It never ceases to amaze me, how lifestyle expectations drive spending decisions. In a society which is defined as a “consumer society,” it’s easy to let ourselves be defined by the type of goods and services we consume. Not only can we be judged by our consumption habits, people will infer our financial well-being (or lack thereof) from our spending patterns. Let me paint you a picture.
Imagine two young men. Let’s call the first man “Richard.” He works in a leadership-track position at a bank, dresses in designer label suits, buys his food from boutique grocers and swanky restaurants, and lives in a spacious apartment at the top of a tall building. He drives a late-model luxury vehicle and enjoys traveling. He sounds pretty rich, doesn’t he? Now we contrast this with a guy we’ll call Jack.
Jack works at a luxury-car dealership as a mechanic. He, too, is on a leadership track and is skilled at his job. Unlike Richard, though, he wears a uniform at work and a simple t-shirt and jeans after work. He generally eats in with food bought from the neighborhood grocer, but when he does eat out, he favors home style dining and easy local fare. He lives in an unassuming apartment in a clean, well-managed apartment complex. He drives an old but reliable pickup truck to work and enjoys watching the game on TV or getting a beer and shooting pool with his buddies.
Now, which is wealthier? I bet 9 out of 10 of you would say “Richard.” What you should be saying is “I don’t know.” You have no idea how much Richard and Jack earn. If I were to tell you that both Richard and Jack earn comparable salaries, then you can guess who has more money. Now, this is important, so pay attention: Generally, the person who has the most money is the person who didn’t spend it. Let me put it another way: You can’t have your money and spend it, too.
This quirk of psychology just drives me bonkers. Here’s the logic. You earn money and then you spend it. The difference between you income and your expenses is you savings. The more you earn and/or the less you spend, the larger your savings. Savings is wealth. And, yet, everyone wants wealth but no one wants to save. It’s crazy-making.
So, we end up with hordes of people who look at a big spender on status geegaws like Richard who say “Wow, he must be rich!” and look at a small spender like Jack and say “Oh, he must be poor.” They judge, but they don’t know.
This phenomenon is so common that there’s a whole series of books that deal with blue-collar wealth in the U.S. by Thomas Stanley. You can probably find them at you local library. My favorites are:
- “The Millionaire Next Door”
- “Stop Acting Rich”
- “Millionaire Women Next Door”
I think these are required reading for anyone who aspires to become wealthy.
So, next time you look at someone, don’t believe for a second that their lifestyle is an accurate representation of their wealth. It isn’t.