5 Fake Signs of Wealth

hey guys what's up I'm Ain and welcome back to the channel when it comes to wealth it's far more important to actually be wealthy than it is to Simply look wealthy and there's a lot of ways you can fake looking wealthy and I feel like so many people actually do this and there are a couple of metrics that when we hear them we tend to automatically associate them with wealth whether or not they truly correlate with wealth and for a lack of a better term some of these metrics I just consider them fake wealth like a credit score of 850 in the financial Community it is often a big goal to try and hit a perfect credit score of 850 or at least aim to hit a really great credit score and quite frankly I think this can be a phenomenal goal not that I think you actually have to aim for 850 but aiming for high 700s or around the 800 Mark I think that's a phenomenal goal because a high credit score comes with some really great perks namely it entitles you to the very best interest rates and if you go to borrow money say you take out a mortgage AG or an auto loan and you lock in a great interest rate over the life of the loan this can save you thousands if not tens of thousands of dollars consider getting a mortgage today at a 7% interest rate versus an 8% interest rate the interest rate you get makes a huge difference but while a good credit score does entitle you to the perk of being able to borrow money at a less expensive rate it does not indicate a sign of wealth rather it indicates that you're responsible with debt repayment for instance I was recently talking with a friend about financial matters and she was telling me that she had a really amazing credit score it was somewhere around 8.45 which is really impressive but then she was talking about her incredibly high debt burden she was talking about the fact that she had a mortgage a brand new fairly High auto loan she had student loan debt and several thousands of dollars in credit card debt that she was simply paying the monthly minimum payments on admittedly her credit score is better than I checked in my score is hovering somewhere around 8:15 which is still a great score and it entitles me to the very best interest rates should I need to borrow money quite honestly I think 800 is a wonderful Benchmark I honestly don't think you have to aim to hit any higher than that because it doesn't entitle you to any greater perks once you get around the 800 Mark or the 780 Mark you generally get the very best of interest rates so to me I think 800 is a perfectly fine Benchmark to aim for and personally I'm not trying to take on any additional debts I have a mortgage and that's it I do really think that it's important to keep in mind that a higher credit score does not indicate a higher level of wealth all your credit score does is to indicate how well you can handle debt repayment it is not a sign of wealth it's so easy to think that if someone has a high income that automatically makes them wealthy but a high income does not automatically mean a high level of wealth you have to consider one's debt to income ratio so much of how wealthy you feel deal really comes down to the income you have to work with if you have a $200,000 a year income that's a great income but if you have expenses that total $200,000 a year at the end of the year you don't have anything to show for it this debt to income ratio is a metric used to assess your ability to manage monthly payments and payb debts but even outside of that it can be a useful metric for you to know on a personal level when it comes to managing your own finances it's calculated by dividing a person's Total Money monthly debt payments by their gross monthly income that is typically expressed as a percentage as a general broad statement I like to keep the debt income ratio as low as possible meaning I like to keep the overall debt burden as low as possible leaving you with as much of your income as you could possibly want to have to work with and do whatever you wish with however I do understand that people may not want a simple statement of keep it as low as possible generally people want a number assigned to this so in that case a debt to income ratio of 35% or less means you're generally in really good shape and should be able to handle your debt load a debt burden of 36 to 49% is considered manageable still and a debt burden of 50% or more is considered worrisome and you may find yourself in a situation where you struggle to pay back your debts the general guideline is that lower is better and remember this is going to include all of your debt types so a mortgage auto loans student loans personal loan credit cards debts they're all going to go into this ratio the higher your debt burden the more payments you sign yourself up for essentially the more you're signing away your paycheck the less of your income you have to work with and it's a really easy trap to fall into to Simply increase your debt obligations or increase your expenses as your income increases this is how you end up with even high income earners living paycheck to paycheck fancy well anything having a fancy anything is not an indicator of wealth whether this is a fancy home or a fancy car fancy clothes jewelry you name it a nice appearance does not indicate wealth and this kind of goes back to the previous one where you never know if someone is spending every single last bit of their paycheck or even spending beyond their paycheck I know I've mentioned this before but I love those CNBC make it YouTube episodes where they do a little Deep dive into people's personal finances I think it's really fun to pull back the curtain and see what people are doing with their money recently there was an episode titled how I afford NYC living on $117,000 a year this title absolutely caught my attention because New York City is one of the most expensive places to live and I was wondering how can someone live there on $177,000 a year and spoiler alert this person is not living in NYC on $177,000 a year the individual featured actually drives two vehicles one of which is a BMW which we can say is a fairly fancy car so it looks like he does have a bit of a luxurious life he has an income of $117,000 a year but ultimately he spends around $34,000 a year which means he's literally spending double what he makes you can't be Building Wealth going into the red by double your income on an annual basis it can be so easy to make it look like you're doing well with your finances even though that may not be the case and especially with social media today it's easier than ever to make it look like you're doing better than you actually are you have people who will rent a fancy vehicle just to get a handful of pictures with it or maybe they simply walked past a fancy car that was parked nearby and took a picture with it you could assume the same thing with jewelry or clothes or even fancy hotels you name it you have no idea if this person actually bought it borrowed it or simply took a 1- second picture with it and the reality is it doesn't really matter much what matters is that you know that so much of what is put out there is fake don't be fooled by all the smoke and mirrors of whatever anybody else is posting