Why LOOKING POOR Is Important

If you aspire to become wealthy, you might want to consider looking poor today. This approach is rooted in the idea that different social classes perceive and handle money differently. For instance, those who are poor often view money as a means to pay bills and survive, while the middle class sees it as a way to attain comfort, often taking on liabilities like car loans or credit card debt. In contrast, the wealthy perceive money as a tool to acquire assets such as stocks and real estate, which can generate more income to cover their liabilities. Take Warren Buffett, for example, who, despite being worth over $100 billion, still lives in the house he bought in 1958 for $31,500. Similarly, Mark Zuckerberg often wears a simple gray t-shirt and hoodie, and Jeff Bezos was still driving a 1997 Honda Accord years after becoming a billionaire, stating, "This is a perfectly good car." In fact, 61% of people who earn more than $250,000 a year are more likely to drive cars like Hondas, Fords, and Toyotas. Wealthy individuals don’t feel the need to appear rich because they are clear about their priorities and know what's truly important to them. They don’t have anything to prove, which is a valuable mindset to adopt if you are on your financial journey, whether you’re paying off debt, improving your credit score, or building an emergency fund. You’re investing in yourself, and you don’t need to prove anything to anyone else.

Trying to appear wealthy can become very expensive. A 2014 Federal Reserve report found that the gap between a household's income and that of its close neighbors influences its level of debt. This phenomenon, known as "keeping up with the Joneses," can lead to financial strain. For example, if you’re considering buying a car to commute and have saved up $20,000 to buy a Toyota Camry outright, you might reconsider after seeing your neighbor with a brand-new Tesla Cybertruck. To keep up, you might opt for a $100,000 Porsche Cayenne instead, despite not having the extra $80,000. This decision might lead you to take out a car loan just to afford the higher price, and the costs don't end there. You'll face additional expenses like monthly interest payments, higher insurance costs, and depreciation in value. What started as a $100,000 purchase could ultimately cost you over $150,000. For everyday people, sacrificing financial goals to buy luxury products can lead to a debt spiral, making it challenging to escape. As of 2023, the average American has about $66,000 in credit card debt. If your credit card balance is $6,000 with a 24% interest rate and you only make minimum payments each month, it could take you over 25 years to pay off your debt, totaling $17,330—nearly three times the original $6,000 amount due to interest. The bigger issue, however, is the opportunity cost—the money you spend on one thing is money you can't invest elsewhere. For example, if you had invested that $80,000 in the stock market instead of spending it on a luxury car, you could have over $200,000 in 10 years, enough to buy two Porsche Cayennes outright. Falling into the trap of looking wealthy not only leads to debt but also costs you your peace of mind and mental health. A 2023 study found that the larger the wealth gap in a neighborhood, the worse the mental health of its residents. This is explained by social comparison theory, which suggests that people don't necessarily feel bad about their income but rather feel sad when comparing their income to that of those around them. Even if you're earning six figures and have savings, living near multimillionaires can make you feel unhappy. Constant negative comparisons can impact your mental health and personal happiness because there will always be someone wealthier than you.

On the topic of mental health, it's important to acknowledge that many people, including myself, grew up without money. My parents did everything they could to save, even buying my clothes in larger sizes so I could wear them for years. Growing up without money can create financial baggage and trauma that affects you later in life, but therapy can be incredibly helpful in working through these issues. That’s why I’m excited to talk about today’s sponsor, BetterHelp. BetterHelp's mission is to make therapy more affordable and accessible. Finding a therapist can be challenging, especially when you're limited to local options. BetterHelp is an online platform that makes it easier to find a therapist, offering remote sessions and the ability to be matched with a professional therapist within a few days after filling out a questionnaire. It's easy to sign up and get matched with a therapist. If you're going through a tough time, consider online therapy with BetterHelp. You can get 10% off your first month by clicking the link below.

Another reason why trying to look wealthy will cost you more is that people often charge higher prices for the same service if they perceive you as wealthy. A 2018 study asked participants how much they would charge a potential client for their services, showing them photos of the same person in different outfits—one looking wealthy and one more casual. The results showed that the wealthier-looking client was quoted a significantly higher price. Another study showed that people would charge more for a car wash if the car was a new Mercedes-Benz rather than an old Mitsubishi. So, unless you want to pay extra for the same services, it might be wise to dress more modestly. Furthermore, trying to appear wealthy might lead to fewer authentic connections and friendships. Many people try to look wealthy to feel accepted by society, thinking that displaying luxury items will make others want to befriend them. However, a study by the Ross School of Business found that flashy displays of wealth might have the opposite effect. Participants in the study perceived those who flaunted luxury items as more self-interested and were less likely to form genuine connections with them or invite them into social groups. This suggests that the cost of appearing wealthy may outweigh the social benefits, making it counterproductive.

On the other hand, looking poor can help you focus on what really matters, like achieving financial freedom. For me, financial freedom means retiring at 35 without any financial worries. If you’re not concerned with keeping up with the latest trends or impressing others, achieving your financial goals becomes much more attainable. Every 5% of additional income you save can allow you to retire several years earlier. For example, if you earn $65,000 a year and save 10%, or $6,500, you could be financially free in 51.4 years. However, if you save 15% instead, you could be financially free in 42.8 years—shaving off over 8 years of work with just 5% more effort. It's not just about saving more money; it's also about transforming your lifestyle so you need less to be comfortable. For example, if you previously lived on $80,000 a year but managed to reduce your expenses to $60,000, you now need significantly less money to retire comfortably.

I’m not suggesting that you need to look homeless, but rather that you find your financial balance. Here are three things that have helped me achieve this:. First, shift your mindset from wanting to have things to show that you’re successful to focusing on achieving your financial dreams. Make your financial dream your measuring stick for success. Once you're working toward your dreams or have achieved them, it doesn’t matter what anyone else thinks of you. For instance, one of my financial dreams is to become financially free. For me, success means being able to help my parents out financially, travel the world whenever I want, and attend my future kids' events without work getting in the way. Having access to these opportunities defines success for me, even if no one else knows it. If you're not sure what your next steps should be to achieve your financial dreams, I’ve created a free five-question quiz that will customize a personalized wealth plan for you.

Next, implement the box strategy. Many people want to look wealthy because they compare themselves to others. If your friend looks wealthy, you might also want to look wealthy to prove your worth. But this is a never-ending cycle of comparison, as there will always be someone more successful or wealthier than you. Instead of comparing yourself to others, use the box strategy: think about all your past financial accomplishments and put them in a box. Your goal is to fill up a new box with bigger and better accomplishments than your old one. This way, you’re comparing yourself to your past self, which is a much healthier and more effective strategy. For example, I used to commute two hours every day to the office and worked 70-hour weeks, which made me miserable. Today, I’ve achieved the freedom to work on my dream. I may not have three mansions and six Lamborghinis, but I’m in a much better place than I was a few years ago, and that makes me really happy.

Finally, even if you're taking all these steps and improving your finances, you might still feel like you’re not doing enough. This could be because you’re unaware of the middle-class habits that keep people in the rat race. To find out if you're committing these habits and what you need to do instead, click here to learn more.