When I read The Millionaire Next Door by William Stanley, I was amazed at how many millionaires lived in plain sight.
If you think about popular exposure to wealth – it’s pretty flashy. We’re trained, by television and social media, to think that millionaires live a life of excess. Big mansions, expensive cars, lots of jewelry, and partying non-stop. The reality is far more nuanced.
There are very wealthy folks who live lavishly. They get a lot of the publicity because it’s interesting.
There are far more wealthy folks who aren’t flashy at all. For every Kardashian, there are hundreds of wealthy people who live modest lives.
At the risk of holding up one extreme example to prove a point, I point to one of the richest men in the world – Mr. Warren Buffet. He is north of eighty billion dollars and lives in a modest house. His only vice is drinking full-calorie Coca-Cola.
We know about Warren Buffet’s wealth not because of his flashy lifestyle but because his company, Berkshire Hathaway, is a publicly traded company. You could easily drive by that house and have no idea that the man who lived there was worth more the annual GDP of many countries (source).
There’s a name for this phenomenon – Stealth Wealth.
And there’s a reason so many people hide their money…
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Wealth Is Stealth Until You Reveal
No one has any clue how much you make. Unless you reveal bank account and brokerage statements (which would make you a socially awkward weirdo, honestly, who does that), they can only guess. They can only guess based on what you reveal in your purchases.
When you think about who is rich vs. who is wealthy – the only signals are what they show you.
There’s a reason why real estate agents drive expensive cars. They may be wealthy but they want to project success, even if they are not financially stable, because you pick real estate agents based on their ability to sell. An agent earns money only when they sell a house. In that scenario, driving a flashy car goes beyond vanity though I’d argue there are more direct and less expensive ways to prove you’re a successful agent.
When I suggest you be stealthy with your wealth, I don’t mean you should hide it against your own best interests. I am not suggesting you hide it because everyone is out to get you. I’m merely saying that there are far more benefits to being stealthy.
Benefits of Stealth Wealth
You avoid uncomfortable conversations and situations. Money makes people weird. Having it, especially with people who are in need, can create strange and uncomfortable situations that you probably don’t want. Do you want friends and family members asking you for loans or to invest in their new (probably bad) project? Do you want to have to tell them no?
What if they’re in a dire situation of their own doing and they need “just a little bit” of help to get out? What if you think that little bit of help won’t help but is actually enabling them? What if it’s your brother or sister? Or your parents? Or a childhood friend?
If it looks like you have wealth, people start showing up thinking they can get a piece of it. Some of them are totally innocent, like an old friend who is seeking investment in his new project, and some are not, like an old friend who is seeking investment in his new project – will you know the difference?
No one can see your bank account unless you show them.
You don’t pay the driveway tax. My realtor told me once that we had a nice long driveway that didn’t look like a long driveway, since it meandered through the woods. The “driveway tax” is what contractors call the markup they add to a job whenever the driveway is super long and super nice. With services that have no set price, people wise up to how rich people can pay more for the same things (they are price insensitive) and are eager to increase their prices.
They’re not being dishonest when they do this, they’re merely responding to market forces. It’s no different when you compare the price of services in Manhattan and Omaha. Is it fair to charge more prices in a higher cost of living area when the work itself will be the same? Of course. Your expensive house is a higher cost of living.
Do they like you or do they like your access to money? Imagine the recently rich lottery winner who goes to a bar and meets a woman he feels is out of his league – is she interested in him because he’s awesome or because he has an awesome amount of money? What about the tech entrepreneur who meets up with an old friend and discovers he’s perfect for this new business venture?
This is a common concern for individuals who have wealth. It’s hard to know who likes you for you and who likes you for your net worth.
There’s a reason why LeBron James’ entourage and business associates consist of friends he’s had since childhood. These guys, like Maverick Carter, were initially ridiculed in the press because they had no experience. They’ve since proven themselves to be more than capable of the task.
Part of it is loyalty and a “don’t forget where you came from” but much of it is an issue of trust. How can you tell the difference between a legit operator and Bernie Madoff?
You can’t. Unless no one knows you have wealth.
You won’t be kidnapped. Kidnappers don’t kidnap poor people, right?
This is a morbid way of saying you won’t become a target. Whether it’s a target for kidnapping, fraud, or other ill will; being flashy makes you a target and it can be for any number of reasons. Don’t give them a reason!
