The Money Ladder: Which Level Are You On? || Masterminds Podcast EP59

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Most people think about money in terms of how much they make. Very few think about where they actually sit on the financial ladder — and even fewer have a plan to climb it.

In this solo episode of the Masterminds Podcast, Richie Mensah breaks down the six levels of the money ladder, from trapped all the way to wealthy, and explains exactly what separates each level from the next. He unpacks why money doesn't solve problems but changes how you experience them, why being rich is not the same as being wealthy, why lifestyle inflation is the silent killer of financial progress, and what you need to do right now — regardless of where you are — to start climbing. This episode is a complete financial framework in under 30 minutes.

In this episode, you'll learn:

• What money actually does in your life — and what it doesn't
• The six levels of the money ladder and how to identify where you are
• Why lifestyle inflation is keeping most people stuck at above average
• The key difference between being rich and being wealthy
• Why wealthy people don't need to work — and how they got there
• The difference between income and ownership — and why it changes everything
• How to start saving and investing from any level
• The two types of investment and which one is the surest path to wealth

Transcript

SPEAKER_00 0:00

Hi and welcome to another awesome episode of the Masterminds Podcast. Once again, I'm here to help tune and sharpen your most important and your most powerful weapon, your mind. In this episode, we're going to talk about what money actually does in your life and the different levels of money. Let's call it the money ladder. So that you know the level you are at and how you're going to rise on that ladder. So before we continue with the episode, something interesting just happened in the studio right now. After shooting one of my usual solo episodes, somebody asked me questions, which made me realize that sometimes your questions actually allow me to give better feedback and better information. So let's do this. If you've ever felt like you've wanted to ask me questions or further clarification on anything I've said, you can drop it in the comments and I'll use those questions to do special episodes just to answer you. I may even cut out your name so that you understand that I am answering you. And also do me a favor. I see so many people who are watching my episodes who have forgotten to hit the subscribe button. You know, we're trying to grow this community, build masterminds like you and I, who can acquire wealth, who can build their mindset and become more wealthy financially, physically, spiritually, and especially when it comes to health. So please do me the favor and subscribe. So let's start with what money does in your life. I know everybody's heard it. We hear everybody say, oh, money doesn't solve problems, money cannot make you happy, money doesn't buy happiness, money this, money that. We sometimes think it's just a rich person trying to get a poor person to not chase wealth, but that's not it. Let me explain it to you properly. Money does not take away problems. You will always have problems in life. The true purpose of money in your life is money gives you options. Let me explain it like this. Whether you are poor, whether you are rich, whether you are wealthy, you can get sick. But the difference is what options do you have when you get sick? When a poor person gets sick, they panic because anything that they try and do to solve their sickness could lead to extreme poverty, could lead to them not having their next meal or something drastic in their life. When a rich person gets sick, he asks, which hospital do I go to? Which medicine can I buy? Because he has options to buy any of them because he can afford it. So money gives you options. So phrasing it like that makes you understand that money is not changing your life. Money is not changing the things that are going to happen to you because they will happen to you regardless. What money does is it changes how you experience those things happening in your life. If it's heartbreak, everybody will chop breakfast. But when you chop the breakfast, are you sitting in your one bedroom that you are squatting in in heat, crying? Or are you driving to a vacation in your luxury car to blow off some steam? So money can buy happiness, but neither does poverty. So please, let's work on how we are going to take you up on the money ladder. So first let me explain what the money ladder is. Money ladder is over time, people have been able to estimate how much people have based on their living conditions. And we segmented it into different levels, right? The first level, which I call ground floor zero, you know, day inside. The first level is trapped. Now, to be trapped means that you are a dependent. Now, when I say you are dependent, I'm not talking about kids. Kids are supposed to be dependent. I mean an adult, but you are dependent because your income is lower than your basic expenses. That's a horrible place to be. That means how much you are making every month cannot afford to give you the necessities in life. Let's look at what we call the necessities in life from accommodation, food, basic transportation. I mean getting from one place to another, just basic transportation, basic clothes. These are the bare necessities in life, the things you need to survive. So if your income is less than what it takes to get this at the lowest form, then you are trapped. Because this means you have to be dependent on gifts, on family, on friends, whatever it is, you are only surviving at someone else's behest. So if anything happens to that person, or if you get any extreme expense yourself, it's a rap. Now, the first level, so now we've left ground floor, we've gone up the elevator. Level one is poor. Now let's explain poverty properly because there are certain people who call themselves poor but they are not, they're actually doing very well. So poverty means that you are able to cover only your basic needs. So this means