There is a secret class of people hiding in plain-sight. The stealthy wealthy. The stealthy wealthy are the high net-worth individuals that would never let you know about it. They choose to drive a Camry over a Porsche. They are probably–though not necessarily–in the top 10% of earners, but you’d never guess it. What is important to them is net worth, unlike their millionaire imposter counterparts who care more about enjoying the luxuries of life than what their balance sheet looks like. Don’t be fooled. Millionaire imposters are not truly rich.
What the stealthy wealthy don’t look like
It’s nearly impossible to spot the stealthy wealthy in their natural habitat. By definition, they tend to blend in. It is easy, however, to spot those that are wealthy from a cash-flow perspective but are essentially poor from all of their monthly debts.
There are few better examples of what millionaire imposters look like than professional athletes. Don’t get me wrong here. I’m sure that there are plenty of professional athletes out there who are building their net worth and will retire succesfully. I’m also sure that they are outnumbered by players who are up to their eyeballs in minimum payments. These millionaire imposters are only surviving because of their high income. They may be living in an 8,000 sq-ft mansion and driving a Ferrari, but they have almost no net worth. If their income stops, their monthly debts pile up quickly and they must sell their assets to keep afloat. No more living the high life. Think I’m joking? Sports Illustrated ran an article that stated 78% of NFL players are under financial stress or bankrupt within two years of retirement. Combine that with how many leave the game with long-lasting physical damage and I’m not so sure anymore that the dream job is being a professional athlete.
If professional athletes don’t resonate with you, let’s try musicians. Remember MC Hammer? He was in the news for going from millionaire status to bankruptcy, losing everything but his excessively baggy pants!
Millionaire imposters exist at all income levels, not just at the pro-athlete level. If we scale things down, we can see another example of millionaire imposters: engineers fresh out of college. I can say this because I witnessed it first hand with so many of my classmates. Back in the days when I still stalked “friends” on Facebook, I was amazed to see how many of my former classmates were splurging big time. I’m talking buying a brand new Mustang (at the time it was $25k car) AND buying a house. All on somewhere between $60-70k/year salaries. They were buying cars that were worth almost half of their annual salary! These guys weren’t working for more than 6 months, so there was no way on god’s green earth that they had significant money for down payments on these toys. This means only one thing: financing. They had a nice car, house, and clothes, but were doing absolutely nothing for their net worth. This is a double-shame when you’re young; had they been investing instead of spending, they would’ve had more time for their investments to increase exponentially.
Net worth vs income
So why prioritize net worth over income? The biggest reason is that when you focus on increasing your net worth, your income will almost always increase. Whether it’s in shares of index mutual funds, real estate, or a business, if your net worth is increasing, your income will be too. Investments pay dividends. Tenants pay rent. Businesses grow revenue. If your net worth is increasing, but your income isn’t, then you’re doing something wrong!
For all you spenders out there, don’t worry. Something beautiful happens when your net worth increases. You make more money! There’s this weird phenomenon that happens when you focus on your net worth. It grows. When it grows, you want it to keep growing and you’ll keep working hard to achieve it. As a result, reckless spending decreases. Net worth continues to increase. Instead of salivating over the newest Gucci bag, you’re constantly checking your balance sheet to see how much it’s grown. Its a healthy addiction. Embrace it!
There’s a pretty cool book out there about the the mindset of first-generation millionaires called The Millionaire Mind. This is an absolutely fantastic read and will really get you excited about increasing your net worth. Warning: you’re going to want to start your own business after reading it.
How to join the stealthy wealthy
It’s pretty easy. Simply follow the steps outlined in the series, What Should I Do With My Money. You’ll be there in no time. It also helps if you follow some simple automation steps covered in Dominate Savings with Automation
Increasing your net worth is most easily achieved by increasing the balance of your investments. Compounding interest will have a very positive effect on your net worth over the long run, especially when you start early. The earlier you start, the faster you can join the stealthy wealthy.
If you’re looking for a stealthy wealthy role model, then choose Warren Buffett. He isn’t so stealthy in terms of celebrity status since he’s probably America’s favorite millionaire, however; he doesn’t live like one. The Buffmeister drives vehicles way below what he can afford and even lives in the same modest house he’s had since 1958! How can you not love the guy?
If my spendy classmates were dropping money in the S&P 500 instead of fancy cars when they graduated, they’d be in a pretty awesome spot right now: the S&P was hovering around 1,000 points back then. Now it’s near the 2,000 mark. Every dollar they invested that summer would have doubled in only five years! That Mustang is worth less than half of what they paid for it. Me? Let’s just say that I really love the S&P.
- Revisit What Should I Do With My Money and make sure you’re on track.
- Read these two books: The Millionaire Mind and The Millionaire Next Door. Both by Thomas J. Stanley. Take some notes and maybe even discuss it with some close friends or family to engrain the concepts.
Do you know any millionaire imposters? Share your story in the comments!