You’re not wealthy

Hi,

I have been reading “The Psychology of Money” by Morgan Housel. If you haven’t read it, the book discusses strange ways people think about money and teaches readers how to make better sense of one of life’s most important topics. Chapter 9 really stood out to me. It is titled Wealth is What You Don’t See. Underneath the title is written: Spending money to show people how much money you have is the fastest way to have less money.

In the age of social media, it’s increasingly difficult to not compare our lives to other people. We believe that we’ll be “cool” if we buy that new thing to impress others. The person you see on social media taking fancy trips every couple months, buying a brand new expensive car, or purchasing the newest “in season” clothes is probably in debt. Even if they aren’t, is your wealth worth someone else’s perception of you?

It is not. Your wealth is not worth someone else’s perception of you. Perception being the keyword here. Someone thinking you’re rich and someone thinking you’re wealthy are two very different things. Rich is an outwards appearance. Rich is buying expensive things. Wealth is hidden. Wealth is your ability to do what you want, when you want, with whoever you want without worrying about running out of money. Wealth is powerful.

I like to think I made a decent amount of money for my age. I also believe that I live well within my means. I don’t have student loan payments or car payments, put away 15% of my income for retirement (with a 5% company match), invest 5% of my income separately each year, max out my Health Savings Account each year, and my husband does the same. We want to retire in 20 years from now. Meanwhile, I have coworkers that drive brand new Teslas. If I wanted to afford the monthly payment for a new Tesla, I would have to save less each month. Which, in my eyes, would never be worth a new car. My wealth and my ability to retire early are so much more important than whether people think I’m rich or not.

This is not to say we can’t have nice things but need to be wary of the financial situation this things might throw us into. I really love European cars. So I bought a really nice European car after I landed my first job. It was a Mercedes coupe. I loved that car because I thought it screamed “success.” It also put me in to massive debt. The monthly payment was $450! I was making about 70k a year and I also had student loans at the time. I was an idiot. Until I wasn’t and decided to pay off my student loans and my car. Now the only monthly payment I have is my mortgage. I did end up buying a newer European car (a gently preowned 2018 Black BMW X1) because yes we can still have nice things. It’s 100% paid off and I will likely drive it until it breaks down or I have enough money to buy a newer car in cash. Though, my ability to retire earlier will never be trumped by a newer car.

Thanks for reading.