The Five Stages of Money

As Maslow famously theorized, there’s a hierarchy of needs that motivates every human being. After reading a rather fun spoof on the Hierarchy of Silicon Valley, his theory got me wondering if we could similarly map stages to how we handle money. Whether single or coupled, rich or poor, gay or straight, male or female, I’ve seen strikingly clear patterns emerge from the hundreds of conversations I’ve had about finances.

In these conversations, there were distinct signs that could be mapped to five discrete stages. Whether you're just idly curious or you're actively trying to understand your relationship to money, I hope this framework will help you identify which stage you're in and where to go from there.

STAGE 1: Struggling with money

Many of us have been here - spending more than we earn, going into debt, and generally struggling to make our finances work for us. Some “strugglers” are starting out their money journeys and others have been stuck here for a while. Some have even fallen back here because of a divorce or a medical emergency. Whatever brought you to this place, you might feel frustrated, dejected, or maybe even be avoiding your reality.

If you’re in a relationship, you might be fine on your own but not as a couple. This a tough stage to be in because it can be hard to look at your finances head-on, simply put one foot in front of the next, and work yourself out of it.

What this feels like:

• You don’t know where you money is going.
• You find yourself missing multiple bills.
• You need to borrow more and more money to pay for all your expenses.
• You lack an understanding of where you are financially because you’re avoiding it.

How to get to the next stage:

• Understand the situation. Before you can fix something, you need to know what’s broken. That means understanding your financial situation. Sit down with your partner, friend, or a financial coach and dive into your finances. If you’re in a relationship, a tool like Zeta can help.
• Focus. Don’t try to solve for everything! Start by focusing on 1-2 things - ideally the things that will make the biggest impact. For example, if your rent is more than 30% of your budget, it’s worth looking for a more affordable place to live.
• Set a goal. Now that you know what you’re trying to fix, set a goal and hold yourself accountable to it. If you’re not sure you will, ask your partner or a friend to help you stay on track. And when you hit that milestone, make sure you celebrate!

STAGE 2: Surviving

This is an interesting stage - you’ve managed to right-side your income and expenses, but you’re barely making it work. Said another way, the struggle is very real. You might be here for a variety of reasons - you made some early money mistakes and are saddled with high-interest debts you’re trying to pay off. Or your cost of living is too high for you to sustain. Sometimes, you’re the primary breadwinner and the costs of raising a family are no joke.

What this feels like:

• You find yourself often checking your bank account for when your next paycheck hits.
• An emergency expense throws off your finances for a few months.
• You’re paying the minimum payments for your student loans or your credit card.
• You know your money situation, but you haven’t sought out any help to move past this stage.

How to get to the next stage:

• Get help. There are tons of free or paid programs to help you get on the right track. Do the research and identify which one is right for you. There are classes, apps, coaches, and non-profit organizations dedicated to help people at this stage.
• Try a side hustle or asking for a raise. As Kamilah of The Focused Spender suggests, increasing your income is just as important as reducing your expenses. Try asking for a raise or finding a higher-paying job. If that’s not an option, find a side hustle. Here’s a list of 70 side hustles from J. at Budgets Are Sexy.
• Start an emergency fund. You need to start a small emergency fund so you’re not totally wiped out if something comes up. Start by putting away $25-100/week if you can. In three months, you could have more than $1,000 saved up.

STAGE 3: Maintaining

At this stage, you’ve moved past stressing the small stuff and are comfortable splurging without feeling any guilt. You’ve got your bills covered and you even have a little slush fund for those small purchases that make you happy. Some “maintainers” are happy to just stay put at this stage - after all, life is about more than pursuing money. They might be young and care-free or older and wiser. Whatever their reasons, “maintainers” are still susceptible to tough financial times, but they’re less stressed, less likely to get mad at their SO about their finances, and more free of the chains that bring us down.

What this feels like:

• You don’t panic when you have a crazy night out or go on a bougie date.
• You're feeling more confident about money, and you might even help some of your friends or family with finances.
• You can’t YOLO all the time, but you’re on your way.

How to get to the next stage:

• Keep paying down that debt. In order to truly build wealth, it's important to pay off high-interest debt (like credit cards or private student loans) as quickly as possible. Lauren Bowling of Financial Best Life suggests making contributions from your side hustles to pay down debt even faster.
• Build up a robust emergency fund. Now that you’re in the habit, Lauren recommends making your emergency fund robust enough to withstand six-to-eight months of expenses. Having a fully-loaded EF is the fastest way to maintain your lifestyle without going backwards.
• Create longer-term goals. With emergencies taken care of, you can now focus on medium and long-term goals. For each goal, create a dedicated fund and put money into it with each paycheck (or monthly, if that’s easier). It’s a great idea to automate that savings, so you don’t even have to think about it.

STAGE 4: Building

This is an interesting stage because “builders” aren’t quite ready to quit their jobs, but they’re also pretty comfortable. They’ve paid down a lot of their debt, are contributing to retirement, and have built strong savings habits. Some “builders” might even feel like they’re on auto-pilot because all of their obvious money goals have been met. That said, I’ve seen some “builders” get a little rudderless because their next milestone feels like it’s decades away. Others are fine staying put at this stage - they feel they’ve achieved the life that they set out to pursue for themselves.

What this feels like:

• Your net worth is steadily increasing at a consistent rate.
• You can withstand most emergencies and even help a brother out if needed.
• You could take a 3-month sabbatical without having a panic attack.

What to do:

• Find your passion. Now that you’ve living debt-free and with solid savings, you can put your extra cash toward other passions, like re-building a car or pursuing more education.
• Share the love. With additional cash, you’re in a more comfortable position to help friends or family out who might need some support. You’ll be able to lend or give them money without pressure or anxiety. There are also so many great causes that could use financial support — find a few you care about and set up recurring donations.

STAGE 5: Thriving

At this point, you’ve got 99 problems but money isn’t one. It’s less about how much money you have, and more about the fact that you’re able to live within your means, however big or small. This is what financial independence feels like.

What this feels like:

• You just don’t stress about money.
• You do you and you’re able to without thinking twice.
• Your friends are jealous.

What to do:

• We want to hear from you! Tell us all about how you're planning and thriving on Twitter