The Ideally suited Stage of Wealth

Since I printed The Wealth Ladder three and a half months in the past, I’ve had just a few readers attain out and ask, “Is there an preferrred stage of wealth?”

My intestine response is to say, “Sure, the perfect stage of wealth is the amount of cash that permits you to reside by yourself phrases.” In The Art of Spending Money, Morgan Housel defines the very best stage of wealth as:

You get up each morning realizing which you could spend your time doing what you need, with whom you need, for so long as you need.

These solutions are each technically right. The best stage of wealth is dependent in your private circumstances. It’s primarily based on what you need out of life. 

Nevertheless, the extra I take into consideration these responses, the extra I discover them unsatisfying. If the perfect stage of wealth is at all times primarily based on particular person circumstances, then we are able to’t present any basic pointers round it. If everyone seems to be particular, then nobody is. In impact, we’ve maximized precision however minimized usefulness.

However, what if we reversed this? What if as an alternative of giving the proper reply for everybody, we discovered a reasonably good reply for most individuals? What if we gave up some specificity to have extra practicality? What would the perfect stage of wealth seem like then?

If we are able to outline it, even roughly, then we’ll have a greater concept of when to maintain pursuing cash and when to cease. And, as soon as we all know this, we are able to get to our preferrred stage of wealth after which begin residing the great life.

However, how a lot does “the great life” truly value?

How A lot Do You Must Dwell a Good Life?

Whereas the reply to this query will differ primarily based in your circumstances, let’s assume that you simply, your partner, and your two youngsters reside within the median priced residence in the US. This received’t cowl everybody, but it surely’s a great base case that we are able to modify from.

Utilizing this as a base case, a household of 4 spends roughly $120,000 per yr after taxes to keep up a middle-class life-style. Right here’s how that breaks down by class, primarily based on knowledge (principally) from the Consumer Expenditure Survey (Bureau of Labor Statistics) and some different sources:

• Housing: $35,000 ($2,917 monthly). As of Q2 2025, the median sale worth for houses within the U.S. was $410,800. Placing 20% down, that would depart a mortgage of $328,640. At 6.2% for a 30-year fastened fee mortgage (the present fee), that’s about $2,013 monthly. Add in property tax at 1% per yr (of the property worth), upkeep at 1% per yr, and insurance coverage at 0.5% per yr, and that’s one other $854 monthly (or $10,270 per yr). Placing all of it collectively and including a bit wiggle room, a household of 4 would pay round $2,917 monthly, or $35,000 per yr, for housing.
• Transportation: $20,000 ($1,667 monthly). Utilizing the Consumer Expenditure (“CE”) data, a pair with two youngsters spent roughly $18,463 on transportation in 2023. Adjusting for inflation to September 2025, that comes out to round $20,000 per yr immediately.
• Meals: $17,000 ($1,417 monthly). Once again from the CE data, spending on meals for a married couple with two youngsters was $15,558 in 2023. If we modify for inflation that comes out to $16,890, so I rounded as much as $17,000 for good measure.
• Childcare: $15,000 ($1,250 monthly). These prices will differ considerably over time, however the common annual value of full-time care was round $11,582 per little one in 2023, according to Child Care Aware of America. Assuming our hypothetical couple has one youthful little one (in childcare/daycare) and one barely older little one in after faculty applications (which will value round $3,000 per yr), then the whole annual value is near $15,000. After all, this may differ wildly relying on the kind of childcare applications you enroll your youngsters in.
• Attire and Leisure: $12,000 ($1,000 monthly). Utilizing the CE estimates, annual prices for attire and leisure for a household of 4 in 2023 had been $3,500 and $6,500, respectively. Add in some inflation and a bit wiggle room and also you’re at $12,000 per yr.
• Healthcare: $8,500 ($708 monthly). Within the U.S., healthcare is generally lined via employer-sponsored plans, however the price of copays and different prices were around $7,700 in 2023. Add in some fundamental inflation and also you get $8,500.
• Utilities: $6,600 ($550 monthly). The CE knowledge states that a pair with two youngsters spent $6,102 on utilities in 2023. Adjusting for inflation (to get to September 2025) and that comes out to $6,600 per yr.
• Journey: $6,000 ($500 monthly). A NerdWallet study found that the common value for a household of 4 journey to Disney World for seven nights is round $6,000. After all, there are cheaper and undoubtedly costlier methods to trip yearly, however I’m leaving this $6,000 expense as is for now. 

Word that the $120,000 is pure consumption and doesn’t account for saving for retirement. This was intentional. We care about residing bills and retirement financial savings aren’t a residing expense, however an anticipated future residing expense.

This apart, you can simply modify this annual quantity primarily based by yourself consumption habits. For instance, my complete spending within the above state of affairs would most likely be nearer to $170,000 per yr after taxes (or $50,000 extra) as a result of my housing and meals prices are nearer to double these quantities.

In the intervening time although, let’s stick to our $120,000 annual spending quantity. How a lot wealth is required to assist this a lot spending? Let’s begin on the high-end after which work downward from there.

