What are the four financial classes?
Curious about which financial class you belong to? Ever dreamed of upgrading from credit cards to real estate investment trusts? Let’s figure out where you stand now and where you want to go! Whether pinching pennies or swimming in dough, here’s your chance to map your journey to financial freedom.
Which of the four financial classes describes you
Over our years of working in financial services, managing money, and keeping up with economics, we’ve concluded that, just as there were four original members of Destiny’s Child, there are four fundamental financial classes. Some folks may dabble in a few classes, and some may bounce between them like a ping-pong ball, but most find themselves firmly planted in one.
Think of these financial classes like the members of a boy band—each has its distinct characteristics that can either help or hinder someone from changing their financial tune. Just because you’re in one class now doesn’t mean you’re stuck there forever. People can slip down to a less desirable financial class faster than you can say “impulse buy.” But with the right mix of education and effort, you can climb to a more desirable class, no matter where you started.
So, without further ado, here are the four financial classes as we see them:
The four financial classes
1. Leveraging class
Like Stanley Burrell, a.k.a. MC Hammer, members of the Leveraging Class have mastered the art of spending money they don’t have. These high rollers live on credit, and just like Hammer’s infamous parachute pants, their debts are oversized and often out of control. They’ve perfected the delicate dance of borrowing and repaying, a never-ending cha-cha of financial gymnastics.
The Leveraging Class is like the rock stars of spending—they’ve got a good credit rating, but they’re paying a 15% premium for everything because that balance on their credit card never quite makes it to zero. They’re the ones who always look like they just stepped out of a fashion magazine, keeping up with, and often setting, the trends for the rest of us. Yes, they are the proverbial Joneses we’re all trying to keep up with.
Picture this: a member of the Leveraging Class walks into the mall, and it’s like a scene from a movie. The spotlight shines, the music swells, and they strut through the aisles, card in hand, ready to swipe their way to temporary happiness. Need a new outfit? Swipe. The latest gadget? Swipe. A designer handbag? Swipe, swipe, swipe. They leave the mall with bags full of goodies and a credit card bill that looks like it’s been on a lavish vacation.
Sometimes, members of the Leveraging Class find themselves slipping into the Spending Class—like when reality sets in, and they realize that maybe, just maybe, they should’ve skipped that fifth pair of designer shoes. It’s a tough cycle to break, and they might not even want to break it. After all, life in the fast lane has its perks, even if it comes with a high-interest price tag.
So, whether you see them as financial daredevils or credit card connoisseurs, the Leveraging Class keeps the economy—and their debt—spinning. If you find yourself in this class, remember: it’s fun to be the life of the party, but don’t forget to check the price of admission.
2. Spending class
As if they believe “Mo’ Money Mo’ Problems” is gospel truth, members of the Spending Class spend every penny they get as if it’s burning a hole in their pocket. They rarely see more than a few crisp $100 bills in their wallets—if they ever join the Saving Class at all—and frequently find themselves crashing the Leveraging Class party.
Picture this: members of the Spending Class waltz into the mall with a fistful of cash, eyes twinkling with the excitement of a kid in a candy store. They don’t have a lot of stuff like the Joneses do, but they do have a knack for making that cash disappear faster than you can say “retail therapy.”
When it comes to credit cards, they dabble—occasionally using them and often paying a 5% premium on everything because those interest rates sneak up like ninjas. Their credit history? Let’s just say it’s more like a credit novella—short, inconsistent, and definitely not a bestseller. This often leaves them with credit scores that are more meh than magnificent.
While the Joneses might inspire envy with their shiny new toys and gadgets, the Spending Class folks are rocking a more…vintage vibe. Their stuff isn’t the latest or greatest, but hey, it’s got character, right? Emergency savings? That’s about as mythical as a unicorn riding a rainbow. They live in the moment, which is great for their Instagram stories but not so much for their financial stability.
So, next time you see a member of the Spending Class at the mall, watch as they make it rain with whatever cash they’ve got. New sneakers? Sure! A spontaneous trip to the food court for overpriced smoothies? Absolutely! They’re living one impulse buy at a time, ensuring every shopping trip is an adventure.
