We’ve all seen one or more variations of the stages of wealth and how to attain the highest level from one or more financial websites, pundits, or gurus. Most of these lists have “Financial Abundance” at the top.
Joshua Sheats, the host of the popular finance podcast Radical Personal Finance, describes seven stages of wealth with Financial Abundance at the top and described as follows:
Financial Abundance – You have enough investment income that you cannot possibly spend this money. Vast amounts of your money will outlive you, and your focus is wise stewardship of this wealth so that you can leave a beautiful legacy.
I have my own variation on the stages of wealth, but at the top of my list is “Financial Transcendence.” When you have reached this stage, not only do you have wealth that will outlive you, but you’ve taken steps to ensure that the wealth will endure for multiple generations through the proper legal frameworks but also through educating your heirs.
Cornelius Vanderbilt had achieved Financial Abundance, but he had not achieved Financial Transcendence. Vanderbilt died in 1877 as the richest American during his lifetime. He left his children a fortune valued at $2.1 billion in today’s dollars. Within thirty years after his death, no family member was among the richest people in the United States. When 120 of his descendants gathered at Vanderbilt University in 1973 for the first family reunion, there was not a millionaire among them.
Before going more in-depth on achieving Financial Transcendence, let’s explore the various stages of wealth you’ll need to pass to attain that highest level.
These first seven stages are attributed to Joshua Sheats and can be found here (with my commentary added in italics):
Stage 0 – Total Financial Dependence. Everyone starts here. When you’re a child, for example, you’re dependent on grown-ups.
Stage 1 – Financial Solvency. You can support yourself without help or handouts from others, and you’re current on your bills.
I’m not a fan of the word solvency since solvency implies no debt. Many people can support themselves without help or handouts but may be doing so using credit card debt.
Stage 2 – Financial Stability. You can support yourself, your bills are current, and you hold some savings.
Stage 3 – Debt Freedom. You’re debt-free, in addition to the points above. It’s your choice whether or not you want to include your mortgage within this definition.
I will add that there is good debt and bad debt. Debt freedom means you’re free of bad debt. I would consider debt undertaken for passive investments that cash flow to be good debt.
Stage 4 – Financial Security. You have enough investment income to cover basic, bare-bones living costs.
Stage 5 – Financial Independence. You have enough investment income to cover your current lifestyle.
I would clarify that unless the investment income is passive, you haven’t reached financial independence. If you’re trading a job for an active investment that takes up all your time, you’re just trading one boss for another. You’re your own boss in the second scenario, but you’re still trading time for money. Financial independence allows you to buy back your time.
Stage 6 – Financial Freedom. – You have enough investment income to cover BIG dreams and upgrade your lifestyle.
Stage 7 – Financial Abundance. – You have enough investment income that you cannot possibly spend this money. Vast amounts of your money will outlive you, and your focus is wise stewardship of this wealth so that you can leave a beautiful legacy.
With Financial Abundance, your stewardship over your wealth ends with your death. Financial Transcendence ensures that your wealth will endure for multiple generations.
Stage 8 – Financial Transcendence. – You not only have enough passive income to outlast your lifetime but the lifetimes of your children and their children and so on. You have taken all the necessary legal provisions to ensure proper management of your wealth and investments.
You’ve also implemented appropriate precautions to prevent your heirs from squandering their wealth through legal provisions as well as through education – educating your children and your heirs during your lifetime on the merits of passive investments for the creation and preservation of their own wealth from the resources received from you.
How To Achieve Financial Transcendence
Everything starts with you and continues with your heirs through legal measures and knowledge transfer. The key to transcendent wealth is cash-flowing tangible assets that appreciate over time and are accompanied by significant tax benefits that will allow you to keep more of what you make.
The wealthy don’t speculate. That’s why many of the wealthy with enduring wealth had and continue to have passive investments in real assets and income-producing businesses in their portfolios.
The key to enduring wealth is to take the necessary precautions to not only prevent your heirs from squandering your wealth but – more than that – to build upon what you’ve given them. Bill Marriott expanded the hotel empire his father, J. Willard Marriott, started and passed on to his children. J. Willard Marriott transferred his knowledge onto his son to ensure a continuation of the family empire.
The wealthy don’t simply hand over their assets to their heirs when they die. Many will set up trusts or make provisions in their wills to continue their investment activity beyond their deaths under the stewardship of dependable trustees and designees.
The key to achieving Transcendent Wealth is investing in the right assets.
Avoid speculative stocks and crypto that the herd is rushing to and embrace enduring tangible assets that cash flow and appreciate over time.
Investing in assets that consumers will always need will ensure constant and dependable cash flow and growth that will outlast your life, but don’t stop there. Vanderbilt did, and his fortune was gone within two generations.
Instead, take the necessary steps to ensure you leave an enduring legacy of money and knowledge.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.