Stealth Wealth – How to Hide Your Riches

Stealth wealth became famous after The Millionaire Next Door was published. Many imagined that millionaires drove luxury cars and lived in glamorous homes, and it turns out the opposite was true.

This makes sense conceptually. By not spending money to flaunt their wealth, people save more money to become even more wealthy through the powerful effects of compounding interest.

In addition to not spending your money, stealth wealth also encourages hiding your income. There is only one time income sharing is beneficial – when you are negotiating for a raise. Aside from that, there are rarely benefits to sharing how much you make.

There are many benefits of stealth wealth – such as having genuine friendships, and not being expected to pay more. Below are all of the benefits, as well as how to practice stealth wealth.

The Benefits of Stealth Wealth

Fewer people will ask you for money

As more people learn about your wealth, more people will come to you for money. Their intentions are often good, and it will be difficult to say no to everyone.

This is one that I take personally. My uncle hates money – all he does is spend it, and has never known how to save. He bought a brand new Chevrolet Corvette last year, which cost roughly his annual income. Far less than the 1/10th of income that we recommend.

He knows some relatives that have done well, and is often asking for money.

Imagine if he asked me this question. From his perspective, I have a much larger net worth, and should share it to help his family. From my perspective, he wouldn’t be in this position if he wasn’t spending his annual income on depreciating assets like automobiles. My car is 15 years old, of course I’m going to have more money saved up.

Regardless of whether you say yes or no, your relationships with these people will never feel the same. You’ll either feel like they owe you money, or they’ll feel like you were cheap and couldn’t help them. It’s better for them to not ask, and they never will if they have no idea how much you’re worth.

You won’t be expected to pay more

How much do you tip your valet driver? I’m pretty sure valet drivers would expect me to tip more if I had a brand new Porsche compared to a 15 year old Honda.

I used this signal the last time I bought a bed as well. After negotiating the price down to $1,799 (from a starting price of $4,199), I asked to step outside to “think about it”. After sitting next to my 15 year-old Honda looking at comparable prices online, the sales rep realized that this bed would be worth more than my car. We ended up purchasing the bed for over 70% off for $1,199.

Genuine friendships

The more money and influence you have, the more people will want to exploit you for it. It’s tough to know if people want a true friendship, or if they want a piece of your money or contacts.

Don’t let money ruin a good relationship.

Less likely to get robbed

Mugging a wealthy person is just as illegal as mugging a poor person. Seeing that as the case, you might as well target the wealthiest people.

This is especially true in San Francisco, which had over 30,000 car break-ins in 2017. Which kind of cars do you think they’re targeting? You can also take a guess on which neighborhoods they’re targeting as well.

How to Practice Stealth Wealth

Never share your true income or net worth

The average person makes $46,409 per year and the median net worth of adults under 35 is $11,000. There’s no benefit to sharing how much more you make compared to the average.

Think about how much you spend for other things as well, like a vacation or watch. A $900 Tag Heuer watch is worth more than the average person makes in a week, be mindful of these numbers when you talk to people.

Never drive a nice car

Automobiles are one of the biggest signals of wealth. Not only will a nice car make people jealous, it’s also a massive waste of money.

Follow the 1/10th rule of buying a car that is worth 10% of your annual salary. If you’re part of the 1% who makes over $300k per year, that rule suggests that you buy a $30,000 car like a Honda Accord. How many people will assume you make $300k if you drive a car like that?

Live in a modest home

Anybody can go on Zillow to see how much you paid for your home. They can also look up how much apartment units around you cost for rent. If somebody knows where you live, they can quickly gauge how affluent you are.

Owning too much of a home can make you house poor as well. If too much of your paycheck is going to your house, you won’t be able to save for retirement or your hierarchy of savings.

Don’t own nice stuff

Avoid lifestyle inflation as you make more money. You shouldn’t spend more money just because you’re making more. Not only will this give you less financial flexibility if things turn, it will make you a target to others.

Allocate your time and money towards building wealth instead of owning nice things. People won’t notice how much stock you own, but they will notice a Louis Vuitton bag or a Rolex watch. If you must own something like that, tell everybody it’s fake.

Praise your friends and family’s milestones

Unimpressed that somebody graduated college? Just because you and your friends did it, doesn’t mean it’s easy. Only 40% of Americans graduate college, which means that graduating college is a milestone that less than half of Americans achieve.

Keep that example in mind as your friends and family celebrate their milestones. It will make them feel better, and will make you look like less of a jerk.

Get out of your bubble

Odds are that you make a similar income to your coworkers, and have a similar education background.

The median income at Facebook is $240,000 per employee, which is more than 98% of all Americans. Remind yourself of this if you are fortunate enough to be surround by people who make that much money.

Stealth Wealth – The Bottom Line

There’s no benefit to flaunting your income and net worth as they grow. Practicing stealth wealth will allow you to save more money, and will keep you from being perceived as out of touch.

Aside from staying in touch, stealth wealth will keep people from exploiting you for money. Salespeople won’t expect you to pay more, service staff won’t expect you to tip more, and friends won’t expect you to pay more.

Be mindful of wealth signals, such as the car you drive or the home you live in. Staying modest will keep you under the radar, and will ensure your relationships stay genuine.

Finally, spending modestly will ensure more money is going to your savings, which will put you on a faster track to financial independence. At the end of the day, isn’t that what this is about?