Becoming wealthy has never been easier in America. However, feeling comfortable as a wealthy person on the other hand, has never been tougher. The pandemic has created a K-shaped recovery where the investor class has widened the gap between the working class. This widening gap is why I’m a big proponent of practicing Stealth Wealth.
The investor class crushed it in 2020 with the S&P 500 up 18 and the NASDAQ up 43%. Post-pandemic, the housing market is now booming and will likely continue to do well for years. If you are an owner of real estate, stocks, and other appreciating assets, you are getting richer by the month.
Meanwhile, millions of people lost their jobs or were long-term underemployed. To be open about your income and wealth gains would be completely foolish when so many people are hurting. Instead, if you are rich, it’s much better to convince people you are middle class. This way, when the revolution comes, you will be spared.
Further, just look at how the government goes after your money. The government taxes you based on income and much less so on wealth. Taxes are likely going up under Joe Biden as well. Therefore, stealth wealth is paramount.
Stealth Wealth To Avoid The Government
For example, once you make much more than $250,000 a year, you will face an abundance of taxes or tax phaseouts: Medicare tax, AMT, deduction phaseout, credit eliminations, education tax, Net Investment Income tax, etc. With Joe Biden as president, he has promised to raise taxes on households making over $400,000 a year.
However, you can pass on at last $11.7 million per person in wealth, tax-free to your heirs in 2021. This sounds like a lot of money, however, you already paid taxes on the $11.7 already. So don’t think the high estate tax threshold is really a great benefit.
President Biden has proposed raising the top capital gains tax rate. He might also abolish the stepped-up basis if he has his way. Therefore, the government is clearly targeting the wealthy to try and better distribute some of the wealth.
I can understand targeting centi-millionaires and billionaires. But if you’re a six-figure income-earning household working 60 hours a week, I’m not so sure this won’t cause disdain. You must practice Stealth Wealth to avoid the government’s growing reach.
Stealth Wealth To Avoid The People
If the government doesn’t get you, regular citizens will. Who did you cheat or rob to get to where you are? Is the common attitude among those who feel left behind. This is a real problem for those who want to make it big in the land of dreams and hand guns.
Freedom is one of America’s greatest attributes. Yet, if you go too far on the income curve you’ll start feeling like a prisoner to society. Finally, hundreds of millions of Americans know what losing freedom is like due to months of shelter-in-place to combat the coronavirus pandemic of 2020.
Despite the rich giving more to charity in one year than many others will give in their lifetimes, people will protest their wealth and hate them forever. Despite paying more taxes each year than what the median household makes, the rich person will be demonized for not paying his or her fair share.
Class warfare is no fun, even if you do have the financial means to own a bazooka.
Practice Stealth Wealth
Most readers here are ambitious folks who want to improve their financial health. Thanks to disciplined savings and investing habits, in another 10 years, I’m sure everybody is going to be that much wealthier, if not millionaires.
But once you get to where you are going, you’ll wonder what’s next. Never lose site of the fact that it’s really the journey to financial independence that’s most rewarding.
When society turns their back on you for being successful, just recollect on all your struggles and take a deep breath. Be proud of your accomplishments because you know you’re not just doing it for yourself, but for your family as well.
You don’t have to be ashamed for not being the dumb ass in high school who thought it was cool to skip class every week to smoke weed. You shouldn’t feel bad that you worked summer internships during college while your buddies went off to play. And you should certainly not feel embarrassed by your frugal habits and smart investments once you found a job.
If you’re getting up at 5am every morning to make extra income before work, good on you! Feel proud of working more than 40 hours a week and not complaining why you can’t get ahead.
It’s OK To Be Secretly Proud Of Your Achievements
Unfortunately, society has a fantastic way of discrediting your achievements. “Nobody is self made,” and “You didn’t build that,” are my two favorite retorts. Just try taking yourself completely out of the equation and see where that logic goes when there’s nobody to think, dream, and execute. When you are outnumbered, resistance is futile. You must blend in and rage with the rest of them.
With the below suggestions you’ll be able to better walk amongst the shadows without fear of retribution any longer. Your family will be more guarded from bullies lurking to recondition your children every chance they get.
Once you finish reading this post, never speak of its matters beyond your immediate family and friends again. Going on Twitter or Facebook to boast about your financial accomplishment is really stupid. We’ve got to protect our own little community on the web.
A Guide To Stealth Wealth
As America attempts to reverse capitalism due to widening income inequality, blending in as a middle class citizen has never been more vital. Below are 15 Stealth Wealth recommendations to help you assimilate better in society.
Stealth Wealth Rule #1: Never drive a nice car to work or to any public setting.
Drive the most economical, safe car you know so that when you ultimately run into your co-workers, they’ll think you’re frugal or poor. Take public transportation and proclaim your love for buses and trains profusely. You don’t want to roll into the office in a Benzo and have your boss see you. His or her immediate thought will be to cut your bonus since you are doing so well.
