The 7 Money Models: Which One Are You?

When I talk to people who are experiencing financial difficulties, one of the things that often strikes me is the sense of powerlessness they seem to espouse.

And having experienced plenty of such challenges myself, it’s hard to blame them. When things are going badly, it can sure look like the world is conspiring to put us down and keep us there.

So I wanted to come up with some really simple financial advice that would be both enlightening and empowering.

Having, on one hand, suffered through some debilitating injuries that left me unemployed and just-over-broke for several years, and then on the other – traveling the world on a shoestring and seeing the power of the human mind to creatively solve problems, I’ve come to embrace the fact that money plays a central role in most people’s lives.

I think this is something we may as well admit right from the get go, and to do so without shame. Even if we, ourselves, were to lead a moneyless existence, the world in which we’re a part of is decidedly one of economic action.

And as individual participants, our goal is – very generally speaking – something called “financial freedom” or financial independence.

In one of my very first pieces for this site I talked about the popular idea of financial freedom being a lie – that true financial freedom is not making more money from our investments (business, stock portfolios, royalties, or other assets) than we have in expenses and being able to do whatever we want, but rather our lack of fear about money.

Someone who makes a million bucks a month, is frugal, but fears every day the loss of their all their material wealth isn’t financially free.

In this sense, someone who feels completely comfortable and secure at any level of earnings is someone who is truly financially free.

But that being said, I’d say it’s objectively superior to earn more from a portfolio of assets (not a job) than we spend, and this is a worthy objective for us to achieve.

Why? Because having a large degree of financial freedom makes it easier to focus on other things that improve our lives and the lives of those we care about – we can invest in our education, sleep more, exercise more, spend more time with people, and do all the other things we often put to the side in our quest for wealth.

And while I think we should make an effort to enrich all these aspects of our lives – no matter our financial situation, the fact is it’s way freakin’ easier if money isn’t an additional worry.


I know that a lot of people resigned to leading an average financial life, thinking they don’t have the education, experience, qualifications, talent, time, or whatever it is necessary to become rich. That their past or current results somehow make their future results predestined to be the same.

But as I recently explained, the game of earning money simply comes down to balancing our assets (incomes that generally don’t involve trading our time for money) against our liabilities (expenses).

It’s not about making a million dollars, owning a big house, or any other pride-inflating, ego boosting nonsense. If we have a hole in our souls, no amount of stuff is going to fill it.

The key theme is self-empowerment. And the news is rosy – we can achieve financial independence with a relatively small income if we don’t burden ourselves with a huge list of liabilities that we are then forced to work and pay for.

The 7 Money Models

The 7 money models are different approaches to earning and using money. By knowing an individual’s money model, we can fairly reliably their financial future, regardless of their intelligence, experience, education, or other external factors.

More importantly, by knowing which money-model describes us, we can take steps to evolve our approach – to adopt a new, more effective model.

These models, while presented in a linear fashion according to their effectiveness at producing financial independence, don’t have to be approached this way in reality.

In fact, even if we have no money or are in massive debt, the best thing we can do is start acting like a rich person now.

It’s like the old saying about “I’ll start exercising once I lose 20 lbs.” The logic is completely twisted and backwards.

That being said, the most responsible and practical approach is twofold, taking steps to reach the next level, while keeping one eye on our ultimate prize, and going for that at the same time.

Model One: The Beginner

The Beginner isn’t currently earning an income. They may be between jobs, never had a job, recently laid off, long-term unemployed, or anywhere in between.

The most stressful place to be, no doubt, is to have no job or other income… and a bunch of financial obligations. An unpaid phone bill barely makes the list here – I’m talking taking care of children, health expenses, rent, and the basic cost of living.

The reason this money-model is called The Beginner is because this is often a stressful and trying place to be, and we usually have disempowering lables associated with it. It’s hard to get fired up over being “unemployed” or “out of work” – but if we think of ourselves as beginning our journey to/back to financial success, then we’ve just put ourselves in a psychologically winning position.

