Review: Stop Acting Rich

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Every other Sunday, The Simple Dollar reviews a personal finance book.

stop acting richOver the years, I’ve professed a ton of admiration for Thomas Stanley and William Danko’s excellent personal finance book The Millionaire Next Door. It was the first book I reviewed on The Simple Dollar and it’s still one I turn to regularly for ideas and inspiration.

One of the most interesting themes in The Millionaire Next Door is the idea that you really can’t judge a book by its cover when it comes to personal wealth. In fact, quite often, public displays of affluence disguise a debt-ridden underaccumulator of wealth, while many exceptional accumulators of wealth possess ordinary, often seemingly outdated things. The underaccumulators of wealth focused on appearance, while the exceptional accumulators of wealth focused on how things functioned.

Thomas Stanley expands upon that single idea here in Stop Acting Rich. The entire premise of the book is simple: lasting wealth and happiness is rarely found through buying expensive things. Throughout the book, Stanley relies on extensive research of people who have acquired financial security – much the same group as in The Millionaire Next Door – to illustrate and reinforce his points, painting a pretty convincing case of the actual buying habits one should adopt if one is seeking lasting personal wealth.

1 – The Difference Between Being Rich and Acting Rich
Stanley opens Stop Acting Rich by defining a group of people he calls “aspirationals” – people who choose to act like the super-rich, but don’t have the financial resources to truly back it up.

The “aspirationals” and the truly rich (people with truly exorbitant wealth) tend to spend a lot of money. Stanley reviews these spending habits in detail here – think yachts, country clubs, cases of vintage wines, private jets, BMWs and the like. To put it simply, “aspirationals” often have to sacrifice every dime they have to appear rich, leaving them incredibly vulnerable to losing everything.

What’s interesting is that this “aspirational” and “truly rich” phenomenon continues all the way down the money scale. In many neighborhood, there are “aspirationals” – people who are pushing themselves into financial ruin to keep up appearances – and people who can actually afford to live there.

The solution to financial success is pretty simple – stop being an “aspirational.”

2 – Everything You Think about Rich Is Wrong
When you step back and look at “aspirationals” from an outsider’s perspective, an interesting phenomenon occurs. Aspirationals are more common than the truly rich by far, so our “pop” idea of what it means to be rich actually comes from people who are financially poor and are making reckless decisions for their future.

Those aspirationals are seeking respect from the wrong group of people. In truth, it doesn’t matter at all what the random person on the street thinks of you, yet it’s the respect of the random person on the street that aspirationals desperately seek.

“But what about dressing for success and the like?” The only people who you should focus on impressing and winning the support of is your professional peer group and community. Their respect is what will actually impact your life. In many – if not most – professional communities, the watch you wear or the car you drive doesn’t matter one little iota.

3 – Do the Shoes Make the Man?
Many people argue that by doing things like dressing for success, they’re creating the groundwork for success. People will trust and respect them and money will flow their way. So they focus on the material elements – they focus on the perfect shoes, the perfect suit, the perfect handbag, the perfect car, and so on. After all, gotta look good, right?

Yet, while that person is focusing their energies and resources on appearing rich, others are focusing their energy on building the skills that will pay the bills. While one person is buying expensive shoes and keeping up appearances at the country club, the other person is practicing their speeches and coming up with a better business plan.

In the end, one of these two people will find lasting wealth. Will it be the glossy suit with nothing underneath, or the person who put in the time to prepare?

Don’t put the appearance of success before success, or else someone who is actually putting in the footwork will grab that brass ring away from you, leaving you with nothing but a mountain of debt. Focus on the skills that pay the bills, not on the bills that bring more bills.

4 – Brother, Do You Have the Time?
Want to know why you’ll often read articles or hear about people who wear expensive things getting extra attention? It’s because having high-end items makes you a target for people who want to drain even more of your money.

Think about it. If two people walk into a jewelry store, with one person dressed in normal clothes and another person dressed to the nines and wearing a $10,000 watch, which one do you think will get more attention from the salespeople – and thus more encouragement to buy a more expensive item than he or she intended to buy? Such “attention” is the type of attention that causes you to walk out of a store with an overpriced item.

If you value your money, you’re better off not appearing affluent in public.

