I sent a real estate listing to some friends of mine that are in a house hunt. It’s a “feel rich” house. I was a little giddy finding this amazing deal. This house will help them build wealth, create passive income and feel rich…. Unfortunately they will look Broke. As. A. Joke. while they live there.
I hate to be the one to break this to you. I really am sorry. But….
You can look rich. You can feel rich. But you can’t have both.
Bummer right? I know you really wanted to be the exception. You wanted to have an amazing, well EVERYTHING. House, car, clothes, vacations, memberships, eating out, designer shoes, Ivy league schools, second homes. AND you wanted freedom, security, early retirement, money to give, so much margin in your budget that you don’t really know what to do with it all. But you can’t have both. You have to pick. Look rich. Or feel rich.
Here are the two things you need to understand about “Looking Rich”
- It cost SO much money to look rich! It is never-ending to keep up with the “look rich” game. Every time you turn around, some marketer has created a new “rich” option. It will suck you dry with never-ending upgrades. Your tee shirts will be expensive, your hair gel, your shoes, don’t forget the expensive socks to go with those. Your sunglasses will need to be expensive. You can’t wear Dollar Store sunglasses with a $300 pair of shoes. Of course you will you need an expensive home, which means expensive property tax, expensive furniture, dishes, cut flowers, hand towels in the bathroom. It’s not like you can have a gorgeous home and 20 year old hand towels. Your landscaping will be expensive, which means you will need an expensive way to keep it watered. It will go on and on, and you will never get ahead. There are thousands and thousands of ways to upgrade your life. And each upgrade requires 5 more upgrades to keep your rich look consistent.
- Your “look rich” line moves as your income grows. So maybe you are thinking you will just earn even more so you can still look rich and feel rich. But as you earn more, the cultural expectation moves with your income. What looks rich on a $50k salary, looks cheap if you earn $300k. Camping for a week on the coast is an amazing vacation if you earn $50k. If you earn $300k, people will think 1. you are cheap or 2. having money problems. You won’t look rich to your peers.
How to feel rich? For each person the numbers will be a bit different. Here is a basic guideline:
After your monthly spending and minimum saving; you have an extra 25% of take home pay.
So after you pay all your bills, save the minimum for retirement, spend on all your monthly wants: there is 25% left. If all your expenses average $3,000 a month and you take home $4000, you will probably feel rich. That $3000 would include saving a minimum for retirement (maybe 10%), a bit for college, perhaps some giving. But then you have an extra $1000 each month. Maybe you use it to get to your goals faster, maybe you add it to your slush fund, maybe you roll it into other passive investments, or maybe you buy a cool pop up camper. But you feel rich. Because you have more than you need. You have enough margin to breathe easy. You don’t stress about money. You could have a $1,000 emergency, and you will shrug your shoulders and say, “Well that sucks! Guess we know where our extra thousand is going this month.” And it doesn’t even effect your bank account, or credit cards. Maybe you decide that for your mom’s birthday you want to go big and you drop $900 on an amazing gift for her. You are still $100 ahead of the game. That is feeling rich.
Some people truly believe it is impossible to live in America and feel rich. It is possible to feel rich. You just have to opt out of the game of trying to look rich. You can’t have both.
I am constantly amused by people’s reaction to the home we live in.
It is all a matter of perspective.
Some rather high earners make rude comments. Subtle, but rude. “You guys will probably move soon, right?” “This is a cute starter home, but you will want something bigger.” “Oh, this is cozy.”(with a hint of disdain in their voice)
We also have some people in deep poverty that visit us. The kind of poverty where the floors of their home have worn through and you can see the dirt and footings below. The kind of poverty where the roof never keeps the rain out, and the walls can’t hold back a strong wind. I do my best to make them feel welcome, but they quickly take off their shoes. They are in awe of our beautiful kitchen. They run their fingers over the surfaces. They admire all the shiny stainless steel appliances.
Same. Exact. House.
We bought a home that would help us feel rich, not look rich. By paying cash for this home, our budget has a generous amount of margin. We want everyone who visits to feel comfortable. We want to feel comfortable living here. But we will go broke if we try to impress everyone. It can’t be done. And to be honest, this is about as nice as we can go if we want the people who experience deep poverty to be comfortable visiting us.
I don’t know which home our friends will go with. For their budget, they could buy that property I showed them with 2 rentals attached. It would give them an extra $800-$1000 in passive income a month. Or they might buy something nicer. Something that makes them look a bit more “rich.” It’s their choice to make. Look rich, or feel rich. But they can’t have both.