Recently, I met this young kid. He’s in his early 20’s, very sociable, and has a happy demeanor.
He seems to be working hard and eager to get his feet under him as he begins his career, which I’m always happy to see.
But the other day he made a comment to me that was a bit startling. He said that his number one goal is to buy a Ferrari.
Yes, you read that correctly! A 21-year-old kid’s #1 goal in life is to buy a Ferrari.
Obviously, he’s into cars, which I have nothing against. But hearing someone say that their #1 goal is to buy a super-expensive car irks me.
What do you expect? I’m a Certified Financial Planner, and this is a blog that is dedicated to helping people build wealth! Buying a Ferrari is not high up on the list of “ways to build wealth.”
This got me thinking about a past conversation I had.
HEADLINES DON’T ALWAYS REFLECT THE MASSES
I once heard someone mention that they always see rich people buying things like fancy cars, yachts, beach houses, private planes, etc.
They asked me:
“Why does it seem like the rich are always buying the assets that don’t produce wealth? And, instead, spend their money on toys?”
This person was puzzled by this phenomenon.
The reality is that this isn’t the full truth.
The reason you might always see this happening is because the media outlets are driven by getting more viewers and readers of their content.
Here’s a question for you:
Which headline do you think you’d be more likely to click on to read/see?
“XYZ celebrity buys $28 million-dollar McMansion – You HAVE to see it to believe it!”
“Millionaire opts to buy used Toyota Camry in order to save money and continue building wealth”
Let’s face it, the second headline just isn’t that “sexy.”
But seeing things like this can put ideas into our minds that lead us astray. Like thinking that it’s a smart financial decision to focus on buying a Ferrari, because that’s what rich people do!
THE TRUTH ABOUT BIG SPENDERS
The reality of the situation is usually one of two things.
Either the person who is buying something like a Ferrari has already amassed great wealth.
They are just imitating great wealth. They are living a lifestyle far outside their means, living paycheck-to-paycheck, probably in a lot of debt, and one major emergency away from being in serious trouble.
You certainly don’t want to be the latter person. But in order to become the first, you need to focus on building wealth before you focus on buying a Ferrari.
USING GOALS TO DRIVE WEALTH-BUILDING
I like the idea that this guy has set a goal for himself. Setting goals and planning out how to achieve them is a great way to increase your likelihood for success. But I think the type of goal he set isn’t a good one.
In the famous personal finance book, The Millionaire Next Door, the authors conducted a study to try and parse out the characteristics and traits of millionaires throughout the United States.
What they found was that the average millionaire lived a relatively ordinary life, and they avoided a lot of the things that are showcased in the media like buying fancy cars, big homes, and spending all of their money on frivolous expenditures.
The study showed them what it takes to become a millionaire.
Many of the individuals were driven by desires to live a financially stable life, stress-free, and where they controlled their future. What they didn’t focus on was earning a bunch of money so they could then blow it on a luxury automobile.
Becoming wealthy should be seen as a lifestyle not a moment in time.
On top of this, happiness should be a key factor in all that we do – driving our actions and keeping us on a path that we can be proud of.
There are many studies and much written (Here and here) about how buying material things (like a car) will only moderately increase your happiness, and only for a short period of time. But eliminating stress around your finances can do wonders to increase the quality of life!
Buying a high-priced automobile will only add more stress to your life, with high insurance premiums, repair costs, and the anxiety of worrying about every little scratch.
In short, it’s not worth it!
THE BEST FINANCIAL GOALS ARE THE ONES THAT WORK!
Now, all of this doesn’t mean that you should never buy a Ferrari, or even that you shouldn’t use that as your carrot, driving you to build wealth. If a specific goal or target gets you to the point of building wealth, I can’t put it down too much.
It’s just that a goal like buying a Ferrari has an underlying current of non-wealth building activity, so it would seemingly make it more difficult for you to reach your goal.
Your goal for building wealth can’t be to ultimately SPEND the wealth, because then, all you really have is a mindset of materialism, and that type of mindset has proven to be a hinderance to building wealth.
You see the wealthy buying fancy things because they ALREADY have wealth.
But, at the end of the day, the best goals are the ones that work. So, if a Ferrari drives you to do big things in the wealth-building world, GO FOR IT! But just make sure that mindset doesn’t trip you up along the way.