Do you want to look wealthy or be wealthy?

Hello Boarders,

I’m Toyin, also known as Liza. I lead Marketing at Nestcoin and I'm also a contributor to Compass by Onboard.

I recently read "The Psychology of Money" by Morgan Housel, and let me tell you, it has completely transformed my outlook on finance and life! While I could go on and on about all the valuable lessons I learned, there's one takeaway I want to share with you today.

Suppose you see a woman carrying a $3,000 Louis Vuitton monogram bag walking into a fancy restaurant. The default assumption might be that she's wealthy, using the bag as a status symbol to show off her ability to afford certain luxuries in life. If you recognize the brand, you're probably thinking, "She's probably wealthy (or rich) to afford this." However, there are many reasons she could have that bag, including that she saved up for months, got it at a discount, received it as a gift, or even bought a knock-off.

It's not wrong to make the assumption of her being wealthy since we can only judge wealth by what we see. We can't see people's bank statements or investment statements, so we rely on tangibles such as the life they portray in Instagram photos, cars, watches, homes, and other things that capitalism glorifies. But the truth and irony of wealth is that it's what we don't see.

When people say they want to be wealthy, they don't typically mean they want to have a certain amount in their bank accounts or in investments, they mean they want to be able to afford luxuries that they see, which unfortunately is the opposite of being a wealthy. It's so ingrained in us that to have money is to spend money, so we do not see the restraint it takes to build wealth.

Since reading this book, I had to be real with myself and ask the question, do you want to appear wealthy (i.e. be rich), or do you want to actually be wealthy? Every financial choice you make will be influenced by your answer to this question, and neither answer is wrong.

I was forced to be more honest with myself, and I realised that while my goal is to build wealth and have freedom over my time, a huge proportion of the decisions I made were not a result of comfort, as I originally told myself, but rather a result of a desire to appear wealthy, especially because I had convinced myself that there are certain luxuries I should be able to afford at this stage in my life and that I work too hard to not enjoy (I’m sure everyone can relate to this one)…. Money is truly about psychology, not finance.

Answering the question may be easy, but taking one of the paths mentioned here is a lot more difficult and lonely. If you are interested in embarking on a wealth-building journey, here are three truths that can help you make better financial decisions:

• Remember, nobody is as impressed with your possessions as you are: What we all want as human beings is respect and admiration. We've been conditioned into thinking that this is what expensive stuff brings you, but all it brings you is a need to continue in the rat race of life. More than your income, your home, or your car, money's greatest intrinsic value is to give you control over your time. Using your money to buy time and options has a lifestyle benefit that few luxury goods can compete with. This flexibility exists only when you have money in the bank. So, save, invest and give your self options, not luxuries.

• Contentment is an easy path to wealth: Financial contentment goes against our very being - our natural desire to acquire and consume. It means letting go of material possessions and societal pressures to discover the path to both happiness and financial freedom. It’s a very challenging journey, especially with social media and society's influence, it's easy to get caught up in the need for more. However, by being content with what you have, you can avoid overspending and impulse buying, which can ultimately save you money in the long run. This money can be invested in assets like stocks, bonds, or real estate to generate passive income and appreciate over time. Prioritizing wealth and financial security over material possessions can lead to a fulfilling and sustainable financial journey. In the end, true freedom comes from living within your means.

• Know what it means to be able to afford something: 4 out of 5 times when you can’t afford something, don’t buy it! One of the wealthiest people I know personally taught me that the easiest way to get poor is by believing you can afford something you can't really afford. It’s also why a lot of people are buried in debt. The general rule of thumb for him is that if he cannot afford something 10 times over, then he probably cannot afford it (ten is probably a bit extreme, but I think you get the point). It doesn't mean he won't buy it - but if he goes ahead to make the purchase, which is rare, then he at least doesn't delude himself that he can afford it. Saving to buy something or financing something is not a good yardstick of your ability to afford it and in that sense, you need to either aim lower, or take that money and put it towards investments that would give you returns in the long run, especially if you're buying a depreciating asset.

To wrap things up, before you create a financial plan or make any important financial decisions, it's crucial to ask yourself a key question: do you want to appear wealthy or do you want to actually be wealthy? Neither option is inherently bad, but it's essential to have a clear understanding of your goals to avoid spinning your wheels. Once you have a clear goal in mind, the path to achieving it isn't easy. However, you should always remember certain truths to help you stay on track. While you won't be perfect, making consistent, wise decisions will bring you one step closer to your goal, and that's what truly matters.

While these concepts are easy to understand, putting them into practice is challenging. That's why we created Onboard, it’s more than just a financial app, we are building a membership community of modern Africans who are on their wealth-building journey and want to share, learn, and support one another. Becoming a member is easy: download the app and get onboard to take the first step in your journey

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DISCLAIMER: This newsletter is for educational purposes only and is not investment advice or a solicitation to buy or sell any assets. Please do your own research before making any investment decisions.