The lifestyle ladder: a wealth-building framework for entrepreneurs

This is my adaptation of the 'lifestyle ladder' concept from the Tropical MBA team.

I believe building a business is the least risky way of building wealth. But building a business from scratch is a marathon, not a sprint.

The lifestyle ladder framework lays out a pathway to building wealth to help you maintain motivation for the decades it could take.

The lifestyle ladder framework

#1. In debt (net worth is less than $0)

This is usually due to credit card debt or irresponsible car purchases.

The top priority is paying down debts.

#2. Broke ($0-$20k in savings)

Free from the strain of living in debt, but still living lean.

Wants to have more than $20k of savings before quitting their job and starting a business.

#3. Hustling ($20k-$60k in savings) + started a business

The early stages of running a business are tough, but within 12 months you are earning enough to cover your basic living costs.

You are working long hours, but it feels exciting.

#4. 1000 day rule - the business can now pay you a market salary

It's taken 3 years of hard work, but now the business has grown to the point it can pay you a market salary.

You have kept your lifestyle expenses in check while your earnings increased. This means you are saving more and building wealth via the assets you own (eg. your business).

#5. Entrepreneur (dividends from the business you own)

After 6 years you are no longer needed in the day-to-day running of your business.

You are receiving dividends (profit distributions) from your business and you are starting to build a portfolio of assets.

#6. Freedom number ($2M-$10M)

Based on the 4% rule from the FIRE movement you will be able to live on $80k per year with $2M in conservatively invested assets and $400k per year with $10M.

As an entrepreneur, the fastest way to get to your 'freedom number' is with your first business exit.

#7. F*ck You Money ($10M+)

Passive investment income is more than covering expenses even at peak lifestyle.

Some entrepreneurs will achieve this with their first exit, but for others, it might be a 15-20 year journey.

Content

NameExcerpt
1
2
© 2022 meryl.johnston.com
3
Made with Super & Notion