In the world of finance, the Spending Class might not have it all figured out, but they sure know how to have fun. They’re the life of the party, even if that party sometimes ends with an empty wallet and a slightly concerned look from their bank.
3. Saving class
Members of the Saving Class, possibly inspired by the dream of making it rain on a material girl’s rainy day, are judicious about every single penny they spend. They scrutinize every purchase like Sherlock Holmes, investigating a mystery and investing in the stock market. That’s either a “maybe later in life” or a “no thanks, I’ve seen The Big Short” due to their current stage in life, income constraints, or a healthy distrust of Wall Street after multiple market crashes and scandals.
In today’s low interest rate environment, the Saving Class isn’t as robust as it used to be or as it should be. It’s a bit like finding a unicorn in a haystack. People just don’t see the point in squirreling away their acorns when the interest rates are about as exciting as a Monday morning meeting.
Picture a member of the Saving Class at the mall. They stroll past stores, admiring the goods from a safe distance, mentally calculating the price per use of that designer jacket they’ll never buy. They’re window-shopping champions, turning the act of not buying things into an art form. They know every sale, every discount, and every clearance event, but they’ve got the self-control of a Zen master.
To them, the mall is a museum of consumerism. They gaze at the latest gadgets and fashion trends, appreciating the craftsmanship and style, all while knowing they won’t part with their hard-earned cash. A spontaneous splurge? Only if it’s on the budget list—and even then, it’ll be debated like a political bill in Congress.
While others might see them as frugal, members of the Saving Class see themselves as financial ninjas, stealthily navigating a world designed to separate them from their money. They’ve got emergency savings accounts that could make a squirrel blush, and they know the value of a dollar better than a seasoned accountant.
So, next time you see someone in the mall looking but not buying, know that they’re members of the Saving Class—wise, wary, and watching their wallets like hawks. They might not be the life of the spending party, but they’ve got their eyes on a bigger prize: financial security, peace of mind, and maybe, just maybe, a rainy day where they can make it drizzle just a bit.
4. Investing class
Members of the Investing Class take inspiration from the CEO of Hip Hop himself, Jay-Z, and invest as much as they can in the stock market, real estate, and other ventures. Thanks to America’s anti-savings policies, they’ve discovered the magical power of their money working harder than a caffeinated squirrel in a nut factory. They wouldn’t be caught dead joining the Saving Class because, let’s face it, their investments are doing all the heavy lifting.
Contrary to Merle Travis’s old tune about needing to work hard, these savvy individuals have cracked the code on using credit to their advantage. Their credit scores are stellar, shining brighter than a Vegas marquee. While they carry some debt, their net worth is so positive they could give a TED Talk on financial success. They’ve mastered the art of generating enough passive income to subsidize their lifestyles through strategic investments and debt management. They might not have to work hard, but earning money for doing nothing feels like winning the lottery every day.
The Investing Class makes The Joneses want to take out another mortgage on their home just to keep up. But good luck with that! The Joneses probably don’t have enough credit to match the lifestyle of someone who sees every opportunity to make buckets of cash.
Picture a member of the Investing Class at the mall. They’re not just window shopping; they’re practically owning the place. Literally, through a Real Estate Investment Trust (REIT) in their 401(k), they earn a tidy 10% annual return on the mall you’re shopping in. While you’re deciding whether to splurge on that new gadget, they’re raking in profits just by virtue of your indecision.
These investment aficionados live life on the next level. They might look like they’re just enjoying a latte at the mall café, but really, they’re analyzing market trends and planning their next big move. They’ve got the luxury of time and the thrill of seeing their wealth grow while they sip their overpriced coffee.
So, next time you spot someone casually lounging at the mall, know this: they might be a member of the Investing Class, effortlessly making money while enjoying the finer things in life. They’ve cracked the financial code, and their money is out there, working harder than ever, so they don’t have to. Cheers to them for making passive income look so darn easy and glamorous.
So, which financial class do you belong to? More importantly, which one do you want to join? Figure that out and chart a course to where you want to be.
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