You won’t feel the pressure to maintain that appearance. Stealth wealth is very affordable. When you throw your money around, whether it’s for good or for attention, you have to keep throwing it around. That attention is like a drug and the only way to fuel it is by burning money. New stuff becomes old stuff and you’ll have to buy more stuff.
When you lend financial support, it leads to more financial support. How many stories have you heard where someone gave someone else $500, they got on their feet, paid it back, and all was well? Not too many because it’s rare. $500 usually is a precursor to more. Or it’s a precursor to an uncomfortable conversation.
Once you’ve decoupled your wealth from the number, you realize the truth about money. Money isn’t about what it can buy but what it can enable – your freedom. So many people are seeking financial independence, so much so that there are dozens of great FIRE blogs out there showing folks the way. Early retirement and independence come down to having enough money to not work.
As children, we focus so much on grades and doing well in school because it ranks you for the next stage in life. Good grades in high school will lead to a good college. Good grades in college will lead to a better job. A better job means more money. But once we leave schooling, there is no obvious next stage. The next stage isn’t in your career but in your life.
Achieving financial independence, so you can control all of your time, is the next step. You can continue working if you want to but wealth gives you options. Accumulating more stuff and converting that wealth into material possessions restricts your options.
Drawbacks of Stealth Wealth
Seriously – name me one and I’ll add it.
OK, maybe there’s one. And I’d argue this answer is a lot like the BS people say whenever a job interviewer asks for a weakness.
The drawback is that you will rarely be the center of attention. There will always be someone who wants the attention and they may think that being flashy will attract it. They are right. Being flashy will attract it. So if you practice stealth wealth, you will be unnoticed and rarely fawned upon by others who want to get a piece of the action. 🙂
How to Become Financially Invisible
Let’s say I’ve convinced you that stealth wealth is the way to go – how do you keep your money under wraps?
There are guides out there that tell you to do this or that but it all boils down to one thing – shut your mouth.
Unless you’re a public employee, your salary is unknown.
If you don’t share your address, no one can look up the property tax records to see how much your home cost.
Even if they did, there are plenty of people who own massive expensive homes who are not wealthy and are on the brink of financial ruin… just look at what happened during the last housing bubble.
If you want reminders of your wealth, let it be when you track your net worth or when you log into an aggregator tool like Personal Capital, not with the things you own.
There’s an old saying “All hat, no cattle.” The folks who show off the most often have little to back it up. All talk and no substance.
The reason some people are all talk is because it gives the appearance of wealth and prestige. If you drive a modest car, live in a modest house, and wear modest clothes – no one will have any idea.
The true signs of wealth are very plain. It’s greater control of your time and the emotional strength to use it on the things you want rather than the things you feel you should be doing. It’s going on all your kids’ field trips. It’s ordering meals at a restaurant without looking at the price. It’s going on a hike or going to the gym during the middle of the day when the only folks around are retirees. Those are signs of wealth that do not betray a single thing.
If you want to stay wealthy, be stealthy. 🙂
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When you lend financial support, it leads to more financial support. How many stories have you hard where someone gave someone else $500, they got on their feet, paid it back, and all was well? Not too many because it’s rare. $500 usually is a precursor to more. Or it’s a precursor to an uncomfortable conversation.
I am enjoying the articles. This is the first time I’ve stumbled across your website.
Jim Wang says
I can think of one downside of stealth wealth.
I worked hard and made sacrifices so I could build wealth for retirement. It would be nice if I could share my success and delight at reaching that goal. It is especially true when you’ve worked toward that goal for decades.
It’s sad when you can’t share good news.
You can share your story and it always begins like this: ‘I knew this man or woman man that became very wealth by…’ Its true, assuming you know yourself somewhat, you are not lying and you get to tell your story. Let them take what they want from that story. Nonetheless, I have learned that its best to avoid telling people what to do with their lives at all cost, unless they ask for your input.
Car man says
Even if you are a public employee and your salary is known, so what? That doesn’t tell much about how wealthy you actually are. Plenty of people making 100K a year who are not wealthy by any means. But a teacher making 60K a year can, over the course of time, have quite some wealth, it’s just not in his salary, but maybe he has his house paid off, cars paid off, no student loans, no credit card debt, a good bank balance worth 6 months living expenses and of course, a good retirement plan. If he keeps on living like the “average Joe”, driving an average car (heck, even if he drives a bit nicer car, that doesn’t mean anything either) and stays quiet about his finances, he is pretty much stealth to me.