I don’t think you can tell without looking into their finances. For some, a big house and a couple of new cars signal wealth, but to me, they’re more likely signs of debt and poor financial judgment.
Personally, I live in a small, 75-year-old house, drive a 17-year-old pickup truck, and walk around in old clothes that were never in fashion to begin with. Yet I know for certain that my financial situation is far better than that of the average person in my country. You’d never be able to gauge my true wealth from my appearance or spending habits.
This is exactly it. If you can avoid the temptation to spend more when your fortunes rise, it makes a big difference in your finances.
For some, a big house and a couple of new cars signal wealth, but to me, they’re more likely signs of debt and poor financial judgment.
Thank you! I sometimes look at people whose financial situation is known to me and I think “what the fuck is you are doing”.
May I ask what you spend your money on that nobody notices?
In my experience the mix out of everything gives me a feeling on how much they have. A big indicator usually are vacations. If you have money to burn to go on a expensive vacation you probably don’t have money problems.
OP already replied, but the answer was super brief: they invest in their future. I don’t know what that looks like for them, but for us it means funding an emergency fund plus 401ks, IRAs, and college funds for our kids. Even if you’re not able to set aside a ton, the more money you can invest when you’re young the better off you’ll be thanks to the power of compounding.
If you’re lucky enough to advance your career put the extra money into your emergency fund and/or investments - you won’t miss it.
If you’re in debt, try to target one loan to pay off. Once you pay off that single loan keep paying that amount towards your next loan. Repeat until necessary. For example, after we paid off our car we put what used to be our old payment as extra $$ for our mortgage.
Not Op, but I was in a very similar situation (decent pay, old house, old car, not many fancy purchases). While many people here will borrow a lot and pay the minimum on their mortgage, I paid down my mortgage completely. (and otherwise spent money on travel).
Ironically, this is bad financial advice. The last 15-20 years interest have been very low, and house prices have soared. It would make much more financial sense to borrow more and buy a nicer house. But I value the freedom I get from not having a mortgage. And I never borrowed to buy a car, as cars depreciate like rocks
It’s more about what I don’t buy - which is a lot. For most of my adult life, I’ve lived well below my means and invested everything I’ve saved. Most people don’t save at all, let alone invest.
My cousin, for example, goes on expensive vacations like the ones you described several times a year. They also drive a nice new BMW. Yet when I recently quoted them €500 for some renovation work, they asked if they could split the payment over a few months because they couldn’t come up with the money all at once.
Suffice it to say, I don’t see vacations as a sign of wealth.
You are renting their second house, but they don’t make enough money off the rent payments and still have to work an actual job to support their family.
It’s hard to tell now days because people are into conspicuous consumption. Like you may drive an Acura and they drive a MBZ right? But you may Max out your retirement and savings and they’re saving nothing. I think until you see where their kids go to college you may not be able to easily tell.
Look at where their kids go to school. The rich never skimp on that.
You’re the same age but they’re retired.
I think they’d be a lot more than slightly more successful than me.
It depends a lot on your age, and how much more modestly you’re willing to live, and whether you plan on leaving anything to anyone.
Having kids is a huge factor. Not only does it destroy 2 decades of potential savings, plus another potential decade’s worth it you put them through college for even 4 years - money which could supplement your retirement income; but also most parents want to leave something to their spawn, and are unwilling to burn down whatever capital investments to $0.
Childless couples (and the perpetually single) have many more options for early retirement.
People have different priorities. Someone may have just bought a $500 designer shirt, while I bought a $500 comic book. Hard to tell by looking.
Is the house paid off?
Even rich people don’t do that.
Although we now know the metaphor is flawed, I don’t have a better one: people are like goldfish*: their spending increases to match their income. You make $100,000/y and buy a $300,000 house with a mortgage. The average person who makes $1,000,000 isn’t going to buy a $300,000; they buy a $3,000,000 and still need a mortgage. If they make $30,000,000, they’ll still take a mortgage because they also want to buy that G500 Gulfstream and a megayacht.
