A few years ago, I went into my local bank branch to do a wire transfer. I wrote my name on the check-in sheet and helped myself to a free cup of coffee in the waiting area.
After a few minutes, a well-groomed young fellow in a suit and tie came over to greet me. As he reached to shake my hand, I noticed his eyes looking me up and down, studying my old t-shirt, dirty jeans, and worn-down Crocs.
The banker led me to his cubicle while making small talk. He seemed like a cool guy, cracking jokes and calling me “dude.” He was very relaxed and casual.
Then something weird happened.
As he took my drivers license and looked up my account information, his facial expressions started to change. His computer screen showed I had $220,000 in my checking account, 3 mortgages on rental properties, 2 business accounts, and 5 credit cards open with the bank. (I had just sold some real estate — that’s the reason for the high cash balance at the time)
Like the flick of a switch, the banker’s character completely changed. He straightened his posture, looked me in the eyes and started calling me “Mr. O’Leary.” What began as a friendly and casual interaction quickly turned into a professional and robotic business meeting. I felt really awkward being treated differently once he found out I had “wealth.”
This is one of the reasons I’m a fan of practicing stealth wealth. I don’t like being treated differently because of money or financial status.
What Is Stealth Wealth?
It’s basically wealth that’s hidden in plain sight, either intentionally or unintentionally. It’s money, assets, or income that are kept private, revealed only when necessary.
Stealth wealth is also the art of being logical and frugal, even though your money can afford to buy more. It’s the opposite of showing off wealth and success. Flaunting your financial status often comes with disadvantages, so practicing stealth wealth is a good way to avoid public or personal scrutiny.
If you have a higher than normal income, net worth, or even a wealthy family heritage, people may treat you differently compared to someone with a lower economic profile. With stealth wealth, a millionaire (or even a billionaire) would look and act the exact same as someone with no money at all.
Why Keep Your Wealth Private?
Sadly, some people treat you differently when they find out how much money or wealth you have (or don’t have)! Just like in my bank visit story, I felt like I was being treated less like a person and more like a number after the guy looked at my bank account. Keeping your wealth hidden can keep interactions more genuine when meeting new people.
Sometimes wealthy people can become targets for harassment or unwelcomed offers. If you appear to have excess income or wealth, businesses or opportunistic individuals may try to take advantage of you. On the other hand, acting like you don’t have anything of value could make you less of a target.
Certain social pressures can be put on you if people think you are “rich.” Your peers might influence you to buy a luxury car or expensive clothes or to donate money to charities just to fit the typical profile of a wealthy person. Keeping your money status hidden can keep social pressures away.
Spending Money for the Wrong Reasons
Conspicuous consumption (buying luxury goods for the sole purpose of public display) has never made much sense to me. I can’t understand why people would sacrifice so much effort to accumulate money, only to spend it all trying to impress others.
I don’t know about you, but when I see people with an excess of fancy items on display, I usually am the opposite of impressed. Being ostentatious is an indicator that someone probably has a lower net worth than they are portraying. That’s what Thomas J. Stanley’s research found in the book The Millionaire Next Door:
“Allocating time and money in the pursuit of looking superior often has a predictable outcome: inferior economic achievement. What are three words that profile the affluent? FRUGAL FRUGAL FRUGAL”
From what I understand, the most wealthy Americans are the ones you would never suspect. They may like and buy nice things, but it’s never in excess or flaunted around.
How to Practice Stealth Wealth
First off, it helps tremendously if you stop worrying about what other people think of you. People want to hang around you because of your attractive personality, not because of how you look or the stuff you have.
As your income grows, keep your expenses the same. Lifestyle inflation (spending more money just because you’re earning more money) doesn’t grow wealth – it actually puts you further away from financial independence and early retirement. Lifestyle inflation hurts your retirement saving. Investing all excess income is what the stealth wealth peeps do. :)
Think and act pragmatically. Keanu Reeves catches the subway – even though he can afford to take a helicopter (or any expensive car he wanted) – because the subway is an efficient and convenient way to get around. Same reason Larry Page drives an old Toyota Prius when he can afford to buy any fancy new car he wants.
Buy stuff because YOU like it. It’s totally OK to like and buy fancy things! Just make sure you’re doing it because you see value, not because you think others will find it cool or your close friend has one. One way you can test this is to ask yourself before you buy something, “If you were the last person left in the whole world, would you still buy and use this?”
Use Family Trusts and LLC’s. Putting your larger assets into a business name or family trust is a good way to disassociate your personal name and hide your wealth. Many real estate investors use LLCs to mask their identity and protect their personal liability. Trusts can also be a great way to transfer wealth from parents to kids.
Financial Independence and Stealth Wealth
In the personal finance community, we do a lot of public money talk. We share our net worth, talk about our income and celebrate each other’s financial success. In a way it’s kind of contradictory to stealth wealth, because our assets are far from hidden!
But, there’s a difference between talking about money and boasting about money. People pursuing financial freedom are less concerned with looking like a rich person, and more concerned about the freedom and experiences that true wealth provides.
So if you’re a personal finance nerd, keep up the money talk! Just be mindful of how you’re sharing information. Keep it classy. And keep it stealthy in real life!
*****This was supposed to be the end of the post, but I left my computer unattended and came back to find my wife had read everything and added a note! So I’m including it below :)*****
My wife’s take on this stealth wealth stuff ;)
Growing up I used to feel uncomfortable about being frugal and living a minimalist lifestyle. I’m from West LA, where people promote a lot of excess and trade their souls for the appearance of lavish lifestyles in upscale neighborhoods. Especially on social media. But finding the FI community has made me become very comfortable in my frugality. I can openly share good deals, free stuff I found, or general opinions on the excess that our local community promotes. Recently what I found really interesting is that the majority of people still don’t like my frugality, they see me as “cheap.” While yes, this hurts my feelings a bit, it makes me double down on this Stealth Wealth idea; sometimes shutting my mouth when talking to the average person with different mindsets works out for the better. It’s a hard thing to swallow, at least for me, since I truly believe in education at all levels of life. How can I get the people around me to dump the luxury items? I’ve found staying true to my own sensible lifestyle and leading by example is the best I can do sometimes. My 2 cents.
PS: If you’re just getting started in your journey, here are a few good resources to help track your money. Doesn’t matter which route you go, just that it ends up sticking!
- The "Budget/Net Worth" spreadsheet - the colorful Excel template I personally use.
- The "Money Snapshot" spreadsheet - a simple Excel template I created for my former $$$ clients
If you're not a spreadsheet guy like me and prefer something more automated (which is fine, whatever gets you to take action!), you can try your hand with a free Personal Capital account instead.
Personal Capital is a cool tool that connects with your bank & investment accounts to give you an automated way to track your net worth. You'll get a crystal clear picture of how your spending and investments affect your financial goals (early retirement?), and it's super easy to use.
It only takes a couple minutes to set up and you can grab your free account here. They also do a lot of other cool stuff as well which my early retired friend Justin covers in our full review of Personal Capital - check it out here: Why I Use Personal Capital Almost Every Single Day.
(There's also Mint.com too btw which is also free and automated, but its more focused on day-to-day budgeting rather than long-term net worth building)