should change your financial strategy over time. Once you see wealth through this lens, you're never going to unsee it. It breaks wealth into six distinct levels based on your net worth. That's all your assets, minus all your liabilities.

Level one is less than $10,000 in wealth. Chances are, you are living paycheck to paycheck and conscious of every dollar you spend.

Level two is $10,000 to $100,000. That is wealth that lets you buy what you want at the grocery store without worrying about your finances. Level three is $100,000 to $1 million. I call that restaurant freedom because you can order what you want when you dine out. Go for the salmon over the burger. The fourth rung, $1 million to $10 million, opens the door to travel where you want; the fifth, $10 million to $100 million, means you can purchase your dream home with little impact on your overall finances. The sixth and highest level, anything above $100 million, gives you the ability to have a profound impact on the lives of others through business and philanthropy.

Level three is the middle class in the United States. The data on this is pretty straightforward — 20% of Americans are in level one; 20% are in level two; 40% are in level three; 18% are in level four, and then the top 2% is level five and above.

Read more: How to save $10,000 in a year

You write that we should spend not based on our income, but on our wealth. Can you elaborate?

Excluding inheritances, trust funds, and lottery winnings, having wealth demonstrates financial discipline. It illustrates that you have control over your spending and that you know how to save money. Without such control, you could end up in a bad place financially.

For example, if you consume based solely on your income, any disruption to that income could send your finances into a tailspin. Unfortunately, most people don’t realize this until it’s too late. The truth is that income can be fickle. One day you’re making good money, and the next you’re looking for a new job.

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How is increasing income the bedrock of all financial success?

The single best investment idea is the continual purchase of a diverse set of income-producing assets and raising your income level.

The strongest correlation in personal finance is income level and savings rate. The higher someone's income is, the higher their savings rate. There are exceptions.

Over time, those individuals that have higher incomes today are more likely to end up higher up the wealth ladder in the future because they are saving a lot more than those with lower incomes, and they have more of their wealth and income-producing assets than those lower on the wealth ladder.

On average, those in levels one to three have less than 25% of their total assets in income-producing assets. An income-producing asset is something like a stock, a bond, a business, or other types of real estate.

When we look at the data, people in levels one and two generally have most of their money in their car and their homes. That's mostly true in level three as well. But by level three, it's more in their home. Four to six is where we see the big shift, where we see more money in retirement accounts, in businesses, in stocks and mutual funds outside of retirement accounts.

People who can shift more of their assets into income-producing assets will generally see more wealth appreciation than those who don't.

Read more: 5 money-saving apps to help you grow your wealth

Author Nick Maggiulli, chief operating officer and a data scientist at Ritholtz Wealth Management. (Photo courtesy of Nick Maggiulli,)

Climbing the wealth ladder takes years for most people, right?

Yes, the median age of a household in level four is 62. Less than 1% of households in level four are under 30.

How can your relationships help you build wealth?

People should think of their assets more broadly, especially when you're just starting out, because you may have other assets in your life — friends, family, professors — who can help you at least get started and get on the right path, even with a recommendation for a job or an internship. As you make your way up the wealth ladder, you want to help others get up too. Pass it on.

Read more: How to save money in 2025: 50 tips to grow your wealth

I love this line in your book: “If you don't do it for the money, you're more likely to make money.” What do you mean?

If you’re working at something you love, you don't stop when there's an obstacle. If money is the only thing that is making you do something, that's not a deep enough motivator to keep you going. You’ll say screw it, and you'll stop. It’s staying power.

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What is the biggest contrarian takeaway from the book?

That more money isn't always better. This is especially true in levels five and six. There's a lot of downsides to getting more wealth that people don't really think through. I fundamentally believe that is true. There are a lot of people where wealth has actually ruined their lives in a way.

And people often think they get to this certain point, and then they’ll be happy. And then you get there and then you're, okay, well maybe I just need a little bit more. Very few people I've ever met, or heard, or spoken with have said, I have enough now.

What’s the deal with your salt and money analogy?

Chefs will tell you that salt is not like the other spices because salt doesn't change the flavor of a food. It just makes food taste better. Money and salt are very similar in a lot of ways because salt by itself is not that useful. You would not just eat a plate of salt. That would be very unappetizing. The same is true of money. If you only had money in your life, you had no friends, you didn't have free time, you didn't have your health, you didn't have your mental sanity, your life would be pretty miserable.

Money is the great enhancer, like salt is the great enhancer of food. But you need all the other things to be there for the money to actually add value.

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky.

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