Embracing Stealth Wealth: Financial Freedom Over Status
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Achieving Financial Independence and Avoiding the Status Trap
This personal finance blog aims to increase financial literacy and guide you on the path to achieving financial independence. Achieving financial independence requires strategic saving and smart investing so you can eventually reach the “crossover point”, where you can live off your investments and where employment becomes optional. For many, financial independence happens at traditional retirement age, where retirees live off a combination of pensions, savings, and investments. However, with strategic planning, financial independence can be achieved much earlier.
In today’s post, we focus on the importance of adopting stealth wealth to attain financial independence. Humans are biologically wired to work hard in pursuit of social status and respect from their peers. From an evolutionary perspective, this makes sense: for most of human history, achieving a higher degree of status would have been crucial for securing sufficient resources, procreating, and transmitting our genetic code to our descendants. In contrast, those at the bottom of the status hierarchy would have faced much greater challenges.
However, in modern society, gaining status is no longer linked to a higher likelihood of passing on genetic material to future generations. In fact, the tables have turned—people with lower social standing are more likely to have larger families, particularly in poorer countries. In any case, if you are calmly reading through this blog’s posts on financial independence and philosophy, chances are you are not struggling to meet basic survival needs.
There is no mistake that achieving social status or receiving respect from your peers ‘feels good’. This likely arises from a long-standing evolutionary mechanism, which, like many others, would link certain behaviors and practices that increase our likelihood of survival with an immediate positive feedback on how we feel. Unfortunately for those in pursuit of status, the satisfaction arising from it is temporary, creating a cycle of constant dissatisfaction that doesn't bring lasting happiness or peace of mind. It’s like a fire that constantly demands more wood to keep burning, requiring increasing effort and resources to sustain its warmth.
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The Hidden Costs of Chasing Status
In addition to its fleeting nature discussed above, pursuing status in today’s materialistic world of abundance comes with significant drawbacks and challenges we should be aware of:
Constant comparison: Comparing ourselves to others fosters dissatisfaction and anxiety. It is a dynamic game that doesn’t depend fully on our efforts, but also on the perception and efforts of others. It is not a fun game to play: when we compare more favourably the positive feeling is fleeting, yet when we feel left behind it will be hard to think of anything else.
Financial pressure: Modern society often measures status through displays of material wealth—we buy fancy cars, large houses, jewellery, exotic vacations, etc. to signal to others that we are worthy of their respect. Focusing too much on status will certainly set you back financially. There is a large opportunity cost of keeping up with the Joneses—it is expensive to build and maintain the social facade you wish to project onto others.
Loss of confidence and authenticity: When you are constantly focused on achieving external validation, you are continuously projecting an image of yourself which you hope complies with the current expectations and standards of others. This leads not only to a loss of confidence and authenticity, but also makes it more difficult to build genuine relationships with others.
Increased pressure and emotional exhaustion: Pursuing status creates constant pressure to project an image to others. It can be time-consuming and exhausting to not be your authentic self, and efforts to keep up with status demands can lead to stress and burnout.
Lack of contentment: Pursuing status becomes a never-ending chase for more. Even when you ‘succeed’ in earning the respect and admiration of others or manage to climb a rung of the social ladder, it is easy to find yourself playing the exact same game with a new social cohort. Continuously seeking external validation does not lead to fufillment, but to misery.
Risk of envy and resentment: The pursuit of status can breed jealousy from others. Unfortunately, there are no good outcomes here: if you ‘fail’ at the status game you will feel miserable, while if you ‘win’ you will generate envy and resentment from those around you.
Illusion of status: When we interact with people we are not close with, we should remember we are using a very limited set of information to infer their social status. Yet, a person driving a fancy car may be $100,000 in debt, while a person who lives in the city and chooses not to drive could well be a millionaire. What good are these external inputs then to determine someone’s financial level, let alone their value as a person?
Status vs. Freedom: The Critical Tradeoff
The status game occurs frequently through displays of material wealth—fancy cars, large houses, jewellery, etc. With this we signal to others that we are worthy of their respect. But, as we saw in the previous section, there are many reasons for which we should turn our backs towards the pursuit of status. Worse still, there is a large tradeoff existing between status and freedom. The more someone tries to impress others through purchases, the more likely one is to experience financial strain.
Ultimately, the whole endeavour comes at the expense of time—you will need to spend more time at your 9-to-5 job to buy all the necessary gadgets and experiences, and it will certainly slow down your timeline to achieve the freedom that is provided by attaining financial independence. In other words, building and maintaining the social facade you wish to project onto others costs money and time–there is a large tradeoff between status and freedom.
A strategic way to overcome our natural tendency for status is to rationally decide to embrace stealth wealth over status, and to substitute financial dependence for financial freedom.
What Is Stealth Wealth and Why It Matters
Why Stealth Wealth Matters and How to Practice It
Stealth wealth is the practice of minimizing the publicly-available information about ones income, assets, and net worth. A stealth wealth practitioner could be a multimillionaire, and it would be impossible to guess unless she told you, because she would be wearing regular clothes, driving a normal car, and perhaps even living in an average house. Embracing stealth wealth is, in fact, the very opposite of pursuing status. Paradoxically, those who embrace stealth wealth early on are far more likely to become wealthy over their lifetime and enjoy the benefits of financial independence than those focused on material-based projections of social status.
