Barbara Stanny describes the four stages of wealth as Survival, Stability, Wealth, and Affluence. Based on thousands of hours as both a client and a counselor in the money coaching process, here is my understanding of each stage.
Survival
You know you’re in survival mode when you stash unopened mail, count the days and hours until the next paycheck, and run out of money each month or each pay period faster than expected. You’re riddled with fear, negative thinking and have crippling financial insecurity. You’re truly living paycheck to paycheck and the cycle of concern about about money seems never ending.
People in survival mode:
Carry balances on their credit cards
Spend inordinate amounts of energy moving money around
Feel regret and remorse about past financial decisions
Feel powerless and resigned about catching up
Owe back payments
Obsess yet avoid their money
Face threats of collections and service shut-down
Stability
You know you’re experiencing financial stability when you’re current with your taxes, have steady income, and pay your bills in full and on time every month. You live in housing that works for your bank account and your lifestyle. You’re able to sustain savings and cover periodic non-monthly expenses (car repairs, vacations, Christmas, etc.) without putting it on the credit card or freaking out.
Though for the most part, people in this stage have a good handle on their personal finances, there can still be occasional dips in financial and emotional security. People in this stage try to save money only to quickly transfer it back and continue using credit cards paying this month for last month’s spending. A surprising number of 20 to 40-somethings have yet to reach sustainable control over their finances.
Basic milestones of financial stability:
Thorough understanding of monthly and annual spending and earning
Six months of living expenses set aside in a safety net savings account
Regular contributions to retirement
Appropriate insurance: health, home, car, life, and long-term care
Wealth
The dictionary defines wealth as an abundance of valuable possessions or money. The archaic definition is well-being or prosperity. Wealthy people demonstrate security and they exercise their right and deservedness to choose. These men and women have transcended daily and monthly concern over bank account balances and are now giving back to themselves, their families and society. Not that being wealthy gives you permission to stop caring, in fact, it mandates taking responsibility for what you’re doing with your money. In this particular stage, there is abundance, in other words, enough to donate time, money, energy and resources to making the world a better place. All basic financial needs are met and there is more pleasure, self-care and adventure on the calendar.
Act like a wealthy person:
Hire a certified financial planner
Strategize for periodic income: bonuses, commission, gifts, tax refunds, and reimbursem*nts
Work with an investment advisor
Have a will, a living will and a medical power of attorney
Hand over your taxes to a strategist or beloved and successful CPA
Understand your parents’ wills
Be educated on the details of your entire estate including inheritance
Ensure that everyone in your family, across generations, is on the same page about family money, empowered with personal finance accounting skills and clear about the elders’ end of life wishes
Affluence
Affluent people leverage their wealth. They use their money to grow more money. The danger zone here is excess. One of my affluent clients, a single man, had 26 magazine subscriptions and nary the time to read one per week.
Common pitfalls of affluent people:
An unhealthy or unconscious relationship with money due to outsourcing, overdoing and overwhelm
Too much stuff, too many houses, and a loss of contact with simple, natural, connected and meaningful experiences
Entitlement that encroaches on their personal and professional relationships
Severe loneliness
Affluent people have access to services, savings, investments, tax and business loopholes and outright wealth accumulation that other people don’t. They have an extraordinary opportunity and responsibility to channel this flow of energy for the good. Have you ever dated someone using a black AmEx? It’s pretty unbelievable what this exclusive credit card allows you to do. Spontaneous trip to Turks and Caicos, anyone? In all seriousness, let’s acknowledge the Bill and Linda Gates Foundation, Oprah Winfrey’s schools and hospitals around the world, and innumerable other non-profits created by affluent people with missions to serve.
Of course it is possible to have behaviors, experiences and feelings from more than one stage at a time. Conflict and stress over money arises when the outside doesn’t match the inside. Sometimes, people have “the stuff” but are emotionally exasperated over money anyway, while others have little to nothing and have joy, gratitude and faith enough to add years to their life. As a money coach, I work with people in every stage of wealth for the sole purpose of alignment. When your personal vision of financial and emotional security is fulfilled, or at the very least your actions are in integrity with your intentions and goals, lasting peace of mind about money becomes possible.
Barbara Stanny's framework categorizes wealth into four stages: Survival, Stability, Wealth, and Affluence. Each stage reflects a distinct financial state and mindset. I'll dive into each concept discussed in the article to offer a comprehensive overview:
Survival: This stage embodies financial distress, marked by paycheck-to-paycheck living, unopened bills, constant worry about money, and a sense of powerlessness. Evidence of this stage includes carrying credit card balances, struggling with past financial decisions, facing collections, and experiencing severe financial insecurity.
Stability: Financial stability represents a higher level where individuals maintain steady income, pay bills on time, and comprehend their expenses and earnings. Achieving this stage involves having savings for emergencies, contributing regularly to retirement, and holding appropriate insurance coverage. However, occasional setbacks and reliance on credit cards to cover expenses from the previous month might still occur.
Wealth: At this stage, individuals transcend constant concern over their bank balances and can give back to themselves, their families, and society. Wealthy individuals focus on strategic financial planning, investment, and ensuring that basic financial needs are met. They exhibit abundance and often engage in charitable activities or contribute to causes they believe in.
Affluence: Affluent individuals not only have wealth but also leverage it to generate more wealth. However, pitfalls at this stage include an unhealthy relationship with money, excessive materialism, and potential isolation or disconnection from simple, meaningful experiences. They possess access to exclusive financial services, investments, and opportunities but might struggle with the responsibility that comes with it.
Each stage represents a spectrum of financial behavior and attitudes. Conflict arises when external wealth doesn't align with internal perceptions or emotions about money. The goal of a money coach, like myself, is to bring alignment between an individual's financial circ*mstances and their emotional well-being to achieve lasting peace of mind regarding money matters.