Maybe when you get into the billionaire range, they’re just paying cash. But the “just slightly” folks aren’t paying cash; they’re buying more expensive houses.
A paid-off house is just a house someone’s lived in, continuously, for 30 years.
Good point, but misses the brief. We’re talking normal people who are doing well, not mega yacht rich.
I think I got the point; I was using the mega rich to illustrate the point. Someone slightly better off than you is still likely to increase their spending proportionally, rather than living at the same level and spending their money more wisely. For example, instead of buying the cheaper house and paying it off, they’re more likely to just buy a more expensive house. I was suggesting that having a house paid-off is less a sign of being more well-off than a sign of self-control and a good use of the funds they have. In other words, you could have your house paid off if you were willing to live in a much cheaper house.
Another example: my wife and I both came out of college with debt: school loans and credit card balances. One of the few fiscally responsible things we’ve done were to aggressively pay down those debts first. We lived as cheaply as we could and funneled all our excess cash into paying off debt. Actually, we do that with our car purchases, too; we always pay down the principal on car loans aggressively. It’s not like we’re otherwise fiscally responsible people; we just both hate debt, and paying interest. Consequently, in over 20 years we haven’t had a credit card balances or payed CC interest. When we buy new cars, we get 0- interest-for-X-years loans and make sure we pay it off before interest kicks in. The only thing we do pay interest on - the only debt we have - is a home mortgage: we’re not going that well off, and we’ve never lived in one place long enough to pay it off. But if we were willing to live more modestly and focus on paying down the mortgage instead of going on vacation, we could be entirely debt-free.
Unless your economic circumstances are dire - that is, of you’re middle-class or up - there are few reasons you can’t live debt-free. Terminal illness. Lots of kids, or aging parents, to support. It’s just that most people choose to spend money on comfort and convenience.
Incidentally, this is the foundation of the fight over avocado toast and Starbucks. It’s not a single Starbucks; it’s not even daily Starbucks. It’s a indication of a broader lifestyle decision; it’s a reflection of how you prioritize spending. If you buy Starbucks, you’re also likely to spend your surplus income on other frivolities, rather than, say, paying down the credit card debt, or your car loan, or whatever. No, giving up Starbucks isn’t going to make you rich; giving up all of your conveniences, your weekly bar visits, your ski trips with friends, your Apple TV, Netflix, and Amazon Prime subscriptions - it all adds up. The avocado toast is just a reflection of someone’s priorities, and a pretty reliable measure that their priority isn’t to save money or pay down their debt.
I want to reiterate: I’m not claiming superiority. It’s only been our mutual hatred of interest and debt that has driven us to make lifestyle sacrifices so that we never build up debt. We’re not rationally fiscally responsible, only emotionally.
Well assuming you’re not “financially successful” and talking about wealth classes that make their money from working, then by comparison they don’t do anything differently when their paycheck arrives, or even know what day exactly they get their paycheck. If someone is living above their means or otherwise financially at risk, they’re paying close attention to the numbers in their accounts. More subtly, they might say something like “I just got paid, let’s go out for dinner” or “I’ll buy those tickets on Tuesday” when there’s no reason they shouldn’t just get them now for whatever it is.
This, and if they’re a friend, not pausing to think before a shared activity that would make you consider finances. A weekend/weeklong trip, concert tickets to a costly performer/seats, trying a new more expensive restaurant for lunch, etc. Even if they aren’t interested that time, the explanations say that openly or they address the cost in time, not money.
This, and not knowing the price of basic things.
They seem to be at exactly the same level. But they have more savings. At least, given the average savings most people have, that would be enough.
If they have a better computer or phone than you.
Edit: (but only if it’s one or two generations apart)
They might also prioritize technology over Gildan garments with expensive words on them. Seriously everyone thought I was ultra super rich with my Surface Headphones and Fire Emblem Fates Limited Edition New Nintendo 3DS XL but I wasn’t, I just didn’t spend that money on two pairs of sneakers with a basketball man’s silhouette on them.