Driving up to an employee salary negotiation meeting in a Bentley isn’t going to work in your favor either. Instead of choosing a new Range Rover Sport and deducting the vehicle as a business expense, consider a more moderate BMW X3 or Jeep Grand Cherokee instead.
When cops huddle for breakfast thinking about which car they want to ticket, do you think they are going for the guy in a 10 year old Toyota Corolla? Cops make $50-$60,000 a year on average and are on a mission to equalize.
Having a regular car is the #1 easiest way to practice Stealth Wealth.
Stealth Wealth Rule #2: Be careful who you give your home address to.
People love to snoop online to see what you paid for your house. Not only will they see what you paid for your house, they’ll also be able to tell whether you’re under water or making huge equity. Instead of giving an exact address, you can give them cross streets and a description of the house. e.g. I’m at the corner of Jackson and Teller. Brown wood shingle house. You can’t miss it.
Inevitably, they will find out your exact address if they pay attention, but delay that information for as long as possible. Your house is your sacred abode. Protect its privacy. I recommend claiming your house online and trying to make the house look as bad as possible. Property tax assessors look online all the time now to try and jack up your taxes.
Your home is now the easiest way to blow your Stealth Wealth cover. Be careful.
Stealth Wealth Rule #3: Don’t flash your bling
Whether it’s your Panerai watch, Birkin bag, Armani suit, or Louboutin shoes, keep them at home if you don’t want people to know you can afford the real thing. People who practice stealth wealth do not flash their bling. Or they may choose to tell someone they’re wearing a fake if asked.
Resist the urge to brag about your material things. You’re already an established individual. The quality things that you buy are for your own pleasure after all. Pretend you don’t know luxury brands or how much things cost. You can just say you like how they look.
Stealth Wealth Rule #4: Never reveal your full income.
Without question, never reveal the full extent to how much you make. Only those who are insecure, seek adoration, or want to make money by teaching you how to make money enjoy flaunting their wealth. There’s definitely an inverse correlation with how much wealth you have and how much you show. You’re an invisible tycoon remember?
If you have a particularly high income level and you’re hanging around with people who make a fraction of what you make, be cognizant not to talk about your vacations or things you’ve bought. Be aware that the median national household income is $68,703 in 2021. Earning anything more than 2X your state’s median household income will put you under fire.
The people bragging about their income are people with the lowest self-esteem. They clearly do not know the importance of Stealth Wealth.
Stealth Wealth Rule #5: Spread your assets around.
Do not become one of the biggest land owners in your community. Do not become one of the biggest shareholders in a private equity deal unless you really, really believe in it.
Spread your investable assets around so people can’t really tell how much you have. Diversification also ensures that your wealth doesn’t take a beating in case of violent downturns either.
Chopping up your assets and putting them into different LLCs is one of the best ways the rich practice Stealth Wealth.
Stealth Wealth Rule #6: Get out of your bubble.
Once you know your State’s median household income and average net worth, adjust your outlook accordingly. Not everybody had nurturing parents, attended great schools, worked hard, got a lucky break etc. Some people are born into poverty, and it’s damn hard to get out because of negative influences all around. Believe that people truly want to do better.
When you start visiting other communities, you realize that despite all your hard work, you are probably luckier than most. The better understanding you have of others, the less chance you’ll come across as an arrogant snob and the better you can assimilate. Take every chance you get to travel internationally and live abroad.
Where I live, San Francisco is a bubble. The NASDAQ has rebounded to all-time highs in 2020, despite there being tens of millions of people unemployed due to the coronavirus pandemic. It would be unwise of me to think the rest of the country is also experiencing this sort of surreal prosperity. A good Stealth Wealth practitioner knows when he or she is living in a usual situation.
Stealth Wealth Rule #7: Pretend you do not understand.
You might be a brilliant person, but brilliant people are intimidating. Instead, pretend you don’t fully understand what another is saying by asking questions. Don’t think you’re better than others just because you see solutions easily. Guard your intelligence like you guard your full income and wealth.
It’s better to start your intelligence at a low level and dial it up if the occasion requires. Some of the smartest people I know have this eery look about them that screams stone cold aloofness. You know they are already thinking multi-variably, but from the outside it seems like they are a dull brick wall.
The expert Stealth Wealth practitioner has a high enough Emotional Quotient to understand that imposing one’s intelligence on someone else is not the right move.
Stealth Wealth Rule #8: Praise others for their success.
Always be encouraging and positive of other people’s milestones. People who are insecure tend to be the ones who want to toot their horn the most.
You know the types who constantly post pictures of themselves online, name drop who they hung out with the other day, or constantly share how great they are. Once in a while is absolutely fine. All the time just cries for desperation and attention.