your income is just about equivalent to your basic needs. Once again, when I say basic needs, please understand me properly. I'm talking about the lowest level of survival. Yes, you are eating, but you are only eating the food that is the cheapest, the one that you can only you can afford because it is too low. The food that nobody else wants to buy. You have a house, you're staying in a house, but the place you are staying in, you know you shouldn't be staying there. But this is the only thing you can afford for now. Most transportation to you looks like walking to work, walking to go and buy this. You know, your transportation ends up being exercise for you because that is your only option. You know, please, someone watching this who decides to walk for exercise, that is not poverty. That is a choice. At the poor level, your basic needs are at the lowest level, but you are able to meet them. So this level means you are surviving and only surviving. Now let's go to level two. You've risen a bit. Now, the level two is below average. So the person who is below average is getting just a little more than their basic needs. Their income is able to cover their basic needs and a comfort every once in a while. Every once in a while, they're able to splurge on something small. When I say splurge on something small, what I mean is maybe there are two gober sellers in your house, you know. One of them, you know, say it will give you food poisoning, but you eat it like that because it's the cheapest. But every once in a while, you can go to the other gober seller and give some extra money so that you feel good. So below average still means you're not doing good enough, but you've elevated from the poverty level. So below average feels like progress because you're doing better in life than you probably were before. But it still comes at very high risk because if anything happens to you, because your basic needs are still very, very close to your income. So if anything happens, if you fall sick at the wrong time, if you know you go and hurt your leg or your your family member needs something, it brings you right back to zero because you don't have enough strength to maintain. That is below average. The third level where most people are at is average. Now, what average means is that you are doing okay in life. Okay means you're fine. You can cover your basic needs. For most people at this level, your basic needs are even being covered in a slightly more respectable manner. You know, you have a nicer house, you've moved from the old neighborhood that you were in, you take your bus to work all the time, every once in a while you decide, let me take an Uber, let me take a bolt. Do you get me? You've been able to solve your daily problems in a nicer way, which means this comes back to what I was saying in the beginning. Your options have grown. For instance, now when you are going to work, you can ask yourself, should I walk to work? Should I take a bus to work? Or should I take an Uber to work? Understand, the moment you can think about options, it means your life is getting better. Because what I just said, someone else doesn't have these options. For someone else, the only question is, should I walk to work or take a bus to work? For someone else, it's not an option. I am walking to work. So the average person now has a little more options. But this is where it starts to get tricky. Because for most average people, lifestyle inflation kicks in. This is where the things that were fine for you three months ago when you were either below average or poor are suddenly not fine for you anymore. Now that wache seller at your junction, I don't know, there's not enough salt in their food. So now instead of buying that wache, which you were fine with not too long ago, now you need to take an Uber to go to the other side of town to go and buy some wache. Well, right now, 10 Cities Wache is not really good. You want the one that's 20 cities watche, lifestyle inflation starts to kick in. Don't get me wrong, I'm not saying you shouldn't advance in life. But the problem with lifestyle inflation, which happens to most people at the average level, is it prevents you from growing and going to the next level. Because bear in mind, the average level means you have enough to survive and small for a little comfort. So when you are spending that small for a little comfort all the time, you stay average. Now let's go to level four. Bear in mind, level four is where most people end up and get stuck in life. Level four is above average. So above average means now you're really doing good. You have strong income, possibly even multiple sources of income. You know, by average, below average, poor, most of the time, that one has only one source of income. You have a job that you are doing, and that's the only money that you are making. But above average means maybe you have a side hustle that has kicked in, or some inheritance became that has helped you. But there are different ways of you making money. So now you've elevated from just surviving on your basic needs. Now you're able to enjoy life small, you know. It goes from the occasional comfort to the regular comforts. The person above average is never going to maybe take a bus. It is either they are taking Uber or now they've bought a car because life is good. Do you get me? So the person above average has more options, they are able to do more. And this level gets very comfortable for most people, especially for someone who has risen up on the ladder of the on the money ladder. If you started from being trapped to being poor to below average to average, and then you are finally at above average, most people stop here because it's fine. I've done well, I'm eating good, I'm living good, I go to the spa every once in a while, you know. I go to parties, I go to the club, pop a few bottles every once in a while. So they are doing good. Now what happens? The trick is I mentioned lifestyle inflation at average. At above average, the lifestyle inflation is massive. You are spending money that you shouldn't be spending. You are doing things that deep down inside you know you shouldn't