5 – Keeping Up with Your Spirits
Here, Stanley focuses in specifically on one type of product – sspirits – to make a greater point about purchasing habits. People who buy high-end wines and spirits do so because they believe that having a particular brand – a brand that’s been built up with a lot of careful marketing – of liquor will somehow enhance their satisfaction with their lives.

In truth, an expensive brand is often of debatable quality as compared to the “bang for the buck” choice. The premium paid for a luxury brand may offer a bit more quality, but the minute increase in quality is rarely worth the extra price. What people pay for is the “cachet” – the idea that this particular brand will contribute more to the quality of their life than the other brand.

And that’s called marketing, my friends. Nothing more, nothing less.

6 – The Grapes of Wrath
Stanley discovered an interesting correlation between the net worth and the amount people spent on wines. Ignoring the outliers, the more a person spent on a bottle of wine, the lower their net worth was.

Why the focus on wine? More than almost anything else, wine is a prestige-oriented product. There are many, many wines with strong tasting scores well under the $10 threshold, yet many people who are “aspirationals” tend to seek out the prestige wines – vintages with exorbitant costs that are only marginally better than the $10 versions and, even worse, actively turn their noses up at the lower cost vintages.

Such snobbery has a dual effect. Not only does it sap you of your financial strength, it also can cause unwanted negative consequences. Stanley relates a tale in which a person thought they were showing off high class and sophistication by turning up their nose at the $12 wine offered to them and brandishing their own expensive vintage, but in the eyes of the wine offerer, the person was being downright rude and his actions cut off a potentially useful relationship. To put it simply, trying too hard to appear affluent can cut off relationships.

7 – The Road to Happiness
Among millionaires, what automobile manufacturer has the highest loyalty rate? The highest percentage of ownership? The most recent buys?

One might expect to hear names like Mercedes-Benz and BMW here, but in truth, the answers are Chevrolet, Ford, and Toyota, respectively. In other words, millionaires aren’t the ones buying the expensive cars. Who is? The “aspirationals” – the broke people pretending to be their idea of what a millionaire is.

You can actually judge people by their cars. If you see a shiny new Mercedes rolling your way, it’s likely that the person inside isn’t rich, they’re just pretending to be rich.

8 – Geeting Out of the Poorhouse
The size of a home is a better predictor of the size of one’s mortgage than the size of one’s net worth.

Stanley actually draws this correlation statistically in this chapter, as well as relating that ratio of financial assets to home value to one’s state of happiness. Guess what? The lower that ratio is – meaning that you’ve got a mortgage so large that your net worth is significantly lower than the value of your home – the less happy you are with your life.

Instead of buying what you think you need, focus on buying what you actually need. We did this very thing at our home, where our two children share a bedroom (and soon the three of them will). They don’t need a bedroom to play in – that’s what the family room is for. Why have that unnecessary extra space? Just so we can store more stuff we don’t need?

9 – All that Glitters Is Not the Millionaire’s Goal
Accumulating wealth is an unhealthy goal in life. A person is much better off with other goals in their life.

Of course, the ability to enjoy all that life has to offer without the need to spend exorbitantly on stuff is a key part of being able to accumulate wealth. Wealth isn’t accumulated on an elaborate European vacation – it’s accumulated by spending a summer vacation camping and visiting museums. Wealth isn’t accumulated with a country club membership – it’s accumulated with a walk in the park with people that you want to be around. Wealth isn’t accumulated from rich mahogany and many leather-bound books – it’s accumulated from a home you feel comfortable in and books you actually read, probably checked out from the library.

Is Stop Acting Rich Worth Reading?
Stop Acting Rich is basically just a somewhat more action-oriented but perhaps slightly less rigorous and thought-provoking book than The Millionaire Next Door. They’re very comparable, as they cover many of the same topics.

From my perspective, it felt like The Millionaire Next Door was broader in scope, while Stop Acting Rich focused in on more specific behavioral issues. For some, that may make Stop Acting Rich more worthwhile; for others, perhaps not.

For me, I didn’t feel like Stop Acting Rich surpassed the original at all. Perhaps it was because the first book introduced the ideas, but this often felt like a re-hash in places, albeit of some excellent ideas. If you’ve never read The Millionaire Next Door, Stop Acting Rich would be an excellent read – if you have, it’s probably redundant.

