“Today my teacher asked me how we are able to go on another cruise so soon after the last one. I told my teacher that my daddy is retired and my mommy is about to retire, too. Then a kid in my class asked to borrow a few thousand dollars from me.”
That’s what my nine year old told me at dinner a few days ago (continue reading to hear the rest of the dinner conversation). Some parents might freak out about how honest their kid was with their teachers and fellow classmates. Not me. But should I be more concerned?
At some schools, I don’t think it is that unusual to have kids with retired parents. Wealthier women tend to postpone having children, often until they approach age 40. Add in a hypothetical husband ten years older than his wife, and it’s not hard to have a 55 year old father when a kid starts kindergarten. At a wealthy school at least. Plenty of folks retire at 55 (anyone who started working in government by age 25 and stuck with it for 30 years, for example).
My children’s school is the complete opposite of wealthy. In fact, it is the second poorest school out of 146 elementary schools in the district (check out my next post for the analysis on why we chose such a “crappy” school). Over 80% of the students receive free or reduced price lunch (the metric our school district uses to define “economically disadvantaged” students). Gauging from the parents I see at the school, most are very young and probably in their 20’s and 30’s. There aren’t a lot of parents nearing retirement age at our school. Being retired at a young age makes me a very noticeable outlier at this particular school.
Keep Early Retirement a Secret?
Should I worry that our household’s socioeconomic status is known around my kids’ school? Or, to consider the bigger question, should I care if people in general know that I’m retired in my 30’s?
My answer is that I’m not worried about people close to me knowing where we stand financially. I don’t think I have a positive duty to tell people, but I don’t see a big reason to keep it a secret. Your close friends and family shouldn’t resent you for reaching a comfortable financial position. And trying to create a cover story is a lot of work. Telling the truth is easier than lying.
For more casual acquaintances, they don’t really need to know much about how we run our household finances. I don’t think a lot of harm would come from others finding out about our relative wealth. But it really isn’t any of their business. Should I go out of my way to keep our wealth a secret? I share all the juicy details right here on this blog after all.
For those that I don’t know really well or at all, I don’t feel like mentioning the fact that I’m retired. At the most basic level, retirement is just a shorthand way of saying “I don’t work”. I’ll embrace the other parts of my life that define me and are also truthful to varying extents. They are cover stories to some extent, but also completely true:
- “I’m a stay at home dad”
- “I work out of my house”
- “I’m in between jobs”
- “I run a website”
- “I do some freelancing when I can get the work”
I have used all of these descriptive phrases to explain why I’m home in the middle of the day or hanging out with my kid at the Tuesday morning pre-school play time at the community center. People feel comfortable when others fit into a box. If it’s just a casual acquaintance, I don’t mind jumping into a box for a few minutes if I can avoid an interrogation.
Here’s an example. I’m at the park at eleven in the morning with Mr. RoG Jr. and a stay at home mom asks me “so, you stay home and take care of the kid? That’s rare to see. I’ve never actually seen a guy that does that.” My answer was “why yes, yes I do just stay home and take care of the kids.” That’s absolutely true! There’s no need to say “well, actually I’m retired” unless I want to open a whole ‘nother can of worms.
Sometimes I’m in a hurry or don’t want to talk about early retirement. Or I don’t want to be labeled as a “rich person”. I’m just me, after all. I can talk about money, finances and early retirement in relative anonymity here on this blog. Most people that stick around here have some interest in building their wealth and “get it”. In real life, it’s different. People jump to conclusions, they think they have you all figured out, and stick you in the wrong box.
For the uninitiated, early retirement is kind of weird. Statistically, there just aren’t that many people that do it. Having perfectly marketable skills yet not keeping a job to make even more money? Craziness. Blasphemy! Think about all the stuff you could have if you just kept working. For those still firmly lodged in the make more, spend more recursive loop, early retirement doesn’t make sense.
To recap: family and friends get the real deal, casual acquaintances often get a “cover story” that fits the accepted version of how a society is ordered, and readers of the blog get almost all of the real deal (as long as I can stay relatively anonymous).
How To Keep Wealth A Secret
From participating in early retirement online discussion forums for a decade, I know many early retirees are concerned about how others perceive them. Maybe early retirees aren’t strange in this regard, since everyone seems to be concerned about how they appear to others.
My friend the Financial Samurai shared a good guide to “stealth wealth”. I follow some of the advice he offers, but don’t stick to the guide very closely. FS’s guide seems more closely tailored to those that have conspicuous signs of wealth like expensive clothes and accessories, blinged out jewelry, luxury performance cars, and expensive house(s). I like to keep it simple and I’m proud to say I don’t want to own any of those things.
I don’t have to hide the fact that I spent $100,000 on a new high end BMW because I don’t have one. No one thinks I’m rich when they see my 15 year old Honda Civic. Best wealth disguise ever.
I like FS’s advice on being humble and not losing touch with “the common people”. That isn’t too hard since I consider myself to be one of “the common people”. Just a very financially secure common person.