be doing because some of these things you are doing are just for status. A lot of above-average people try so hard to look rich. It's funny, most people that you think are rich are actually above average because they want to feel good. You know, there's something people don't understand the psychology of money. When you are trapped and suffering in poverty for so long, when you finally make money, there's a psychology which makes you feel like, let me show people, let me show them who I am, let me change my car, let me buy these bougie clothes, you know, let me buy all the designers to show them, yes, do you know me? I am Richimenta. Let me go to the club and pop bottles. I don't even drink champagne, but please, five bottles of champagne so that everybody in the club sees that there's a baller in here. So they do bala lets, bala lets, then it's like, ah, there's a psychology that makes us feel we need to show off. You know, Morgan Housel said it perfectly when he asked that. Before you spend any money, ask yourself if no one saw the thing that you are spending money on, would you still do it? If no one ever saw that luxury house you want to buy, or no one ever saw that bougie car or the bougie clothes that you want to buy, would you still buy it? If the answer is no, then you understand you are only buying it to show off. And it's a very logical thing for most people because you've suffered for so long, you want to show off. But this is what keeps people stuck at above average. Because all your multiple sources of income which are coming in are now going into multiple sources of expense. Now let's go to level five. We're almost at the top. Level five is rich. So the person who is rich has very, very high income, and most of the time also has very, very high expenses. So the person who is rich is living a luxurious life. You know, they they eat at the finest restaurants, they drive the luxury cars, they buy the luxury houses, they live a life of luxury. Now, the moment you see such wealth being like shown to the world, then you understand that this person is at a level where they are making a lot of money and also spending a lot of money. So a rich person has status, but not freedom. When I say that, what I mean is that maintaining that status is very expensive. So they need to keep working very hard to keep maintaining that status. So being rich is a different kind of prison where you need to always keep pushing hard, keep working hard to maintain and stay at a certain level. So don't get me wrong, being rich is an amazing place to be. But it means you are constantly on the treadmill. You are constantly working hard, pushing hard to be able to maintain the luxuries that you need in your life when they really are just luxuries. So being rich, I know a lot of people are aiming to be rich, but I need to tell you that that shouldn't be your goal because you will be stuck on that treadmill forever. So now this brings me to the top level, the last level on the money ladder, level six, which is wealthy. Now, let me explain this properly for most people who don't fully understand what wealth is. Bear in mind we've already spoken about rich. So wealth is a different thing. Wealth is simply when the expenses of your everyday life are lower than the income from your assets. This is the key difference between a wealthy person and a rich person. A rich person is consistently working, they are using their time to earn income, which supersedes their expenses. But for a wealthy person, their assets, their ownerships, the things that they don't need to actively work on is bringing more revenue than how much they are spending in their everyday life. I hope I'm explaining this properly. It's the key difference between being rich and being wealthy. Let me give a practical example. If a rich person has an accident, something makes them incapable of working, or their company collapses, do you get me? If something like that happens in their life, maybe the next three to six months, they will be back to being poor all over again. So even though being rich is good, it's still not stable enough. But a wealthy person means without working, without lifting a finger, they can continue to make money that is over how much they are spending every day. Now let's talk about how you're going to climb up the ladder because we all want to be wealthy. I'm not there yet. I'm working towards it. So let's work on it together. So the transition. The transition comes from you understanding the difference between income and ownership. So income means you have to work hard, push hard, fight hard, keep, you know, keep hustling. And if you stay in that level for the rest of your life, you will keep fighting hard, keep working hard until you die. You will be old and gray and still fighting hard for your next meal. Whereas ownership means that your money now works for you. The money which you fought hard to make, the money that which you hustled to make, is now going into assets that is bringing you money automatically. I'm not saying it's easy, but it means that you don't need to work as hard to be able to rise up the ladder. So once you understand the difference between income and ownership, then you have to start asking yourself how do you become someone who owns assets? The first thing is your financial knowledge determines the level that you are at financially right now. Wherever you are on the ladder, it's based on what you know. So the first thing is to start learning how to behave like a rich person, which means you have to learn how to save. I know it sounds counterintuitive, but the truth is saving is not a way you build wealth. Saving is a habit that you learn towards building wealth. And what I mean by this is the first thing you need to do to start changing your life financially is pay yourself first. The richest man of Babylon says that pay 10% of all the money you make to yourself, which means put it in savings, put it in an investment, whatever it is, take 10% and put it somewhere else for yourself. I say 20%. You know, the time they wrote richest man in Babylon, life wasn't hard like it is right now. Right now, life is