Of course, with an income of $0.00, our only way to get by is by having no expenses. Which is doable if we’re creative enough, but it’s not a sustainable long-term option for most people.

For The Beginner to transform into another model, the most logical option is to look for any job at all. Unfortunately, this is exactly what practically everyone else with this archetype does, leading to an overwhelming amount of competition for the lowest-level positions available.

This is one example of why it’s important to set our sights higher at the same time, even if that’s just 30 minutes a day. Jumping to a higher-ranking money-model has a disproportionately large payoff for the time we could invest.

Resource: No Money For Food? 10 Ways to Get a Free Meal

Model Two: The Gun-For-Hire

The Gun-For-Hire is willing to take whatever job they can find.

At this stage, the goal is still basic survival. And any job, even at an immorally low wage, can at least help achieve this end.

For the majority of us who aren’t living a self sustaining, off-the-grid sort of lifestyle, The Gun-For-Hire usually sees a small bit of income usually struggling against a pile of expenses.

As is so often the case with trying financial situations, it’s easy for fear to rule here. But it’s important to keep looking ahead and trying to increase our income – not just cut expenses by clipping coupons and looking for sales.

As Ramit Sethi espouses, there’s a much more strict limit on how much we can save than what we can earn. That is, when we’re already saving hard and scrimping every penny, the amount of effort required to save an extra $1000 is astronomical compared to the effort to earn $100, even at a low wage.

Remember, time is still our most valuable resource.

For The Gun-For-Hire, or The Beginner or striving towards becoming one, we must remember that this is a temporary stop on our way to the next level and beyond.

Model 3: The Worker

This is the zone most people strive for and most end up staying in, unless an economic downturn dumps The Worker and a bunch of their pals into the first couple zones.

The Worker has a high enough wage that the necessities of life are never in question. There is comfort and security, but a lot of pressure and a lot of things that could go wrong.

Beyond that, there’s a huge income range possible. The Worker might make $8,000 a year, living in Thailand and teaching English. Or they might be making $100,000 as a lawyer in Los Angeles.

The factor tying the people in this group together is that all their income is tied to their work – selling their time and labor for money.

People in this group aren’t investing their income in assets, outside a minority who may have a company-enforced retirement plan or an even smaller group that does a bit of their own retirement investing.

This is the living month-to-month zone, where everything is fine so long as nothing drastic changes, but getting laid off or having a medical emergency could prove disastrous.

Why? Because The Worker hasn’t yet been able to separate their income from their expenses. That is, as an individual’s income increases, they end up buying more things more-or-less directly in line with their new income.

Sadly, this accounts for an overwhelming majority of individuals, many or most of whom have great intentions to save and invest for the future, but never learn how to direct their behavior to do so.

Model 4: The Saver

The saver is the transition point between financial richness and poorness. The people in this category not only realize the importance of investing for the future, but have taken an important step in that direction.

Every month, The Saver puts aside a portion of their paycheck instead of spending it on bills, toys, knick knacks, home upgrades, nights out, and other goodies.

Most likely, they’ve discovered one of the Golden Rules of Investing: Paying Yourself First – putting aside savings before counting their lifestyle expenses.

They hope that by saving diligently enough, they’ll one day have enough to retire and have work be an optional endeavor.

This is a good start, but it’s not enough.

For The Saver has one critical weakness – a high risk portfolio, namely – cash.

While The Saver is usually doing a good job of contributing to their retirement fund, they also keep a large part of their savings in cash.

The problem with this is that money has no intrinsic value, not counting the heat we can generate from burning it, and is therefore a very risky investment. If the markets were ever to take a rapid turn for the worst, all that cash might become the victim of massive inflation, poor exchange rates, or other forms of devaluation.

However, The Saver is putting themselves in the perfect position to succeed. There’s nothing wrong whatsoever with being a saver while trying to figure out how exactly to move to the next level…

Model 5: The Investor

The Investor is the first individual we’ve met who is acting like a rich person. In fact, we can call the investor a future rich person, because they’ve taken the necessary step to reach financial independence.

