Warren Buffett, one of the most successful investors in history, is known for his keen ability to recognize genuine wealth versus fake wealth. He gets pitched investment ideas in businesses almost every day. He had to develop strategies to read people’s character and intentions. In his many years of experience, he has seen countless people who have tried to portray themselves as rich but living a lifestyle far beyond their means. This blog post will examine Buffett’s 12 tips for recognizing fake rich people.
1. Own an expensive car but live in a relatively cheap apartment or house
One of the most common ways that fake rich people try to impress others is by purchasing an expensive car, but they live in a small or modest home. This often indicates that they are living beyond their means and using debt to finance their lifestyle. A new sports car or luxury home parked next to a small house is usually a sign of a large car payment, not wealth.
Warren Buffett is the richest man in the world and has never cared about what type of car he drives, keeping his car for over seven years in most cases. Buffett also still lives in the same house he purchased in 1958. It’s a lovely, large home, but the key lesson is that his used Cadilac and house fit together. The fake rich’s cars don’t match where they live and stick out by contrast.
2. Dress to impress
Fake rich people dress to impress, even if they can’t afford high-quality, well-made clothing. They may prioritize fashion over quality and spend more than they can afford on designer clothing and accessories. Buffett always wears a suit for business, but he does it to look professional, not to impress anyone. The rich don’t have a dress code; only employees do. The rich don’t have bosses to impress. People with careers must dress to impress. It’s the smart thing to do. However, the rich dress the way they want. How casually someone is dressed for important business meetings can even be a flex when they are the ones with the money.
“I wear expensive suits. They just look cheap on me.” – Warren Buffett
3. Lack of impulse control
Buying items for instant gratification or to impress others rather than investing in assets with long-term benefits can make you broke, not rich. Fake rich people often purchase items that provide instant gratification or are meant to impress others rather than investing in items that have long-term benefits. For example, they may buy an expensive watch or jewelry to impress others rather than invest in a business or property that will provide long-term financial benefits. The rich buy what they want, not with the motivation to impress anyone. They have little or no self-control between wanting to get something and buying it.
“If you buy things you do not need, soon you will have to sell things you need.” – Warren Buffett
4. Prioritize brand names
Fake rich people often prioritize brand names over quality when shopping. They may buy expensive items simply because they have a recognizable brand name rather than considering the quality of the product and whether it’s worth the price. People that need brand names to look rich are rarely rich. The rich buy the brand they want, not as a flex to others.
Warren Buffett’s favorite brands are McDonald’s and Coca-Cola, not Lamborghini and Rolex.
5. Talk a lot but take little action
Talk about their new ideas and goals rather than working on them. Fake rich people often talk about their new ideas and goals but rarely take action to achieve them. They may spend a lot of time discussing their plans but never follow through, which shows a lack of ambition and discipline.
These two Warren Buffett quotes elaborate on the disparity between action and results:
“You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
“It is not necessary to do extraordinary things to get extraordinary results.”
The bottom line is rich people take action; they don’t just talk a good game. Doing is the path to wealth, not talking.
6. Lack of savings
Fake rich people often do not have any savings or investments, even if they earn a significant amount of money. They may spend all their money on luxury items and other expenses, leaving nothing for savings or investments. Fake rich people want to keep up with their neighbor’s possessions more than become the wealthiest person in the neighborhood.
“Do not save what is left after spending, but spend what is left after saving.” – Warren Buffett
7. Talk about money a lot but know little
Fake rich people always talk about money but lack financial literacy because their finances are problematic. Fake rich people love to talk with authority about what you should do with your money, but they have no financial success in their own life. They may not understand how to manage their money or invest it wisely, which can lead to financial problems in the long run. Buffett talks from knowledge, not ignorance. He reads every company report within the industries that interest him.
“By the age of 10, I’d read every book in the Omaha public library about investing, some twice,” says Warren Buffett. “I made my first investment at age 11; I was wasting my life up until then.”
“Never invest in a business you cannot understand.” – Warren Buffett
8. Seek approval of others
Fake rich people often seek the approval of others and may try to impress people with their wealth and possessions. They may be more concerned with what others think of them than their financial well-being. The fake rich think they are in a competition and have an audience. The rich only want to win at their own game and don’t seek others’ approval.
“The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way.” – Warren Buffett
9. Compare their possessions to the people around them
Fake rich people often compare their possessions to those around them and try to “keep up with the Joneses.” They may be more concerned with impressing others than their financial stability and success. The fake rich are in external competition with everyone they know to own a better car or bigger house. They will buy things simply because their neighbor did, like a pool or a boat. They feel inferior if they don’t have equal possessions with friends, family, and neighbors. Some couples will even feel they must spend equally by buying a new car or spending an equal amount of money.
Warren Buffett has never tried to keep up with his billionaire peers with ownership of luxury cars, yachts, compounds, are even mansions. He doesn’t care, and you will see broke people driving a better car than him to impress you while paying big car payments.
10. Continuously strive for more expensive possessions
Fake rich people often continuously strive for bigger and better possessions, even if they cannot afford them. They may try to keep up with the latest trends and fashions, even if it means going into debt or spending beyond their means. This is an insatiable inner desire for more. Rich people’s passion is their business and investments; that is their game. Not owning the biggest or best car, house, or boat. The rich tend to get the big possessions after spending years with a laser focus on success in their business or investments. The fake rich tend to buy the most expensive car and mortgage at the beginning of their careers and get trapped in a paycheck. Happiness comes from the journey to wealth, not owing expensive things when you’re broke.
“In the world of business, the people who are most successful are those who are doing what they love.” – Warren Buffett
11. Being jealous of others
Finally, fake rich people may be jealous of others they perceive as wealthier or more successful than themselves. They may try to keep up with these individuals or even try to one-up them rather than focus on their financial goals and well-being.
“It’s not greed that drives the world, but envy.” – Charlie Munger
“Failure comes from ego, greed, envy, fear, imitation. I have success not because I am smart, but because I am rational.” – Warren Buffett
12. They don’t value their own time
Fake rich people don’t have proper time management or understand the value of time. Their lack of self-discipline keeps them broke. Successful people understand the value of time and have excellent time-management skills. Fake rich people, on the other hand, often waste time and lack self-discipline. They may spend their days indulging in activities that do not contribute to their long-term success or well-being. Fake rich people will always say yes to their employers, work extra to impress their bosses, or say yes to anything that gratifies their ego. The rich know their time and energy are their most important and scarce resource and carefully choose how they spend their time.
“The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffett
Conclusion
Warren Buffett’s 12 tips for recognizing fake rich people are about looking beyond the surface level and identifying those living beyond their means or prioritizing instant gratification over long-term success. By following these tips, you can recognize genuine wealth and success and avoid falling into the trap of fake wealth and financial instability. Remember, true success is not about what you have but what you do with what you have. The rich have high net worths and own assets; the fake rich have big payments on a lot of debt and depreciating consumer assets.