hard. If you want to build wealth, 10%, 10%, it won't get you there. Put aside 20% of every money you make into your future self. This means if you are making 1,000 CDs a month, see it as you are only making 800 CDs and put away 200 CDs. If you are making 10,000, put away 2,000. Every money that comes in, push 20% away into your future self. When you're able to master the skill, you are guaranteed that you are going to make money. Because even if you are unable to master investment yet, even if you don't buy any stocks, you don't own anything, just the fact that you have the habit of spending less than you make every month and you are able to put some towards your future self will start taking you towards wealth. Now it's not good enough to just save the money. So now that you've built the habit of saving the money, you have to learn how to invest the money. There are two ways of investing. Only two. They all fall under these two things. One is your own businesses, and two is other people's businesses. So your own business is high risk, high stress, high reward. It requires a lot of skill, it requires knowledge, it requires a lot of hard work. But when you're able to build your own businesses and it works out, the reward is legendary. But of course, it comes with a very high risk of the fact that the businesses could fail. So even though that is the way that a lot of people have gotten wealthy, it's also the way a lot of people have gotten poor by trying to get wealthy. So the first type of investment is your own business. The second type of business is other people's businesses. Now, this comes in different ways of investing, which is stocks, funds, in index investments, treasury bills, bonds, any other investment that you just give your money to somebody else and they run with it, becomes investing in other people's businesses. Now, this method is not as risky as investing in your own business. The rewards are not as high because if you start a business, there's a possibility you can make 300% profits, 500%, sometimes 3,000% profits. Of the money that you injected into the business. But when it comes to other people's businesses, buying stocks, treasury bills, you're looking at 13% profits, 15%, 20%. If it's a crazy scheme, then you are going at 40, 50%, right? But those ones are also a little more risky. However, even though this one has lower reward, because it has lower risk, there's a bigger guarantee for success for most people. So a lot of people who've built wealth throughout their life concentrated on investing in the low-risk businesses, other people's businesses. If anybody's asking me of the surest way to build wealth, I would definitely tell them it's investing in other people's businesses. You know, personally, I really like using Achieve because I can consistently buy stocks on Achieve. Sorry, I mean I can consistently buy investments and achieve. They have this digisafe that I like to use, and every day I put aside a small amount. Do you get me? To be able to build wealth consistently is actually the easiest way of becoming wealthy. I know people who just had a nurse's salary, and after 20 years, they had built a bigger wealth than an actor who had a lot of money coming in for big projects. This is an is a real life example. I'm sorry, I don't remember the nurse's name, but I remember at the time I read an article where when the nurse was retiring, she had more wealth than Nicolas Cage. And Nicolas Cage is an actor who, in his prime, could take up to$5 million,$10 million per movie. But because of his lifestyle and the fact that he wasn't investing, a nurse who just kept investing every month retired with more money than he did. So being able to find an investment like achieved that you can just consistently put money away in and watch the money grow is one of the best things that you can do to build wealth. So now let me wrap it up with how you're actually going to climb the ladder. So please, if you've understood the ladder, you've understood the important things for you to go up. The first one is income. Increase your income. The way to increase your income is by increasing your knowledge and your skills. When you are at the lowest level, that is what you need to concentrate on. Increase your skills. If you are a laborer on a construction site, learn how to paint so you can make more money. Learn how to do some carpentry so you can make more money. Increase your skills, then you increase your income. As you increase your income, then now you focus on putting aside 20% of that income consistently. So that when your energy starts to run out from working so hard to make money, that savings that you've put aside now goes to investing. And remember, when you are investing, there are different types of investment. Don't put all your eggs in one basket. So you can decide to open one small hustle, whatever you can afford. If it's a delivery company, buy one um motorbike and start with it and see. If it's bringing in, if it's buying products and selling it, maybe you find things that cost five cities, seven cities, and you sell it at eight cities, nine cities, whatever it is, based on your circle. Start a small side hustle that is a little guaranteed and can bring you some revenue. And then the other money that you have, put that aside in investments. Put that aside in from treasury bills, from stocks, you know, find ways of letting that money grow. But once every single month you are putting money away for your future self, you will see yourself climb that ladder. But the most important thing for me is avoid lifestyle inflation. Please remember you came on this earth alone. You have nobody to impress. Don't go buy things because you want to look good in other people's eyes. Don't go spend money that you've worked so hard to earn just to get status. Everything you spend money on should be something you love, something you cherish, something that means a lot to you. Avoid lifestyle inflation. Stay with these three rules, and you will be on the journey to achieving success. I hope this episode has brought you five steps closer to being the mastermind that I know you deserve to be.