Try really hard to bite your tongue and not “one-up” someone else despite any successes you have. Give glory to them. Be happy for others and never belittle their achievements.
A Stealth Wealth practitioner knows there’s enough praise to go around for everyone.
Stealth Wealth Rule #9: Volunteer to be on various charitable boards.
Although charitable boards are a breeding ground for some of the wealthiest people, it’s hard to get attacked if your name is prominently on the brochure for good. Your role as a charity board member is mainly to fundraise since it is assumed you are relatively well-connected.
Rich people attract other rich people, who enjoy rallying around a cause. The more money you can raise for the charity, the less bad things other people will have to say about your wealth.
Just be aware that usually only very wealthy people have time and the connections to land a board position at a charity.
Stealth Wealth Rule #10: Always stay humble.
Consistently mention your failures. Sooner or later, people will figure out you are not as poor as you make yourself out to look. When they do, they will realize how humble and unassuming you were all those times they were talking about their wealth and their achievements.
You know those movies where a girl falls in love with an ordinary guy she meets at a park, but he turns out to be a prince instead? You want to be that guy. They’ll love you even more and you may even affect their financial lives in a positive way.
Since 2012, when I retired from finance, I’ve been internet retirement policed for not being truly retired. People attack me because Financial Samurai has grown to be a large independently-run personal finance site with over 1 million pageviews a month. If Financial Samurai was a small site, nobody would say anything.
Instead of denying the Internet Retirement Police’s claims, I accept them. I give in. I can’t help that I love to write and connect with other like-minded folks on the internet. It’s one of my biggest joys in retirement. By writing, Why I Failed At Early Retirement: A Love Story, I’m no longer harassed by the IRP. And you know what? It feels quite liberating.
Stealth Wealth Rule #11: Donate aggressively to both parties or donate nothing at all.
If you donate aggressively to one party, you run the risk of being ostracized if another party comes into power. Think about all the senior government officials and big backers who were loyal to Obama when Trump assumed power. Their careers instantly got shut down.
Now think about all the loyal backers of Trump if Biden becomes president? All of Trump’s backers will be run out of town as well.
The solution is to donate to both parties equally and sing their causes for a greater America. Once you identify yourself as an American rather than as a Republican or a Democrat, it’s easier to justify being a patriot.
Stealth Wealth Rule #12: Set up trusts for your children and charities.
One of the great ways to hide and protect your wealth is by setting up revocable living trusts. You don’t want your heirs to go through a public and potentially messy probate court to fight for what they think they should get.
Trusts are all about leaving a legacy you desire without other people getting up in your business. Just be careful not to leave your kids too much, or else they might become spoiled brats with no purpose in life!
I also recommend putting businesses you own under someone else’s name (a proxy, usually a lawyer) or under the shelter of a trust. Keep the inquisitive eyes guessing and even play along if they start getting very aggressive. A trust within a trust, just like a dream within a dream.
Stealth Wealth Rule #13: Stop smiling so much.
One of the biggest annoyances is being around someone who is always so happy when you are not. The happy person usually lifts your spirits up. Smiling is the #1 thing you can do to improve your chances of being liked.
But if you are always happy, some people start thinking what’s wrong with you. And more importantly, your constant happiness might make other people feel bad for not feeling as happy. People are much more empathetic to people who are feeling down and out. Misery loves company!
Instead of always being happy, develop a poker face in your daily life and practice your frump. Since money can’t buy happiness after ~$200k per person and $300,000 per household, society will be thrilled if you are worth multi-millions and sad.
Of course, if you are amongst happy people, smile and be happy as much as you want! The Stealth Wealth practitioner is highly aware of his or her surroundings. Ideally, you learn how to smile internally.
Stealth Wealth Rule #14: Understand pop culture and sports.
The more you can connect with someone, the less they will hate you. Americans spend six hours a day on average watching TV instead of producing. If you don’t have six hours a day to waste, read the online synopsis of The Game Of Thrones, Keeping Up With the Kardashians, Strangers Things and more.
Make sure you know who are the top four contenders in the NFL and NBA. The more sports and pop culture you know, the more you are able to assimilate. The greatest thing I like about sports is that it breaks down all race, cultural, and economic barriers. It’s what you do on the field that counts.
Now that tens of millions of people are sheltering in place forever, you should also become familiar with all the top shows on Netflix, Hulu, Amazon Prime, and HBO Now.
Stealth Wealth Rule #15: Always attribute your success to luck.
Eventually, people might catch on that you are wealthier than you make it seem to be. When they confront you, it is vital you attribute your success to lucky breaks. Once you do, there’s nothing more than can say because you’ve already acknowledged your skills and hard work didn’t get to where you are.
Take the confrontation a step further and buy them a drink or a meal to share your luck. You will instantly gain an ally if you do.
