It’s Better to Preserve Wealth than Show It
I live in a modest, one story ranch house that is about 2200 square feet. I’ve got a small front yard and my seven-year-old Pontiac decorates the driveway. My backyard is a decent size and is surrounded by a five-foot-tall white fence. It’s high enough to give me privacy but also allows me a glimpse at all of my neighbor’s houses and yards.
My next-door neighbor has quite a different house than me. His house is over 10,000 square feet. It’s three levels and has a three-car garage. They have two Mercedes parked in their driveway and a pool that changes color at night. One Sunday my husband and I went to their home to watch the Dolphins game on their massive HD projection screen while the sound was played through their home audio system.
Looking at their mansion every day and waving to them as they drive by me in their sleek, black convertible sometimes gets to me. I am not immune to jealousy or wanting to keep up with the Joneses. I may write this financial newsletter about saving money, but anyone who says they don’t enjoy some nice things is a liar.
Every time I get like this it’s a reminder that affluence does not equal net worth. When I look at their house, cars, and talk to them about their vacation home in Bimini I know I am not necessarily looking at a wealthy household, rather I am seeing their spending habits.
The trappings of wealth and having actual wealth are two very different things. If I looked into their financial lives I might see a very different picture. Their house might be the biggest and nicest on the block, but they may have a mortgage payment they have to stretch to afford every month. Their two Mercedes are great to look at, but they may owe more than those cars are worth. Their vacation house in the Caribbean sounds amazing, but it may require a lot of cash flow to keep it up and only get used a few times a year. The gold Rolex watch my neighbor told my husband he got a great deal on for only $5,000 may be flashy and look nice, but he might have had to finance it.
Now I don’t know if my neighbors are living beyond their means or if they can readily afford their lavish lifestyle. I don’t wish them bad and certainly hope they are living within their means. However, there are definitely many people who get so caught up in material trappings they ignore building real wealth… all to keep up with their neighbors.
You don’t need the Mercedes, the big house, or the other toys to prove to others you’re wealthy. Real wealth comes from being able to live comfortably and earn more then you spend. Or never having to work another day in your life because your passive income pays for everything you need.
I’ll likely never know the answer to the question of whether or not my neighbors are truly wealthy. I’ll spend my days making extra payments on my mortgage to pay it off quicker, shopping for deals and value in all of my purchases, and putting my money into savings and other investments.
When you spend less than you make, you are buying flexibility and financial freedom. You gain the ability to change jobs to one that you love or move to an area you’ve always wanted to. You show rather than tell your children about good financial habits. And as a result they grow up in a household without financial stress and apply those principles to their own lives as adults. What you are ultimately buying is the ability to say yes to the things that matter because you save on the areas that aren’t as important to you.
What will you spend your money on today and in the future? Material goods or financial freedom?
The next time you see your friends or neighbors with their flashy cars, statement jewelry or hear them talking about the fabulous vacation they just got back from, don’t get jealous and don’t try to keep up with them. Remember that they are only talking about their spending habits, not their actual wealth.
Remember to be thankful for all you have.
Keeping Money in Your Pocket,