We all have friends that love to buy the finer things in life. They drive nice cars, live in a big house, and when they dine out they always go to the expensive places with the trendy eats. In short, they live a high dollar lifestyle where they love to display their wealth for everyone around them to see.
The thing is, quite often those same people who are living the high-consumption lifestyle are the same ones who are struggling to get by with huge mortgages, large car payments and home equity loans. Even if they've got relatively high incomes far too often they live beyond their means.
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Time To Stop Acting Rich
In his book “Stop Acting Rich“, Thomas J. Stanley talks about how far too often we are substituting a life of actual wealth creation, for one where wealth is only an illusion.
Ours is a culture of hyperconsumerism. Not only can and do we buy nearly anything (except for the truly outrageously expensive), but we seem to have come to believe that we can and should have it all and that who we are is dependent on the ability to live in the right neighborhoods, with appropriately sized homes filled with brand-name appliances, with prestige cars parked in the driveway with expensive golf bags and clubs in the trunk and so on. And so we spend.
We spend to excess, and attempt to display a persona to those around us that says “I'm successful”. The problem is, most of the world's millionaires aren't living a high consumption lifestyle with all the expensive trappings. In fact, most of them have become wealthy because they are able to live below their means, and live less “flashy” lives.
You can act rich or actually become rich. Few of us will ever be able to do both, and we certainly won't bet rich by acting the part before we have the financial resources with which to pay for la dolce vita.
We live in a time when it has never been easier to act rich than to actually become rich, even with the devastation of the financial crisis. At the end of the day, not only are we bad actors because it is simply impossible for us to keep up with the glittering rich (if we buy one expensive, prestige car, they buy 20), but we are terribly misguided and ill informed about how millionaires really spend and what they actually buy. Instead of focusing on millionaires generally, we are enamored with the few glitteringly rich people.
Know first who you are, then adorn yourself accordingly – Euripides
We fool ourselves, and think that we can emulate the glittering rich lifestyles of the rich and famous – before we have the income to match – and afford the lifestyle.
If we truly want to be wealthy, we have to life below our means, and live a lifestyle that allows us to build wealth.
How Do Millionaires Spend?
When Stanley actually surveyed millionaires in his studies he found that they as a group were much more frugal than most people might think.
Let's look at how real millionaires spend their money and what they pay for goods and services. Real millionaires pay about $16 for a haircut at a traditional barbershop… Only 5.7 percent of millionaires surveyed nationally paid $1000 or more for their most recently acquired suit… The watch he wears every day was purchased at a Wal-Mart store for $15..
Real millionaires don't mind spending money, but they also know about buying things that give you good value. They don't splurge on things they don't want or need, and instead they save their money, invest, save and give. They also find greater pleasure in enjoying things that don't cost money. Spending time with family, enjoying the outdoors, and working hard at their chosen profession.
Conclusion
So what's the conclusion that we can draw from how real millionaires live? That the truly wealthy in this country aren't the ones we see around us driving the expensive cars, or living in the 10,000 square foot homes. Those people are more than likely over-extended and in a hole. The truly wealthy are those that don't have to flaunt it. They drive cars that have good value, and homes that are in the 300,000 dollar range. They became wealthy by living frugally, saving and investing the income that they created. They're the ones I hope to emulate as I go on my own journey towards wealth.
Do you know people who live beyond their means and appear wealthy on the surface? Do you know someone who is truly wealthy? What do you think about the ideas of appearing wealthy vs. actually being wealthy? Tell us your thoughts in the comments!
Thanks for reviewing this book. I am a huge fan of Thomas Stanley, but somehow missed this one.
The trait that jumps out to me about those who act rich is how shallow and phony they are. I would guess that their self esteem is near zero if they think that such acting will impress others. Their desire to act rich is not only a formula for financial failure, but also for alienating potential friends. The “acting rich” lifestyle must be a very lonely one.
In the book there is one story in particular that jumps out at me. There is a guy who is income affluent, but who overspends his income. He shows up at a neighborhood get-together where they have wine and snacks served. Instead of drinking the wine provided by the host, he brings his own, and then doesn’t share it with anyone else. He is basically trying to show how he is affluent by his choice of expensive wine, and how he can talk intelligently about wine. Of course the hosts who were actually wealthy weren’t very impressed.
Sounds like an interesting read, I’ll have to check it out. We’re far from wealthy but working towards it. It’s funny, I think our frugal lifestyle makes our friends feel sorry for us. But from both a cash and net worth perspective, I think we’re better off than most of them.
So true!
I reviewed as well.
Dr Stanley’s series is an eye-opener. The big house and expensive car say nothing about the mortgage or loan. The guy with a $400K paid off home is far better off than the one in the $1M house with huge mortgage.
I saw your review, it comes up near the top in google! :)
It’s true that those who are balance sheet affluent – or who actually have cold hard assets in excess of 1 million dollars – are truly better off.
I love this book. Any chance to do a giveaway?
It seems that the more money you have, the LESS you show it off. When we are younger and poorer, we feel we need to prove ourselves to the world. Once we accumulate “enough”, we become hard to notice for our wealth.
Best, Sam
Kind of the whole fake it til you make it mentality? I think one thing that was written that really made sense was that if people were at the high end of their neighborhood there was no need to live up to their neighbors, in fact they could enjoy their wealth with no need to keep up with the joneses. If they were wealthy, but at the low end of the neighborhood, they still sometimes fell into the mentality of having to live up to the same standard of the others in the neighborhood.
Thank you for your insightful thoughts about Stop Acting Rich. They made my day!
Thanks for stopping by! It’s an honor to have you commenting on my humble blog! :) I really have enjoyed your books and I think they should be required reading in our high schools – before people start making too many wrong conclusions about how wealth is created.
My late friend from high school, Geoff, was a member of the family who owned the Marx Toy Co.
They sold it to Quaker Oats in the late 1960’s for between $350 and 375 million.
He bought a used Rolls-Royce after college graduation. After he paid nearly $2000 for a brake job, he sold the Rolls and bought a Volvo, never looking back. His family had always driven VW’s, but it only took him one little lesson to realize his parents knew what was smart vs. ostentatious. They lived in a beautiful pre-war mansion, but that, unlike an automobile, was an appreciating asset.