Looking rich may look cool, but looking poor can give you financial freedom much sooner. That’s the overarching message from personal finance guru Humphrey Yang‘s recent TikTok video.
He outlined the four reasons why it is smart to look poor. Some of his reasons revolved around saving money and getting more with less, but one of his reasons also touched on the social circle you attract with looking poor vs. looking rich.
Simplicity
Yang’s first reason for looking poor is the simplicity that comes with it. If you avoid expensive possessions, you avoid expensive problems.
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Yang then gave the example of receiving a free Lamborghini. Although the vehicle is free in this scenario, it comes with expensive problems. You will have much higher auto insurance premiums, higher gas prices, and more expensive maintenance visits. That’s before considering how much it costs to buy a Lamborghini.
Expensive items take up more space in your budget, and some of those items continue to show up in your monthly expenses long after you bought them. Looking poor helps you avoid these problems and embrace a simple life.
It’s Cheaper
Most people don’t need the newest iPhone. Using an older model won’t make you look rich, but you will end up saving a lot of money. Ditching designer fashion and exotic cars also lets you save a lot of money.
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Looking poor doesn’t mean you are poor. It just means you aren’t spending excessive money on materialistic items. Some people live frugally and still find time to go on multiple vacations each year. In fact, it’s because these people look poor that they have more money to spend on experiences.
It Attracts The Right People
A humble lifestyle will attract people who value you for who you are instead of what you can give them. The way people view you may shift for the worse if you start to look rich. People who look rich may attract people who care about their money instead of who they are as a person.
The way you present yourself impacts your social circle and how people value you. It’s possible to look poor while dressing in a respectable manner. However, if you come to the next community event in a Lamborghini, you will have a different type of social group that wants to connect with you.
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You Can Retire With Less
Looking poor will free up more room in your budget that you can invest in retirement accounts and other assets. Those additional investments will compound quicker since you can put more capital into your portfolio.
On top of that, Yang said that spending less money allows you to retire earlier, using models like the 4% withdrawal rule. If you follow that rule and spend $50,000 per year, you only need a $1.25 million portfolio. However, if you want to spend $100,000 per year in retirement, you’ll end up needing a $2.5 million portfolio. The amount you spend each month is a key factor that determines when you can retire.
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