Stay Small: Owning a Porsche Doesn’t Make You Rich

It is very common for the average American household to overspend their earnings on material goods. We all have that neighbor that drives a Porsche or that co-worker renting a luxury beach condo he can’t afford. In fact, this sort of unnecessary consumption is probably one of the biggest financial problems plaguing the middle class today. There is something about our society that equates the ownership of luxury goods with your level of wealth. The truth is that, most of these individuals that own these types of luxury items don’t really have any sort of real wealth.

The True Meaning of Wealth

Sadly, while we as a society equate extreme consumerism with “richness,” we don’t do a really good job of educating ourselves on the true meaning of wealth. There is a book by Thomas J. Stanley called The Millionaire Next Door, which I believe should be required reading for all individuals starting at a young age. It explains that the majority of the country’s wealthy (i.e. those with a net worth of $1 million or more) do not live lavish lifestyles and, in fact, live among the middle class without giving any indication of their extreme wealth. And that the reason these people are wealthy, and have stayed wealthy, is because of this frugality.

No one needs a Porsche. We’d all be perfectly fine driving a pre-owned Honda Civic. It’d still get us to where we need to go at a fraction of the price. None of us truly need to purchase a 10,000 Sq Ft mansion in the best neighborhood in town. A 1,400 Sq Ft house in a middle class neighborhood is “good enough” and will provide the same shelter as the mansion with much less overhead.

The more things we desire and the more we have to do to earn or attain those achievements, the less we actually enjoy our lives–and the less free we are.

-The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living

When you buy yourself an expensive gift, you experience “temporary happiness.” This usually fades away very quickly and in most cases you are now left with a very expensive luxury item that will now cost you to maintain, adding to your financial burden. Driving your new Porsche down i95 will feel amazing for the first few weeks. After this, nothing will change the fact that you are on i95, except now you have an expensive car payment to go along with it. You will eventually grow to resent that car (the opposite of what you felt when you purchased it) as you sit in bumper-to-bumper traffic, on that 2 hour commute, to that high paying job, that you are forced to work, in order to pay for your lifestyle. Living lavishly under extreme consumerism causes you to need to work more and harder in order to maintain said lifestyle, trapping you in a never ending spiral of consumerism and spending. This is not wealth!

“Stay Small”

Warren Buffet is worth $65 billion, yet he has lived in the same house he purchased in 1958 for $31,500. The stock market could tank tomorrow, wiping out most of Buffet’s wealth, yet the impact on his life would be minimal. This is because Buffet’s lifestyle does not live and die by how much he is worth. That is true financial freedom!

My wife and I have set a goal this year (and all subsequent years) that we labeled “Stay Small.” The essence of this goal is that no matter how much wealth we accumulate investing in real estate, we are not going to get carried away by consumerism. The house we currently live in is good enough and we are not going to move into something “better.” We are fine with the 10+ year old Hondas we are driving now because they are paid off and do not cause us any financial burden. The more we grow our wealth, the more financially free we will become, because our lifestyle will not grow as quickly, or quicker than our earnings. We will never become prisoners of our own doing by living beyond our means, and our wealth will grow at a much faster pace as a result.

Happiness is not determined by the amount of wealth and material goods that one accumulates. It comes with the freedom that wealth brings you to do the things, and be with the people, that you love. Spending your wealth completely will have the opposite effect.

Stay small and be financially free!