Wealth Is What You Don't See

As I wrote about here before, one of my favorite finance books is The Psychology of Money by Morgan Housel. It is the most approachable book on managing your money I have read and it tackles many of the softer areas of financial planning, such as common investor biases and psychology.  

One of my favorite quotes from the book is “We tend to judge wealth by what we see because that’s the information we have in front of us. We can’t see people’s bank accounts or brokerage statements.” 

I grew up in one of the most expensive areas in the country – Great Falls, VA. When I turned 16, many classmates showed up in their new BMWs. I was in a Honda Accord as old as I was. Many of my classmates’ parents used their kids as a way to show their social circles just how wealthy they were. I’m not sure there is any better way to say “I’ve got money to burn” quite like giving your teenager a $75,000 car they are likely to total before graduation.  

The irony is that the kids with these nice cars often didn’t come from the families with the most wealth. As I got older and could appreciate what many of my classmates’ parents did for a living, I realized the ones with real, meaningful wealth, had their kids in boring and often preowned cars. 

As Housel puts it “Wealth is what you don’t see. Wealth is the nice cars not purchased.” The simple truth is that if you spend money on things you can’t afford, you will wind up with all the things and none of the money.

That doesn’t mean money should not be enjoyed. After all, what is the point of working and saving for many years to not enjoy it? But the ability to realize when you have enough and to stop moving the proverbial goalposts will not only lead to more happiness but true wealth.

Happy Planning,

Alex

This blog post is not advice. Please read disclaimers.