The Simple Dollar has reviewed hundreds of personal finance, personal growth, and career books. Please check out the full list of Simple Dollar book reviews, alphabetized for your convenience.

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31 thoughts on “Review: Stop Acting Rich

  1. If I’m remembering right, these people are referred to as “big hat, no cattle” in The Millionaire Next Door. Love that description!

  2. I normally don’t publicly nitpick on spelling or grammar, but Item #8 says “geeting” and not “getting”. Might want to fix that. :)

  3. I haven’t read this but after reading “The Millionaire Next Door” followed by “The Millionaire Mind,” I’m not surprised to hear that it comes across as a re-hash. Still, the title, “STOP ACTING RICH!” could not be more timely and if marketed correctly could have a big impact. Let’s hope it succeeds!

  4. I have a question related to this: my little brother has a Honda Civic right now, but he intends to trade it in for a new BMW. His reasoning is that he wants to start a hedge fund (he currently has his own successful trading business) and so he needs to project the image of success in order to get people to invest with him. He sees the car as an investment that could help him make a lot more money in the future. I have a hard time thinking of him blowing all that money on a car. Do you think a BMW is a good investment in his case?

  5. I remember when my husband and I were first shopping around for insurance. One person came up in a few years old 5 series BMW and was very well dressed. The next rep drove up in a Hummer and was extremely well dressed. And the third person was a young guy in a ten year old Buick that leaked anti-freeze in our driveway. Before he left he insisted on borrowing our water hose to wash away the liquid and stain off the driveway. Guess which person we bought insurance from? In fact I’ve followed this guy to other companies because I trust his advice. I know we share similar philosophies about money. He easily could have afforded payments on a nicer car, but he only drove what he could afford. I respected that.

  6. @ Genevieve – Your brother may actually have a point. He is trying to start a hedge fund. He isn’t trying to attract people like us – sensible middle and upper-mid class people. He’s going after very affluent clients. If he drove a Honda – even a brand new top of the line one – it might scare clients away. And, unfortunately, that is something he has to do – “impress” people. I know it goes against everything most of us reading this site go for, but in his case its probably important.

    We should be aware of “impressions”, but the fact is that most of the world gives in to “impressions”. I think that is part of Stanley’s point in the above book – most of us don’t need to make an impression – but in a few instances it might be important. If I’m a millionaire and I want someone managing my money (or buying into their hedge fund) they’d better be in something that originally costs more than $20k. If I’m a thousandaire, and I am, I want someone who shares my values and drives something less than $20k.

    However, chances are he’s leasing a new BMW, or making payments on a brand new one. He’d be better off just buying a used one, even if he has to take out a loan. Then he’d have ownership and wouldn’t be paying the new car mark up.

  7. When I was a child, I was lucky enough to get to go to summer camp. You could really tell the children of aspirationals from those of the wealthy. The truly wealthy kids wore sensible clothes–they were going in the huge camp laundry, after all. The clothes were often hand me downs. They had whipcord bedspreads for their cots, old battered Army trunks, and plain sneakers. Those who did bring a comforter instead of a whipcord bedspread brought an old one. The kids of aspirationals wore fancy clothes, bought new; name-brand footwear; fancy linens and bedding; they had new, huge trunks…..

    As for #8, I agree–but I don’t care if the bottle *costs* $6, as long as it is *good* wine. I won’t drink acidic oaky swill whether it is $6 or $306. I would amend your comment: life is too short to drink BAD booze. I will drink the cheapest QUALITY rather than the most appalling high-end stuff.

    As for the Honda vs. BMW, I would say that Warren Buffett would likely respect the Honda more than the BMW. If her brother isn’t selling to the Buffetts ( ;) ) but to aspirationals, then the BMW is the better choice. Buy used, older, and keep it going.

    Overall, I think part of the message here is what I learned from the genuinely rich I knew when I was a kid (oincluding Mrs. Butt, whose sons were at the time running H.E. B.) 1) Buy quality, not image. I buy Dansko and NAot shoes, because I cn wear them all day and not aggravate my planar fascitis. Yes, the clogs are $138 a pop. They also last at minimum five years, and can be resoled….. 2) Know what you can skimp on and what you can’t. If you know you like nice bright new shoes, buy KEds knockoffs, not Sauconys. OTOH, if you NEED the support, buy the Sauconys and clean them rigorously. WHich leads to point #3) Take care of what you buy and make it last.

