Page 99 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

But the truth is that wealth is what you don’t see.

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Wealth is the nice cars not purchased. The diamonds not bought. The
watches not worn, the clothes forgone and the first-class upgrade declined.
Wealth is financial assets that haven’t yet been converted into the stuff you

see.

That’s not how we think about wealth, because you can’t contextualize what
you can’t see.

Singer Rihanna nearly went bankrupt after overspending and sued her
financial advisor. The advisor responded: “Was it really necessary to tell her
that if you spend money on things, you will end up with the things and not

the money?”³⁰

You can laugh, and please do. But the answer is, yes, people do need to be
told that. When most people say they want to be a millionaire, what they
might actually mean is “I’d like to spend a million dollars.” And that is

literally the opposite of being a millionaire.

Investor Bill Mann once wrote: “There is no faster way to feel rich than to
spend lots of money on really nice things. But the way to be rich is to spend
money you have, and to not spend money you don’t have. It’s really that
simple.”³¹

It is excellent advice, but it may not go far enough. The only way to be
wealthy is to not spend the money that you do have. It’s not just the only
way to accumulate wealth; it’s the very definition of wealth.

We should be careful to define the difference between wealthy and rich. It is
more than semantics. Not knowing the difference is a source of countless

poor money decisions.

Rich is a current income. Someone driving a $100,000 car is almost
certainly rich, because even if they purchased the car with debt you need a
certain level of income to afford the monthly payment. Same with those who
live in big homes. It’s not hard to spot rich people. They often go out of their
way to make themselves known.