matters is that you know what your goals are and you stick your head down and you go after them I really think we've entered a world where people use credit cards as a status symbol people are very eager to talk about their credit card reward programs or all the perks they get from their credit cards and even as you get into those fancier credit cards they're actually made out of metal as opposed to plastic so they even feel a bit fancier and I think credit cards can absolutely be a useful tool in your toolbox but they're not a signifier of wealth not by a long shot I'm a firm believer that there is one and only one way to appropriately use a credit card and that is to pay it off in full and on time every single month and if you don't follow this one rule of credit card usage you can get yourself into some hot water because then you're just borrowing money at an interest rate of 20 25 or even 30% which is just ridiculous and each type of credit card has a different type of Rewards program some simply offer points and when you get into those higher end cards maybe you get free flights or free stays at hotels credits for streaming services or dining credits they really do have Perks and I really shouldn't say that any of these are free because there is an inherent built-in cost that is spread among all the credit card users but the value you get from these cards is going to depend on how you use it still always make sure to follow the rule that you pay it off in full and on time always a lot of these cards have very alluring signup bonuses for instance you can get 990,000 bonus miles on anerican American Express Delta Reserve card so long as you spend $5,000 within the first 6 months of having the card now if you want to sign up for this card and capture this bonus make sure that you're not simply spending an extra $5,000 over the course of the six months just to capture this bonus because there are no airline miles points or whatever that are worth you spending a dollar more to get them from a credit card company they're simply not that valuable and keep in mind that this card comes with a very Hefty $600 50 annual fee so really the important question to ask yourself is are you really going to extract $650 worth of value from this card and truly that's only a question you can answer maybe you do maybe you don't but if you don't it's not worth having the card so often I feel like people go for these Elite cards just for The Prestige of being able to slam down this metal card but they're not actually extracting the True Value from it it's important to remember that there are lots of credit cards out there without any sort of annual fee and regardless of what credit card you have remember the rule of pay it off in full and on time every single month and if you can't do that you don't need to have a credit card frequent job changes can be a little bit of a red flag when it comes to one's ability to generate overall wealth and this one can be a bit of a fine line to walk because it has been proven that strategic career changes can lead to dramatic pay increases pay increases that Far and Away surpass the option of staying in your current career with your current company and simply capturing the annual inflation adjusted pay increase but on the flip side if someone is changing careers too frequently say every year or so this can indicate instability and this person might struggle to have a steady income and having gaps in your employment is certainly going to make it hard to build up your savings and your Investments over time because during these gaps you're likely living off your savings and spending it down until you secure that next paycheck and also if someone changes careers frequently that can hurt you from an investment standpoint in terms of your 401k what a lot of people don't consider when they start a career or a job that has a 401k plan is that there's often a vesting period a vesting period is a period of time or a schedule in which you gain ownership on the employer contributions to your 401k some companies have vesting schedules and some companies don't and there are different types of vesting schedules known as Cliff festing schedules where you gain 100% access to the employer contributions after a set period of time or graded investing schedules where you incrementally gain ownership over the employer contributions or a hybrid approach of the two the thing to keep in mind with investing schedules if you're frequently changing jobs is that if you're actively contributing to a company's 401k plan if you change before you fully fulfill that vesting schedule you may lose out on all or a portion of that employer's match if you don't meet this vesting period and an employer match can end up being a significant amount of money in terms of long-term investment just for the sake of keeping things simple let's say you have a job where you get $100,000 a year and work for an employer that does a dollar for dooll 5% match since the typical 401K employer match is between 4 and 6% in this situation that means if you contribute $55,000 your employer will match $5,000 if this employer uses a 4-year Cliff festing schedule and you leave after 3 years you've just lost out on $115,000 worth of money if you do this on a repeated basis not only are you losing out on significant lump sums of money but you're also losing out on what these significant lump sums could grow to over time so there is something to be said about stability at the end of the day the only true way to know if somebody is wealthy is to take a peak in their bank account and most people are not going to let you do that it's darn near impossible to judge if somebody is Wealthy by any external factor it's just not possible to look at someone and say oh they have type of career so they must be wealthy or they drive this type of car or they have a credit card that gets them access to the airport lounges it just is not an indicator of wealth it doesn't tell the full story there's a lot of ways that people fake looking wealthy and there's a lot of people out there who are putting on errors and it's also worth keeping in mind that we each individually have our own idea of what wealth looks like at the end of the day it doesn't matter what anyone else is doing or what it looks like they have or what they actually have what matters is that you put your head down have your own goals in mind and go after them it doesn't matter what anyone else is doing do you guys have any that you would like to share any fake indicators of wealth leave them in a comment down below I post new videos every single week if you anything at all out of this one please give it a like if you're new here please consider subscribing or if you know of someone who might get something out of this type of content please consider sharing I'll see you soon bye

Channel: Erin Talks Money

Views: 95,731

Keywords: personal finance, wealth building, investing, fake wealth, rich, wealthy, building wealth, pretending, pretending to be wealthy, what is wealthy, rich vs wealthy, credit cards, credit card rewards, rewards program, what wealthy looks like, credit score

Id: yCZhVSF6240

Length: 13min 31sec (811 seconds)

Published: Mon May 06 2024