Even great money advice can have disastrous consequences when applied in the wrong context. My advice once got my best friend in financial trouble, and it took a new mental model to fully understand why.
My best friend was buzzing. I’d just explained to him how I was investing: ETFs, long-term thinking, compound growth, the whole shebang. He loved it. “I’m starting this month” he told me, and I enthusiastically showed him how to do so.
I should’ve asked more questions. Like “Do you have rent covered for the next six months?” or “What happens if your car dies next week?”. But I didn’t. The advice I’d given him was solid, right? Everyone says to start investing as early as possible, and the internet is full of inspirational quotes backing this up: “Time in the market beats timing the market”, “Rachel started with $50 a month at 20, so Ross with $500 at 30 will never surpass her”.
A few months later, my friend and I had a very awkward “so… how’s the portfolio going?” conversation. I came rolling in with that 'Show me the money!' attitude, but it turned out he’d already been forced to pull money out of his portfolio. Twice. A car repair and some unexpected bill I can’t even remember. The money he’d allocated was money he’d need in a month, two months, or whenever life decided to remind him that things break and cost money.
The worst part? Since the money hadn’t grown, he’d been forced to withdraw less than what he started with. Fortunately his bank didn’t have withdrawal fees on ETFs, but the whole situation gave him this sinking feeling that he was doing something fundamentally wrong.
Except he wasn’t doing anything wrong. I was. I’d given him advice that had worked perfectly for me, and then watched it completely threaten his own financial situation.
The Part I Missed
So what did I miss? Turns out, the advice to “start investing early” isn’t inherently bad. It’s just not universal.
It implicitly assumes you’ve got money sitting around that you won’t need for years. It assumes that rent is covered, that groceries aren’t scary, and that if your washing machine explodes tomorrow you’re annoyed but not financially ruined.
When I personally started my investment journey, I’d built a small but important savings buffer to give myself some peace of mind first. Not because I was some financial genius, but because my risk-averseness made me accidentally stumble into it in the right order.
My friend didn’t have that foundation, I’d simply taught him how to start building wealth without first checking if the ground was actually solid.
And that’s when it hit me: all financial advice isn’t inherently good or bad. It’s contextual. And context, when money is involved, is pretty much everything.
Enter The Wealth Ladder
A couple of months after that awkward portfolio update, I stumbled on this book called The Wealth Ladder by Nick Maggiulli.
I devoured it in two days, because from the first pages it felt like someone had just handed me the instruction manual to something I’d been winging it without. It was genuinely insightful, which is rare for most personal finance content I see nowadays, and it perfectly explained the root cause of the shitty situation I’d helped my friend end up in.
The book splits your liquid wealth into six levels, each a 10x jump from the one below:
Level 1 (€0-€10k): Survival mode, living paycheck-to-paycheck. You’re covering rent and buying groceries, but financial setbacks have a significant impact. You want to get out of it as soon as possible, because your financial situation could have long-term health implications. At least, that’s how I personally experienced it.
Level 2 (€10k-€100k): You can finally breathe, financially speaking. There’s a buffer to handle financial setbacks, and groceries aren’t scary anymore. Focusing on your career means income growth, some of which you can maybe start putting aside for the longer term.
Level 3 (€100k-€1M): Day-to-day finances aren’t stressful anymore, meaning your money has enough mass that it increasingly starts working for itself. Meaningful income growth might actually be found outside the career ladder, because making vertical steps becomes increasingly difficult.
Levels 4-6 (€1M+): These levels have great descriptions in the book, but I can only imagine what these look and feel like. I’m not there, so I won’t put them in a personal story like this if I haven’t validated them for myself.
What matters most about these levels: the problems and possibilities are completely different at each one. Advice that works at one level can wreck you at another. My friend was at Level 1, while I’d given him Level 2 advice. No wonder it went sideways.
And that’s where I got lucky myself. Not because I made a ton of money or had some brilliant strategy, but because I stumbled through these levels in roughly the right order without even knowing there was a sequence.
My Own Climb
I graduated university with exactly €0 to my name. Not “close to nothing”, actual zero. I moved back in with my parents after landing my first job, since that was the only way I could save anything on my below-average salary. I lived like a broke student who’d forgotten he graduated. Six months of extremely aggressive saving later, I hit Level 2. The big freedom at that point? I stopped checking grocery prices during a period of rapidly rising Covid inflation. That’s it. Nothing glamorous, but very meaningful.
Then my now ex-girlfriend and I moved in together. We renovated the place, bought furniture, and made it a home. And my savings? The majority of it gone, since renovations and furniture add up fast. Back to Level 1, living paycheck to paycheck. Stuck there, too, because my income was exactly covering my lifestyle.
Then I switched employers, negotiated well, and got a salary bump of more than 50%. Saving finally became an option again. I rebuilt my buffer and started my investing journey, although still with relative small amounts. Enough to get used to the idea, but not enough that I’d panic if I needed it back. This time, Level 2 stuck for good.
My relationship eventually ended (with the biggest financial mistake of my life as collateral damage), and although I stayed in Level 2, it did end with me moving back in with my parents again. Overnight, my living costs dropped, savings rate exploded, and investing became a habit instead of a sacrifice I had to consciously think about.
That was when I eventually hit Level 3, where I am now. A comfortable salary, a strong savings buffer, a six-figure investment portfolio that grows significantly even when I don’t touch it, and the mental peace, financial space and time to start this blog. Not to get rich, but to do something that 100% personally satisfies me without compromise.
Looking back, I did almost everything right by accident. I got out of Level 1 as fast as possible (twice), built a buffer before investing, only invested money I wouldn’t need for some time, and let my career growth raise my baseline income before inflating my lifestyle.
But my friend? He effectively tried skipping Level 1 by investing for the long term while still figuring out how to create the financial space to actually allow it.
And that was the entire difference, nothing more.
The Filter
So, does the wealth ladder deliver any value beyond understanding what went wrong? Absolutely. If you’ve read carefully by now, you’ve probably already deduced that it’s also a perfect framework to filter the metaphorical firehose of financial advice, whether it’s online or from people around you.
When you scroll past a YouTuber explaining tax optimization strategies, you can ask: Which level is this for? My guess would be probably Level 4 and beyond, so best to skip it if you’re at Level 2.
When a blogger talks about building an emergency fund, you recognize that it’s Level 1 advice. If that’s you, pay attention. If you’re already Level 3, you’ve probably already got a significant buffer and your biggest emergency is actually making sure you use it in a meaningful way.
When a TikToker brags about their €450 a month side hustle, you see it for what it is: maybe inspirational for Level 3, irrelevant for Level 5, and potentially harmful for Level 1 and 2 since time is better spent there on building or increasing stable income.
Good advice can destroy you if the timing is wrong. The wealth ladder doesn’t tell you how to get rich, it simply tells you which advice to ignore right now. And my best friend? He’s fine now. He took time to build his buffer first after nearly getting in financial trouble, and only then restarted investing. Same advice, different timing. And this time it worked.
Sometimes the best financial move isn’t doing more. It’s recognizing where you actually are, and doing what matters there first.
If this story gave you something, feel free to pass it on!
Leave a Reply