An Astonishing Truth: Why Most Prefer the Appearance of Wealth Over Actual Wealth

How would you chose between:

a) giving the impression of wealth, but living paycheque to paycheque

OR

b) actually being wealthy, but living a low-key lifestyle

At first glance, the decision seems obvious – isn't actual wealth the better option?

As I frequently remind my clients, however: "Actions, not words, reflect our priorities."

And if we go by consumer data, the verdict is in: We would rather look rich, than be rich.

 

Our Need for Social Validation

For many, being rich is meaningless unless they receive the social validation that comes with it. Whether we like it or not, humans naturally attribute a host of desirable traits to the rich —success, power, elevated social status, intelligence, popularity, generosity, sophistication and leadership. It’s not the money we seek, it’s what we perceive it gives us. Sometimes it’s security and the ability to help others; other times, it’s the dopamine rush of social acceptance.

The reality is that an individual's true financial health is usually invisible, hidden away in bank statements, investment portfolios, and balance sheets only our accountants are privy to.

Our perceptions of wealth are therefore heavily influenced by what we can see and touch: luxury cars, opulent homes, designer clothes, and expensive jewelry. In an era dominated by social media, where individuals meticulously curate an idealized persona, the allure of appearing affluent has seemingly surpassed the actual value of financial stability.  And with record access to credit, faking rich has never been easier.

The example of the "3 second bag"

The "3-second bag" trend in South Korea strikingly illustrates the preference for the appearance of wealth over actual financial security. As you walk down any street in Seoul, it's almost a guarantee that within moments, you'll spot a luxury bag identical to one you've just seen, within a matter of seconds. What's remarkable is that these designer labels have price tags soaring into the thousands, far beyond what's accessible for the average income. This raises the question: why pursue such extravagance when it's evidently out of budget for many?

The answer lies in the symbolism of luxury. A Louis Vuitton bag, for example, isn't just an accessory; it's an apparent symbol of class, distinction, and worldliness.

An acquaintance of mine who earns slightly above minimum wage and lives with her parents at the age of 40 insists on using most of her income for two luxuries: Louis Vuitton bags and keeping up with her Mercedes lease. She lacks savings, is burdened with substantial credit card debt, owns no property or investments, and is weighed down by a hefty student loan. For her, the appearance of affluence trumps the necessity of resolving her financial difficulties.

The Fake Trader with the Fake Lambo

In a wildly cautionary tale, Tyson Robert Scholz, a 35-year-old self-dubbed "Wolf" trader found himself in a legal mess, unable to repay his own mother $750,000. The reason? His preoccupation with maintaining a fake life of luxury on social media. His Instagram was a parade of luxury, featuring everything from exotic vacations to a gleaming $320,000 Lamborghini, all symbols of a life steeped in wealth. Yet, when ordered by the court to settle his debt to his mother, stemming from a failed investment in a Subway franchise, Scholz claimed he was actually broke, reporting an actual income of 44 cents and admitting that the Lamborghini was actually a rental used for Instagram photos. His only part of the Lamborghini he owned was the vanity license plate.  While he was likely exaggerating the extent of his poverty, there was nevertheless a massive discrepancy between his online persona and actual wealth. It showed the extreme lengths some will go to preserve an image of wealth, even at the expense of actual financial stability and family relationships.

This is admittedly an extreme example. Yet, at the same time, countless people live, to varying degrees, a façade, trying to paint a portrait of luxurious living, when in reality, they face staggering debt and no actual means to sustain their lifestyle.

Stealth Wealth

On the flip side, there is a concept known as Stealth Wealth – a way of life characterized by rejecting social pressures for conspicuous displays of wealth. Stealth wealth represents a conscious choice to downplay or completely conceal one’s positive financial status, a fascinating psychological stance that contrasts sharply with the more visible consumption patterns seen in today’s society. This approach stems from a desire for privacy, a rejection of the social pressures associated with conspicuous consumption, or a deeper understanding that true wealth does not require external validation. Psychologically, it taps into the values of autonomy and authenticity, where individuals find satisfaction and security in their accomplishments without the need for public acknowledgment. This mindset often leads to a more serene and content lifestyle, free from the scrutiny and expectations that visible wealth can attract. And in fact, this mindset can help facilitate a wealthy future; it reflects a strategic move to avoid the pitfalls of envy and social comparison that visible affluence might invite, thereby allotting more funds into assets and income producing investments. Moreover, this strategy tends to result in more satisfying personal relationships, fostering genuine interactions based on character rather than perceived financial status.

Indeed, some of the richest people I know are the most understated in outward appearance.  Have you even noticed how some of the world’s ultra-rich do not seem to care about their choice in car, fashion, or homes? They often prioritize functionality and comfort over flashy symbols of wealth, demonstrating that their self-worth and identity are not tied to material possessions. They spend money on assets that produce income, or direct their spending on philanthropic endeavours. This choice reflects a deep-seated confidence and a focus on long-term financial health and helping others over immediate gratification or superficial social standing.  

So what do you do if, in all honesty, you’re more invested in looking rich, than being rich?

If this is the case, it may be time for some frank and honest introspection...before things get out of hand.  

Do this without harsh judgment; Remember, the desire for this facade can often stem from the heavy influences of social media, along with the expectations set by friends and family. It's easier to "look rich" than to be rich, and let's face it - building wealth has become increasingly challenging with rising costs and stagnating wages. You're not alone, so give yourself a break.

Pause and consider the long-term impact of choosing a path defined by conspicuous consumption, not just on your financial health but also on the kind of relationships you foster. Picture what your life will be like 5, 10, 20 years from now if you stay on the same path, and imagine the types of people you will be attracting and comparing yourself to.

If you don't like the picture you see, then aim to realign your goals with values that encourage authenticity over superficiality. What kind of person do you want to be, and what types of people do you want to attract - those that see you for who you are, or who judge you by the designer labels you wear?

Educate yourself in the area of financial literacy and embrace the type of wealth that is based on substance and leads to genuine, long term satisfaction.

Ultimately, while seeking approval through material signs of wealth is a common human trait, remember that the essence of true wealth lies in solid financial planning and authentic connections - far beyond mere appearances.