YouTuber Damon Cassidy released a video in May espousing the importance of looking poor via frugality. He recalls, as a former bank employee, how he once thought the luxury items others showed off were an indication of wealth until he realized, in many cases, the opposite was true.
"The individuals [who] had the expensive and flashy items were not those [with] the high cash balances but instead the high debt balances," he said.
Of course, some born into riches or who find wealth by way of entrepreneurial success can print Benjamins much faster than they’ll ever spend them. But the intriguing wisdom behind looking poor is that it easily translates into much lower expenses. Imagine no car payments to shackle you, no credit cards to pay off, no five-star hotels while traveling to the next town over. Now, take that saved money and ask yourself how you’ll turn it into even more via investing.
Put another way, who really has more money to spend? The guy who shells out $2,000 a month on his tricked-out sports car or the woman who drives a thrifty 2009 Toyota Corolla that’s 100% paid for?
Frugality's virtues
Many material possessions — coveted collectibles and fine art come to mind — can more than recoup the money spent on them. Still, you can't enjoy any small fortune tied up in Beanie Babies or a Jackson Pollock until you sell.
Moreover, paintings and pop culture artifacts may not keep up with conventional investments. Over the last 20 years, the S&P 500 has seen an annual average return of 10.12%, assuming all dividends were reinvested, according to the Official Data Foundation. That means a $1,000 investment in an S&P 500 index fund 2004 would have grown to around $7,100 in 2024.
While certain cars qualify as collectibles, the typical luxury automobile is often a financial clunker. According to Kelley Blue Book, most new vehicles lose about 20% of their value in the first year and after five years are often worth only about 40% of their original value.
Take a tip from one of the richest men in the world, Warren Buffett, who's worth $140-plus billion, according to Forbes. The frugal investor still lives in the same home he bought in 1958 for $31,500, which is around $340,000 in today's money.