But why exactly would someone wealthy decide to embrace stealth wealth? Does it mean not enjoying the fruits of your labor? At first, embracing stealth wealth may sound akin to being very frugal. Although there is some degree of overlap, there is an important distinction to be made. While someone frugal typically restrains himself consistently from spending across all aspects of life, someone embracing stealth wealth is carefully selective of spending in areas that don’t bring value, but is comfortable spending money on things that do bring value.
Wealthy individuals embracing stealth wealth will prioritize first their personal and financial security. If this is secure, they will then spend on services that provide ease and comfort or will spend on projects or hobbies they are truly passionate about. But they will do so in a way that does not attract attention to themselves. They understand deep down that the fundamental purpose of wealth and financial security is to enjoy the personal freedom that can be derived from it, and would never think of jeopardizing it by playing the status game through material purchases. This is the reason why so many multimillionaires dress normally and choose not to drive fancy cars.
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Key Benefits of Embracing Stealth Wealth
Turning your back on the pursuit of status and embracing stealth wealth brings some of the following benefits:
Financial security: As we’ve seen, avoiding external displays of wealth is a proven method to accumulate wealth. Those who practice stealth wealth effectively manage financial risks by prioritizing savings and investments.
Increased privacy: The moment you start displaying your wealth for the world to see is the moment you are opening yourself to unwanted attention, including scams and security threats.
Reduced stress: Embrace stealth wealth and you will experience less pressure to maintain appearances to impress others or to keep up with high net worth individuals. Turning your back on external validation brings back a sense of control and agency over your life.
Authentic relationships: Many will treat you differently when they are aware you are a high-worth individual, and your interactions and relationships with others will not be genuine. Practicing stealth wealth fosters authentic connections centered on character, not wealth or appearances. It also reduces jealousy or resentment from others.
Avoid lifestyle creep: Avoiding lifestyle creep is critical because focusing too much on material upgrades kickstarts a cycle of constant dissatisfaction. You may buy a new car, and, suddenly, your clothes or modest car might seem inadequate. You move into a bigger house and your old furniture feels out of place. This cycle of constant upgrades and comparisons can drain your finances and keep you chasing a sense of fulfillment that never lasts. By adopting a mindset of stealth wealth you will simply stop caring about this.
Freedom of choice: Renouncing the status game will give you financial freedom and liberate you from societal pressures. You will truly be making your own decisions.
Simplicity: Embracing stealth wealth fosters a minimalist and intentional lifestyle. You refuse to let in the external noise and are fully focused on what truly brings you value. You’re skilful at enjoying life to the fullest without craving material possessions.
Tranquil life: As a result of many of the points above, practicing stealth wealth will enable you to live a less demanding, more tranquil and happy life. We’ve covered the importance of leading a tranquil life in previous posts covering the core principles of Stoicism.
Flexible implementation: Another positive feature of embracing stealth wealth is that its implementation is highly adaptable to each person–there is no one-size fits all solution. Embracing stealth wealth will look different for you than for me, since everyone holds a different set of values and interests. The common principle though is to reject playing the status game of external validation and to avoid public displays of wealth.
Stealth Wealth as a Strategy for Financial Independence
What does embracing stealth wealth mean in relation to financial independence? Stealth wealth is normally discussed in the context of high net individuals who may have already reached this level of financial success. It is certainly an effective way to maintain and protect your wealth once you’ve reached this point. However, adopting principles of stealth wealth early on the journey towards financial independence can also be very beneficial. By opting out of the status game, letting go of superficial appearances, and not feeling the need to keep up with your peers, you will naturally see an increase in your savings rate, the single most important factor for accelerating your journey to financial freedom.
I would argue that embracing stealth wealth may be more beneficial than adopting an uber-frugal mindset. While being frugal may come naturally to some, for others it may be a rough road. We should remember that one of the most cited advice from people who have reached financial independence is that you should be easier on yourself during the journey. Treating the journey to financial independence like a sprint may leave you exhausted and burned out. In contrast, adopting a stealth wealth mentality will provide you some room for spending on things that truly bring you joy, while cutting back mercilessly on expenses that don’t.
Ultimately, it's important to clarify your reasons for pursuing wealth: is it to impress, compete, or prove yourself to others? If so, stealth wealth won’t suit you, and maintaining your wealth in the long term may be challenging. However, if your goal is to break free from the 9-to-5 routine, be in a position to care for loved ones, and enhance your freedom for personal growth, then embracing stealth wealth could be the right path for you. By focusing on long-term fulfillment over external validation, you align your wealth with your deeper values and aspirations, while accelerating your path towards financial independence.
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Enjoyed this post? Don’t miss our post on Vicky Robin’s 8 lessons frugality or our post on 8 longevity lessons from Netflix’s latest Blue Zones show.