  8. i’m modearately at odds with a few of the things presented here based on other principles of “frugality,” namely spending money on what you value, not what you don’t. Sure, if you can barely tell the difference buy the popov or the Charles Shaw, but if you really enjoy your wine or liquor, then (assuming you can fit it into your budget) spend more on it. I realize that the authors are trying to point out that people value the brand recognition and others knowing what they spent over the taste, but i’m guessing that a lot of people really do enjoy the more expensive brands more. sometimes you get what you pay for.

  9. I walked over to my local Chapters to check this book out as I already have a copy of The Millionaire Next Door. I found it much ‘lighter’ to read than his first book. I don’t know that I would buy a copy – the main message can be had in an hour’s seating at Chapters or through a loand at the library.

  10. I think it’s good to keep in mind that someone who has all the pretty things may be living beyond his means. It’s a good counter to the images out there.
    BUT
    I see too much ‘smug frugality’ in some places. Yes, many people who drive BMWs are in way over their head, and have no sense of reasonable spending. But that isn’t all. Some people can easily afford any car they want, cash upfront. If a nice car is something that a person values, and they can afford it, then more power to them.
    Don’t take this too far to start assuming that anyone with nice things is in debt and shouldn’t own them.

  11. Appearances only get you so far.

    And about the booze: I’ve had very good cheap wine. I’ve had expensive wine that tasted like sulfuric acid (to me). If you drink what you like, you’ll never go wrong. I have no problem admitting that 3-buck Chuck is perfectly fine by me for most occasions. Obviously I’ll take a little more care in selecting the wine when someone’s coming for dinner, but I never did see much sense in worrying about how much the drinks cost if I don’t *like* how it tastes.

    I believe d’Toqueville (or some other French commentator on life in America) wrote that it was the premise that all men are equal that drives people to distinguish themselves through material means. He wrote this in the late 18th/early 19th century, BTW, so while his premise may be (probably is) flawed, conspicuous consumption is not new.

  12. I have a wonderful story about appearances. Many years ago, one of my uncles was a salesman at a John Deere dealership in SC. One day an older couple came into the dealership. They wore old, worn out clothes and were driving a very beat up pick-up truck. None of the other salesmen would help them, assuming that they did not have the means to purchase one of the large machines this dealership carried. My uncle waited on them.

    He showed them a few machines and answered their questions. The gentlemen chose the one he wanted. When my uncle asked him to step inside to fill out the financial paperwork, the gentleman stated that he would be paying cash and proceeded to hand my uncle a brown paper bag. It contained $105,000, the full price of the piece of farm equipment the gentleman had chosen.

    Needless to say, the rest of the sales staff were a little upset at missing out on that commission! Never judge a book by its cover.

  13. Excellent points, worth pondering and adapting to one’s own preferences and financial situation.

    It’s fine to have the children share a room when they are quite young, but in time they will need their own rooms for privacy — at least to separate the boys from the girls. I think most experienced parents will agree on that.

  14. @ Genevieve
    If your brother is going this route, he should look at maybe a 2-3 year old, better end of good, used slightly above middle rung. Because he is looking for the image of having made it good, but he should not look like he is blowing it all away.

  15. “If you’ve never read The Millionaire Next Door, Stop Acting Rich would be an excellent read – if you have, it’s probably redundant.”

    I’ll second that! Great concept but I tried reading them back to back and didn’t get far with Stop Acting Rich because I felt as though I was re-reading the same book written in a slightly different format.

  16. That is one of the things that bothers me about book marketing these days. Quite often you are rereading the same book slightly reworked. I have sometimes noticed the exact same verbiage taken straight from one to another. This causes me to lose all respect for that author and to assume that subsequent work will in all likelihood be equally unoriginal and therefore a waste of time and money.

  17. Heh, good points on the mortgatge!

    When my husband and I bought our house we had a few things in mind: a fenced yard for our dogs, a spare bedroom to use an office, and a space for my ferrets to play out of their cage comfortably. We don’t have children (and are working towards getting myself sterilized) so that was a non-issue. We didn’t have to worry about how close we were to a ‘good’ school or what parks and playgrounds were nearby.