Here’s another trick: Spend like you’re poor, earn like you’re rich. You can make a lot of money from a job, invest most of it, and let it earn you even more money in your investment portfolio. But when it comes to spending, just think of yourself as just another common person. You can slip in the occasional indulgence here and there, but keep the overall consumption low key. That way you won’t have to hide all your luxurious goodies. What’s the point of owning really nice stuff if you have to worry about keeping it a secret? That sounds overly complicated.
Spend like you’re poor, earn like you’re rich.
I’m not talking about dumpster diving or extreme self deprivation. I almost said “live like you’re poor, earn like you’re rich”, but changed “live” to “spend”. With a few clever tricks here and there, you can live a pretty decent lifestyle while spending like you’re poor.
Benefits To Keeping Your Financial Success Hidden
Those that have followed my last few monthly spending updates from November and December are aware of my major exterior home renovation project. We hired a contractor to install ten new windows, replace the exterior siding, and replace a large section of our roof. The final cost was $8,700. I am certain that the total would have been well over $10,000 if the contractor knew we were financially well off.
From the start, the contractor observed that we didn’t look particularly wealthy. Our house is located in an older neighborhood that’s not in the fancy part of town (that’s a mile or two west of here!). Two old cars sitting in the driveway. Old siding that was at least a few years past the point where it needed to be replaced.
After walking through the inside of the house measuring windows, the contractor suggested I could buy my own windows to save some money. At that point I asked about payment terms. Could I put the job on my credit card, or is it cash or check only? Maybe he thought I didn’t have the money for the renovation. He suggested that if I bought the windows myself then I could put the windows on my credit card and pay for them over time. I only mentioned the credit card because I wanted the 2% cash back.
Throughout our conversations, I let him know that cost was very important to me, but I don’t mind paying for value or for extras if it will enhance the quality of the job. He structured the quote and fee estimate in such a way that I could pick the line items I wanted and decline those added costs that didn’t bring much value. He even suggested ways that I could save money. Cost savings that would also reduce his own fee and profit.
And to cap off my performance of a poor homeowner, my two year old runs outside naked from the waste down. He sprints across the backyard where we are discussing options for the fascia on the rear. Then he starts screaming about wanting to poop. Or he just pooped. Something poop related. This was the ultimate sign that we might have trouble affording new siding. We had all these kids running around, after all. And kids cost TONS of money (not really). The contractor also probably noticed that in spite of visiting during the middle of the day on a weekday, none of the adults were ever at work.
Once I received his fee estimate, I declined a few line items and mentioned that another contractor gave me a lower quote with a little extra in the scope of work. My (eventual) contractor threw in for free the extra work the other guy was going to do, and even agreed to do some of the upgrades for free that I declined to pay for. I hope the guy still made some profit off of me, because I didn’t need all that charity! But I wasn’t going to negotiate against myself.
I will wager that if I lived in a million dollar house with a few luxury cars parked in my four car garage, then I wouldn’t have received a lot of concessions from any contractor. In fact, I bet they would put a little extra fluff in the quote just because they figure the rich guy can afford it and they wouldn’t question a few hundred here and a few hundred there.
What We Discussed At The Dinner Table
Now to circle back to our dinner time discussion that motivated me to write this post. After hearing about our nine year old sharing the news about our retirements and how someone immediately asked to borrow money, we launched into a discussion of “how to handle your wealth”.
After reading the majority of this post, you might be left wondering “if material possessions don’t equal wealth, then what makes you wealthy?”. I think it’s how you act, what you think, and not needing to work for a paycheck.
In our house, we try to think wealthy and convey that knowledge to our kids (so they can grow wealthy on their own one day). At the dinner table, we explained to our children that it’s okay to loan a few thousand dollars to a classmate, but you better get collateral for your loan. “What’s collateral?!” they asked. They were obviously listening and intrigued about this new concept of collateral. “Collateral is security for your loan”, we explained. It provides security to ensure repayment of the loan. If the person who owes you money can’t pay you, you get to keep their collateral.
This provided the perfect segue into a discussion of mortgages and the security interest that the bank receives when making a loan. Otherwise, they wouldn’t hand over a six figure check to just anybody! Now my kids are going to be much savvier creditors and ask for collateral whenever they make a loan in the future. Or at the least, appreciate the fact that a loan made without collateral is an unsecured loan and comes with higher risk of default. I better be careful about what I say or they’ll grow up to be dirty investment bankers.
Knowing how the financial world works was a big factor in our own path to financial independence. Passing that knowledge to our children will give them a head start on their own path to wealth.
Don’t worry about our kids though. Some of our dinner time discussions are pretty normal. Last night we discussed the proper way to respond when someone farts loudly at the dinner table (it was the two year old this time, not me). You don’t laugh and then scream out “ewwww, someone farted!!”. To quote a line from one of their favorite Disney musical cartoons, you just “let it go”. Maybe no one else heard it, or maybe they thought it was a loud motorcycle passing on the road outside.
Whether it’s abnormal wealth at an early age or an errant fart, the moral of the story is to keep it low key. Don’t make a big deal out of it. Maybe others will notice. Then again, maybe they won’t.
Are you open about your financial status? Any consequences? Please share any and all embarrassing moments.
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