Everyone’s in the business of looking rich these days. They’ll do almost anything to give off the impression that they’ve got oodles of cash. Because that’s what matters most, right? It’s no wonder then that we keep bumping into those fake Louis Vuitton monogramed bags. You know the ones! Then there’s the cars. That lovely status symbol on four wheels. And, with all these supply shortages still going on, bagging one fresh outa the showroom is the ultimate flex.
But guess what? ~90% of cars are ‘bought’ on loan. Aka consumers taking out debt since they can’t afford their wheels outright. Loans equal more monthly expenses. And more expenses means you need more money just to cover these new costs. Quite the stress just to show people you can ‘afford’ things, huh! Read here the shocking truth why most Americans now live paycheck to paycheck!
See here’s the thing, it might be easy to fake a handbag (though they aren’t all as authentic-looking as you might think) and perhaps a coat or two. But you can’t fake wealth. You’ve either got it or you don’t. And I hate to break it to you, but until you see the inside of someone’s bank/investment account, you do not know how wealthy anyone is. No matter what they do/don’t show you. Read here how avoiding this dangerous money move will make you richer than you ever thought.
The real deal
The difference between looking rich and being rich are worlds apart. And it’s the latter that matters most. And when it comes to real estate, there’s nowhere to hide. There’s a ceiling for your mortgage. You can only borrow so much. Apart from ’08 (when they were practically dishing out mortgages), banks don’t just go lending willy-nilly. They have some pretty strict lending requirements and if you can’t afford it (or fail their tests) then you’ve got to find some place cheaper.
In the UK, the maximum amount that you’re able to borrow for a mortgage is usually between 3 and 4 times your annual income. But if you’re applying for a mortgage with your partner, then you can usually secure one with 4 times your joint income. But that’s it.
I spent the morning in one of London’s most expensive postcodes. The properties at this location start from a cool £10mil a pop. Swanky cars are everywhere. From the latest Maserati to those brilliant Bugatti’s. They’ve got ‘em all. I bumped into gardeners pruning residents’ trees, cleaning the floors (that their cars would later drive on) and you had workmen polishing their very many doors. These properties look pristine. Just like in the movies. And there wasn’t a thing out of place. Not a leaf or a spec of rubbish.
Now, the people who own these properties either have sky-high incomes that allow them to put a deposit on such an expensive place or they’ve already made their money and have millions splashing around. Or both! And there are all sorts of interesting ways in which the super-rich buy their homes. Some even include putting down their individual shares as a deposit. But if you don’t have assets (cash, shares or otherwise), bagging these beauties will be near to impossible. Read here how this underrated small loan can help you with your mortgage.
See, when it comes to the more expensive postcodes, most ordinary folk would not qualify for that kind of mortgage. Though there are people who will put literally everything into their homes. They’d squeeze themselves so hard all to get into that specific street. The one that’s slightly out of their league. And guess what? All they’re left with is a big pile of debt. No investments. No sneaky stocks or crypto stashed away. Just a house and way too much debt. All to live in a bigger, fancier place. No thank you. Unless of course, you’re offering to foot the bill! Ha, thought so!
Live below your means
See here’s the thing with debt. It’s like a multiplier. It’ll make the good times even better but it’ll make the bad times way worse. If you’ve taken out debt (whether it’s on a home or a car), you’ve got to be able to meet those monthly payments. Month after month. But more importantly, to have enough (emergency) cash to cover the cost of 6-12 months’ worth of these expenses. In case the worse happens. Like losing your job. Read here the 3 simplest ways to boost your financial resilience that anyone can adopt!
But let me tell you, most people with excessive levels of debt do not have nearly enough cash stashed away for these kinds of emergencies. And when the bad times strike, they’ll have to sell assets (if they have any). And the last thing anyone wants is to be forced to sell. Anything. Because when you’re desperate for something, you almost certainly won’t get a good deal.
Stop the stress!
Then there’s all the stress that comes with debt. I know a handful of people who are mortgaged up to their eyeballs. They work day in day out. All to pay their pile of bills. They’re not able to build their asset base since all they’re doing is paying off debt on one single asset – their house. Diversification is crucial. If not, you’ll start to feel trapped and tied to your job.
And while your home is technically an asset (I’m assuming you won’t be renting it out if you live in it but it’ll hopefully appreciate in value) most people won’t sell their homes. Not during their lifetimes anyway. Unless of course they downsize. Which is why you need a whole bunch of other assets. Plus, who wants to be paying off their loans when they’re 80!
But all this can be solved by not living above your means. This means no drowning in debt. This means less stress. And it means greater wellbeing. If you can’t afford to live a particular area, do yourselves a favour and look elsewhere. It isn’t worth your mental sanity to push yourself to the limit. And all for what? To live in a fancier area with a heavier load of debt? That does not smell like financial freedom to me!
Focus on impressing yourself; not others
The only person you should focus on impressing is yourself. And yourself only. And if you want to treat yourself (which for me seems to be so often these days!) go out and do it. By all means. Because that’s what all these nice goods are there for. For a good old treat. For a pick-me-up. But the minute that you’re doing it for others, you’ve totally missed the point.
But most importantly, you’ll be missing out on all that enjoyment that you could’ve had. And from what I’ve seen, most people are too busy with their own lives and their own stuff to spend time thinking about what others are (or aren’t) spending their money on. It’s time we start doing things for ourselves. Not for others. And trust me, you’ll be way happier that way.
Imagine how much better off all these people would be if they put all that money into their investment accounts. Instead of taking out expensive car loans and buying all sorts of other things. I guarantee that if you knew how much your money now would compound to in 50 years’ time, you would not think twice. You’d load it all up. But since we’re too short-term, wanting things here and now, we give up on our financial future.
But it’s never too late. We’ve all made mistakes. So learn from them and turn yourself around. Make new habits. Ones that you’ll be proud of. Ones that will lay the foundation for the future you want.
There’s so much more to life than impressing others.
Impressing yourself is the new cool.
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.