    The result? We bought a small, 908 sq ft house on a corner lot with a big yard. Sometimes we get teased over how small it is – but we love it! There’s not much to clean, my pets all have their respective safe play areas, and the best part – my mortgage is less than my apartment rent was!

    Buying what you actually need is amazing advice :)

  18. Trent, you wrote a great review. It will be perfect to share with my teenager, to remind her that people that look like they spend a lot of money do not necessarily have wealth. I too felt like I was rereading The Millionaire Next Door when I skimmed through the copy I borrowed from the library. I think the best thing about the book is the title, it succinctly states what I have come to know about the difference between wealth and high consumption.

  19. Having worked in public accounting for a number of years and seeing first hand what the haves and the wish-I-haves actually do have, I can say that what you’re reporting from the book is basically on target.

    I think part of the reason the whole “dress for success” concept hangs around–apart from it’s obvious favor with marketers–is the fact that it feeds into our desire to spend with an implied promise of gaining some advantage. We can add the high end car and oversized house as well.

    Logically, if you truly have money, you shouldn’t need to show off to anyone. You have the strength that comes from knowing you’ve arrived, and might even want to keep that a bit of a secret, lest you develop cohorts of new “friends” (hangers on) who are hoping to gain some advantage by affiliation.

  20. KC, #6 — “He easily could have afforded payments on a nicer car, but he only drove what he could afford. I respected that.”

    Um, wha? I don’t see how this statement makes any sense… Just sounds like vehicles aren’t his priority. (And FWIW, I have a hard time respecting anyone who drives a Hummer…… Garbage vehicles that they are, save for H1′s. But you rarely see those. They *were* expensive.)

  21. I have Millionaire Next Store in my guest bathroom, of all places. I encourage friends who visit to read it.

    Young “aspirationals” also have another name or two in current vernacular: two popular ones are “douchebags” and “30k-millionaires.”

    The young aspirationals are in their 20s, not necessarily college grads, but are so convinced that they must live a certain lifestyle. This lifestyle is indicative of instant gratification and deayed adulthood. The car of choice is a leased BMW 328, the clothing is designer, and they spend several nights a week at local “hot spot” clubs. How do they do it? Either parents give them money or they actually LIVE with their parents.

    We have a few here. One of our warehouse guys has a new Acura (he just took off the license plate frame last week, when someone (hint, hint) mentioned that it had the word “leasing” on it). He lives way above his means, with designer clothes, the latest gadgetry, and lots of bling. He’s dating one of our accounts payable accountants: she’s a recent college grad, new baby Lexus, also into the gadgets and designer wear. Since she works in my department I know how much she makes… 15 bucks an hour, with no overtime. They both live with their parents. He once mentioned, “I live near you,” and when I raised an eyebrow he amended it with, “well, my folks live near you.”

    My company tries to stress things like financial prudence, smart investing, and retirement plans. The aspirationals don’t listen, unless they’re young and married.

    Maybe that’s the key.

    @ #8… no, life is too short to drink BAD booze! Believe me, most of the so-called premium brands sold in clubs are swill. That’s just marketing.

  22. I have a story similar to #17. My father had a very wealthy friend. Both were avid pilots although my father’s plane was worth considerably less than his friend Jesse’s, flying was their passion.
    One time they had flown Jesse’s plane to a larger town for repairs and Jesse decided to purchase his wife’s Christmas gift while they were waiting. They took a taxi to a large furrier’s and entered wearing their “fixing the plane” none too clean clothes.
    The clerk was very snooty and said they would have to call the bank to verify Jesse’s check. It was a much subdued clerk who returned as he had found out, not only was the check good, but Jesse owned the bank!

  23. Sure, if you can barely tell the difference buy the popov or the Charles Shaw, but if you really enjoy your wine or liquor, then (assuming you can fit it into your budget) spend more on it.

    I have a wine buff friend (who has built and filled a wine cellar) who said the same thing as Trent. Up to 50 Swiss Francs you are pleasing yourself (it tastes good) above that you are just showing off.

  24. #27 those are the best terms for “aspirationals” ever

    #29 50 swiss francs is 49 USD, so i agree with you. i was just saying that getting yourself from the $5 bottle to the $15-20 range can be totally worth it if you enjoy wine. i’ve tasted a $150 bottle of wine, it was great, but it was definitely NOT 5 times better than a $30 bottle.

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