The investor has turned some of their blood, sweat, tears, and hard earned cash into an asset – any financial instrument that generates an income independent of time investment.

This might be a meticulously curated stock portfolio, rental property, a business, music royalties, or anything else.

The magic is that a percentage of The Investors monthly expenses are being wiped out automatically – decreasing the work load necessary to make end’s meet.

However, The Investor has to remain diligent, and make sure that their expenses don’t rise to match their increased income. Otherwise what we have is really The Worker masquerading as an investor.

This is why it’s critically important to have already learned the lesson “pay yourself first,” and why even The Gun For Hire and The Beginner should start putting away even a tiny pittance every time they make some money – to build the skill and habit.

If this habit is firmly in place, The Investor’s next step is simple, continue investing in assets until all of their expenses are covered by asset income and not work income.

To this end, The Investor needs to determine for themselves whether to decrease their workload (and therefore work income), or continue working in order to invest more money more quickly.

Say for example, The Investor deals with rental homes. In this case, it most likely makes sense to work so they can acquire another property sooner.

On the other hand, if The Investor develops iPhone apps, they might be better off writing new code or marketing their existing apps.

It all depends on context. But have success, and soon we’ll see

Model 6: The Success

The success has seemingly won the game. Their assets cover their liabilities, and they can now lead their chosen lifestyle without the obligation of wage-work.

The Success can pursue their personal goals at their leisure.

Anyone who makes it this far deserves a serious pat on the back.

But we’re not quite done.

And here’s another Golden Rule of Investing: It’s not how much you make, it’s how much you keep.

The Success has their liabilities covered – today. But what about the future? What if the market changes and some of their assets stop producing, or their expenses rise, or the rush of wealth is too much to handle and they start spending money extravagantly and irresponsibly?

The Success still has 1 task left: to consolidate their wealth to withstand any shocks in the marketplace.

This generally means diversifying one’s assets – or not putting all of one’s eggs in their basket. Not only investing in the stock market, or not only investing in technology stocks, or not only in real estate, precious metals, rare stamps, or whatever it is that is The Success’ “bread and butter” investment.

Furthermore, there’s a separate, financial goal to achieve: We don’t want to be exactly even between our asset income and expenses, we want a cushion to allow us to adapt to any market changes without having an immediate and devastating effect on our income and lifestyle.

A 2:1 income to expense ratio will be plenty, and The Success is in a perfect place to reinvest their income and make this happen relatively quickly.

Model 7: The Rich

At last, we come to the end of our financial road: The Rich

Of course, there is no real limit to how much money we can earn, and we can continue investing in more and more assets until we have no more time to manage it all.

But this is silliness. This is financial richness but life-poorness.

The Rich’s expenses are less than 50% of their asset income. Now that they are rich, they are able to devote the vast majority of their time to enriching their lives and the lives of those around them.

Hopefully, they have been ding this the entire time, but now they also have the backing of a large budget and a substantial amount of free time.

The Rich still works, it’s just that they work for their own purposes and their own goals – often for the betterment of some aspect of society. It’s easy, when they don’t have to worry about their paycheck at the end of the month.

Relaxed management of assets and reinvestment of a percentage of profits in relatively risk-free financial instruments will help The Rich stay one step ahead of changing market conditions.

And while financial freedom is no guarantee of happiness, it’s stacking the odds in our favor – especially if we had to learn how to master money on our own, and weren’t just handed a massive sum of it by birthright.

Studies have shown that two of the best ways money buys happiness is in improved health (medical care and food quality) and in experiences had – as forming strong and meaningful memories is linked to a sense of fulfillment, well-being, and sense of purpose.

And if, right now, you find yourself looking in the mirror and see The Gun-For-Hire or The Beginner staring back, don’t despair!

The road may look long and uncertain, but the path is reliable. You just need a map that works. Assets are the key, and it doesn’t take much more than this understanding to get started.

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AJ Walton

AJ Walton will show you how to travel the world on your budget, how to make money on the road, and why you don't have to live the way others expect. Get the free guide: 101 Ways To Make Money While Traveling

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