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What You Don't See

Wealth is a bizarre thing. You can have a lot and live like you have little. You can have little and live like you have a lot. In both instances, you can fool people.

If you own a modest home, drive a modest car, and live a modest life, people typically think you have modest means – even if you have a $5 million investment portfolio that no one can see. On the other hand, if you buy an expensive home, drive an expensive car, and live an expensive life, people often believe you have substantial means – even if your bank account is empty and your credit card is full.

The truth is, when it comes to wealth, it’s what you don’t see that matters.

Why are we so easily fooled when it comes to wealth? Because money is a signal of wealth, but not a true sign. It takes money to buy things. So, if someone has a lot of things, they must have a lot of wealth, or so the thinking goes.

But that mental shortcut can mislead us. Spending is visible. Wealth-building actions are not.

We often intuitively understand this but still fall prey to faulty thinking. How many times have you said, “I don’t know how she affords that on a [fill-in-the-blank] salary.” Or perhaps you have reasoned, “I guess he makes more than I thought.”

Maybe she can’t, and maybe he doesn’t.

But, strangely, even though we do not know others’ financial situations, we begin to make judgements. Lacking other information, we infer their financial position based on what we can see – their purchases. We tell ourselves those who spend must have the means, especially if that spending continues over time.

Those who spend extravagantly certainly send signals of wealth, but that does not mean they have actual wealth.

The complication between spending and wealth has always been present. The saying, “keeping up with the Joneses,” is not new. But it has gotten worse with the rise of social media.

A recent survey confirms that statement. The survey found three in five Americans admit that their spending habits have been influenced by “images and experiences shared by their friends on social media.”

The problem is exposure. Constant exposure.

You could have always observed someone enjoying fine dining – if you were at the restaurant too. You could have always marveled at pictures of someone else’s beautiful beach vacation – if they physically thumbed through their printed photos with you. You could have always admired someone else’s sparkling new vehicle – if they parked next to you.

But now we are blasted with images and videos via social media. You no longer need to be at the restaurant. Or view physical photos. Or pull into a parking spot. And still you see the dinners, vacations, and new cars. Social media makes it more difficult.

But remember, when it comes to wealth, it’s not what you see that matters. It’s what you don’t see. It’s what you can’t know.

What you don’t see is how much people are saving. What you can’t know is how deeply they are in debt. All those purchases you see may be sacrificing their future.

Or, maybe not. Maybe they earn enough to buy those things and still save for retirement and other life goals. With enough income, your friends and neighbors may be able to enjoy a lavish lifestyle without jeopardizing their financial futures.

You don’t know. And quite frankly, it doesn’t matter.

Their priorities are not your priorities. Their goals are not your goals. Don’t get sucked into the “how can they afford this” or “shouldn’t we have that too” way of thinking.

Decisions of others have no relevance to the goals you set. So why on Earth would you allow their choices to impact your behavior?

Life would be interesting if we all had our personal net worth flashing on our foreheads. Some would find that terribly intrusive. Money, after all, is thought of as a private matter. But I suspect we would behave much more sensibly with our finances in that kind of world.

Why? Because net worth can’t be faked. It’s what you don’t see.

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