• Monetary Independence (28.6x Your Annual Spending): $3.5M. Assuming you by no means needed to work once more, you would want about 28.6x your annual spending to cowl your prices indefinitely [$120,000 * 28.6 ~ $3,500,000]. This 28.6 comes from the Kitces research exhibiting that the three.5% Rule is the safe withdrawal rate for a 40-year time horizon and past. This analysis means that if you may make it 40 years whereas withdrawing 3.5% per yr, then you definately’ll probably make it 50 years (or extra). 
  • Word: Multiplying our annual spending by 28.6 (to get the required quantity) is mathematically equal to dividing our annual spending by 3.5%. So, $120,000 divided by 0.035 is identical as $120,000 multiplied by 28.6 (to get to $3.5M). 
  • Lastly, this assumes that your earnings is derived from liquid belongings and is after taxes. That is unlikely to be the case for most individuals. To regulate for this, multiply the whole quantity wanted by 1.25 (+25%) to behave as a tax buffer. So, $3.5M can be nearer to $4.5M if a great chunk of this cash was in certified accounts.
• Coast FIRE (Varies by Age): $1M-$2M. As a substitute of by no means working once more, with Coast FIRE you save up a specific amount for retirement, then cease saving cash after that. Nevertheless, you will have to proceed working to assist your self till you attain your retirement. Coast FIRE is less complicated to achieve than monetary independence since you don’t want to save lots of as a lot to safe your monetary future.
  • For instance, should you want $3.5M in belongings by the point you’re 65, then we are able to again out how a lot you’d want immediately to get there. Under are these quantities by age (assuming a 3.5% annual actual return in your cash thereafter):
    • Age 30 = $1,049,919
    • Age 40 = $1,481,014
    • Age 50 = $2,089,117

You possibly can see this visually within the chart under (for ages 20-65):

As you may see, the quantity of wealth wanted to reside a “good life” is far decrease once we proceed working (versus by no means having to work once more). After all, Coast FIRE is riskier than monetary independence since you continue to must earn an earnings to assist your life-style indefinitely. Nevertheless, Coast FIRE additionally offers extra flexibility and is extra lifelike for the everyday particular person. Most individuals don’t need to sit round doing nothing all day. Don’t get me mistaken, it’s enjoyable and enjoyable for every week or two, however I’ve written about the problems it can lead to.

Whether or not your objective is Coast FIRE or full monetary independence, the perfect stage of wealth within the U.S. is within the low-to-mid vary of Level 4 ($1M-$10M), or $2M-$5M. I do know that is some huge cash and many individuals won’t ever attain it, however that’s why it’s a super. It’s one thing to try for. It’s sufficient the place you don’t have to fret about cash anymore, however not a lot that it turns into a burden or warps your identification.

And, sure, it will probably warp your identification. Nice wealth can affect who you belief, what motivates you, your stress ranges, and even the way you increase your youngsters. As Felix Dennis wrote in How to Get Rich:

Nonetheless, let me repeat it yet one more time. Turning into wealthy doesn’t assure happiness. In reality, it’s virtually sure to impose the alternative situation—if not from the stresses and strains of defending wealth, then from the guilt that inevitably accompanies its arrival.

That is coming from a person who was value $750M on the time.

This can be a “drawback” few of us will ever have. Most of us face the alternative one—not having sufficient. But when Stage 4 appears out of the query for you, don’t fear. As a result of there’s one other path to the great life that’s fairly a bit cheaper.

A Cheaper Path to the Good Life

Up to now, when discussing the “preferrred” stage of wealth, I’ve assumed that you simply reside in a medium-cost-of-living space within the U.S. Nevertheless, should you had been to maneuver to a less expensive space within the U.S. or outdoors of the U.S., your preferrred stage of wealth can be a lot decrease. 

For instance, many nations in Europe have free (or low-cost) schooling, healthcare, and different social providers. Sure, their residents usually pay extra tax for these providers, however this association successfully lowers the bar for the perfect stage of wealth. In the end, you want much less when your society offers extra.

Due to this, I actually imagine you may reside a really fulfilling life in Stage 3 ($100k-$1M) of The Wealth Ladder, whether or not in a less expensive a part of the U.S. or overseas. Is it potential to have a satisfying life in Stage 2 ($10k-$100k) or Stage 1 (

Nevertheless, most individuals wouldn’t name Stage 1–2 the preferrred stage of wealth for a number of causes. Fewer monetary sources imply extra threat. Extra threat which you could’t afford essential healthcare. Extra threat which you could’t assist your self or your loved ones. Extra threat that you simply don’t reside as much as your potential. And so forth.

We shouldn’t be obsessive about cash, however we are able to’t deny its significance both. It impacts the place we reside, what we eat, who we date, what we get pleasure from, who we befriend, what we work on, and way more. 

Whereas the perfect stage of wealth permits you to reside life by yourself phrases, don’t neglect that these phrases are by no means free.

Thanks for studying.

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That is put up 476. Any code I’ve associated to this put up may be discovered right here with the identical numbering: https://github.com/nmaggiulli/of-dollars-and-data