I truly do believe anybody with a significant amount more wealth than average is lucky. Therefore, if you are wealthy and start claiming it was mostly your skill and hard work that got there, you will instantly make enemies.
The Benefits Of Stealth Wealth
1) Truer relationships.
When you’re powerful or wealthy, you’re never quite sure whether a person showing interest likes you for who you are or for the benefits they think you may provide them.
When it comes to romance, we’ve learned from a previous post one should look out for one’s mannerisms to unveil stealth wealth. A good life is all about genuine relationships that are not soiled by the taint of money.
2) Less people come out of the woodwork to bother you for money.
As soon as your old acquaintances and relatives find out you have money, you’ll inevitably get e-mails and phone calls from people who are looking for financial assistance. You might even get a call from your baby mama or baby papa to discover a child you never knew you had!
3) Lower expectations for you to always pay.
There’s a tendency to push the group bill on the wealthiest person in some cultures or circles. You may very well be the wealthiest person at the table, but it starts getting incredibly annoying when people who are not starving are always asking you to pick up the bill.
The same lower expectations go for when it comes time to donate to charity. People should pay or donate out of the goodness of their hearts, not because they are simply wealthier than others.
4) Lower chance you will look like a cheapskate.
People who don’t have as much money enjoy highlighting what a cheapskate some rich person is for not tipping more than he should, or buying up to the limit of what they should be able to afford. A large reason why people are wealthy is because of the financial discipline they’ve practiced all those years while working.
Wealthy people tend to save more and invest more of their money. Less wealthy people tend to take their extravagant spending habits and extrapolate them if they had X amount more money.
5) Less likely you will get ripped off.
If you are a foreigner landing in Mumbai, the taxi driver will easily try to charge you double because what’s an extra 200 rupees to you? You’ve got to spend your time haggling for the standard downtown fare for all passengers. Highway patrol officers tend to target fancy cars over beaters because they know fancy cars tend to move faster and there’s less guilt associated with giving a wealthy person a $250 ticket.
Sales people are trained to look out for wealthy customers. They’ll see what type of watch you’re wearing, what type of car you drive, what type of handbag you hold, and what type of shoes you wear all to size you up and see how much they can extract within an acceptable range.
6) Less likely to get kidnapped or mugged.
No kidnapper is going to bother kidnapping a person from the slums. They are going to go after some rich doctor’s son playing in the park after school one day. Muggers are wise to drive five minutes further to a wealthier zip code in San Francisco to mug unsuspecting pedestrians. Why mug in the Bronx when you can mug in the Upper East Side?
All one has to do is look up online those people in society magazines, or those who frequently report their outsized incomes to target. Kidnapping and mugging is a high risk business. Might as well get the most bang for your buck!
Tip Toe Away From The Spot Light
If you have a substantial amount of wealth be grateful. You might feel ostracized by the world, and hence end up hanging out with only rich people who won’t attack you for being you. However, I encourage you to not lose sight of reality. The K-shaped recovery since the pandemic is began is very real. The wealth gap has widened significantly as a result.
Learn to diversify away from those who spend $50,000 a year on private high schools, $2,000 on fund raiser galas, $85,000 on BMWs and $100,000 on fancy country clubs. Flashing your wealth is a sure fire way to get the hammer by not only the IRS, but by your fellow citizens who can’t stand your success.
It is much better to be rich and a nobody than be rich and famous. Trust me on this one folks. Having the freedom to do what you want in public is priceless.
If you are not wealthy based on your own definition of wealth, I encourage you to channel your frustrations at the wealthy by improving yourself.
The rich and powerful have a tendency to get more rich and powerful. Their children will likely have a huge head start over the average kid graduating from school.
We’ve just got to try harder to get ahead by studying more, coming in earlier, leaving later, taking more risks, and being steadfast in our resolve of never giving up until we find success. Practice Stealth Wealth!
Related: The Stealth Wealth Compendium Of Useful Phrases to deflect attention.
Invest In Real Estate For Financial Independence
Every stealth wealth practitioner I know invests in real estate. Real estate is a tangible asset that is less volatile, provides utility, and generates income. The combination of asset price appreciation and rental price growth is a power combination to create stealth wealth.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
Stealth Wealth Management Tool
To manage your stealth wealth, try using Personal Capital’s free financial tools. It helps you track your net worth, control your cash flow, and growth your wealth on stealth mode for free.
One of their best features is their Portfolio Fee Analyzer, which runs your investment portfolio(s) through its software in a click of a button to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was hemorrhaging!
Their second amazing tool is their Retirement Wealth Planner which is the best on the web because it pulls in real data you’ve linked up, and runs thousands of algorithms through a Monte Carlo simulation to give you a financial picture of your future. You can run multiple different scenarios with different spending, income, and life events to help anticipate your future.