Why would you hide your wealth?
Have you ever been the only kid in the playground with a candy-bar? There’s envy. There’s enmity. There’s politicking.
It’s not all fun and games.
Big Hat No Cattle or All Cattle, No Hat?
Thomas Stanley’s 1996 classic book, The Millionaire Next Door celebrates the rich among us who hide in plain sight.
The underlying message of his book is that the majority of real millionaires live well below their means. Their homes are modest. They are more likely to drive a Ford than a Mercedes-Benz. They’re more likely to shop at Sears than Brooks Brothers.
Mr. Stanley concluded from his surveys and interviews that millionaires are frugal. He describes this frugality as part of the discipline millionaires needed to become affluent. He noted that most self made millionaires did not make extremely high incomes over their working lives, but rather demonstrated a remarkable ability to keep their earnings rather than spend them.
To demonstrate his point, he talks about a wealthy business owner from Texas. He embodied the archetype of humbly dressed but secretly rich tycoon. Once, when a client came to meet him, he was mistaken for a truck driver due to his appearance. When he was finally identified as the owner, he noted that while he did not have a big hat, he owned plenty of cattle. Meaning, he lacked ostentation but did not lack for riches.
The opposite of the millionaire is the low-net worth individual who nevertheless owns numerous expensive badges. That person may be a high income earner, drive a nice car, live in a big house, but has relatively few investable assets with respect to their age and income. Big hat, no cattle.
Which would you rather be? I’d rather be the secret millionaire.
What are the advantages of stealth wealth?
There are undeniably advantages to being wealthy without anyone else knowing. Otherwise it’s why would so many self-made millionaires hide in plain sight? There’s clear advantages.
The first advantage of stealth wealth: avoiding the envy of others
Exciting the envy of your friends and family does not feel good. While there are some people who might being the envied, I think most of us would rather be loved.
It’s unavoidable that wealthy people outstrip some of their friends and family in asset accumulation. And there’s nothing wrong with that; someone always will be outstripping someone in the wealth game.
Think of Mufasa and Scar. One brother envied the other’s lot in life. You all know how that ended.
Don’t be Mufasa.
Stealth wealth helps manage others’ expectations
It’s hard to believe that millionaires can run out of money, but we know that they can and do. From Johnny Depp to Michael Jackson, ultra-wealthy people lose unimaginable sums of money all the time.
Expectations matter. When you’re the rich friend, or brother, or friend, unspoken pressures emerge. Everything from who picks up the bill at lunch to the price of a birthday gift is weighed differently.
But what if you’re not famous, and nobody knows how much you could spend?
Low expectations let you spend as you think is prudent, not how others perceive you should.
Stealth wealth is more sustainable
Imagine you bought a house you could barely afford with a very big mortgage. Everyone in the neighborhood appears to drive nicer cars than you. They are always improving their homes, adding pools, expanding their driveways. Their kids all seem to attend the local private school.
What if you can’t comfortably afford all that?
It’s hard to grow wealth if you are living on the very edge of it. Catastrophes will naturally cut into your nest egg. A few surprises a year may substantially limit your saving ability.
On the other hand, consider the situation if you bought a house you could very easily afford. You might even own your home free and clear. Your living expenses are naturally much lower since the standard of living in your peer group – among your neighbors – does not demand that you live at the limit of your finances.
In other words, it’s much easier to sustain and to grow wealth if you have plenty of room between your cost of living and your income.
How to enjoy your money while practicing stealth wealth
In truth, as we grow older, people naturally become more close-mouthed about their financial situations. And sometimes you can’t guess based on someone’s appearance. Once, my husband drove another guy home from jiu jitsu; he didn’t know until he pulled up to the beachside mansion that his friend was loaded.
It’s possible to enjoy your wealth without being overt.
You might not be able to hide your home address if you frequently entertain, but you don’t have to photograph your expensive vacations. There’s no rule that you have to drive a luxury car.
Let your spending bring you joy rather than unwanted attention.
Thanks for reading.
