Personal Finance YouTuber Tae Kim: 9 Reasons Looking Poor Is Important

Many people associate using the newest tech, driving the fanciest cars and wearing the most expensive clothes with wealth. All these fancy clothes and gear, however, only showcase that you’ve spent a lot of money. While that may impress some, it isn’t the best way to actually become rich or improve your finances.

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Tae Kim, a personal finance expert and YouTube host, believes an excellent way to catapult your way to riches is to “look poor” — not homeless, but like you’re making less than you do. In a recent video upload , Kim breaks down nine reasons why looking poorer than you are can benefit your financial situation .

Money mistakes the super wealthy never make - that you might be doing now.

You Keep a Low-Key Lifestyle

When you dress down, you’re not looking for attention. While it may not impress others like a head-to-toe designer outfit, you’re saying you’re confident with yourself and don’t need to worry about impressing others. You can don’t need those flashy clothes to feel like a million bucks.

With this mindset, you don’t waste as much time, energy and money on what Kim calls “wealth-reducing activities,” including spending for the sake of spending, shopping to impress and get-rich-quick schemes. Instead, you can direct your cash toward wealth-building options like investing and growing your income.

You Don’t Need Social Approval

Kim explains that gaining others’ approval is a basic human desire. For example, a child seeks their parents’ approval, a student seeks their teacher’s approval and an employee seeks their boss’s approval. Though this instinct is completely natural, it can become a problem when it negatively affects your finances.

Compliments may feel great for the moment, but relying on them for self-confidence may increase your desire to spend all your money — or even the money you don’t have — on items that don’t matter. Detaching yourself from the need for social approval from others can help you make proper financial decisions that serve your future.

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You Will Gain Freedom

Not worrying about what others think of your outward appearance gives you the ultimate freedom. Kim explains that this freedom means being able to choose what success means for you instead of following the standards set by others.

Society tells us we can achieve happiness through money, power and fame. But many A-list celebrities and CEOs aren’t happy despite having all three. So, by finding out what matters to you — including your personal dress style — and not living someone else’s life, you may discover your own happiness.

You Spend Less in Other Areas

Dressing down can be contagious. When you finally become OK with it, you may be able to forgo other temptations easily as well.

If you wear designer clothes, you’ll constantly feel the need to upgrade other items to match your ensembles, such as expensive watches, shoes, handbags and cars. On the contrary, by dressing “poor,” you can alleviate the pressure of spending money on other nonclothing items to keep up appearances.

You Save More Money

The road to riches isn’t as difficult as it seems. If you can spend less than you earn, avoid debt and invest correctly, you can build wealth.

Another reason to avoid flashy fashion is that you’ll spend less. Instead, you can invest the money you save, or you can put it toward other things that increase your net worth.

Kim breaks down this point by comparing two hypothetical individuals. The first makes a modest yearly income of $50K but saves a large portion of that by not spending money on extravagant items that don’t benefit his future and invests the savings. The second one makes $500K a year but spends all of it on nice cars, vacations and evenings out.

On the surface, most would think the second person is wealthier than the first one. But, in the long term, the first person will have a much better financial future.

You Get Less Unwarranted Financial Advice

When you dress rich, you gain the attention of not only ordinary people on the street but also financial professionals such as financial advisors, wealth managers and personal bankers. These professionals are always looking to get new clients and increase their income. When they see you in your lavish attire, they’ll want to discuss how you can improve your financial situation. By sporting regular attire, you won’t be as large of a target to them.

Kim clarifies that many of these financial professionals aren’t predators or malicious individuals, but they make money through commissions. By convincing you to buy a financial product, such as actively managed funds, annuities or life insurance, they get to pad their pockets.

For some, these financial products may be appealing. However, Kim believes simple financial moves such as investing in index funds or taking on a fixed-rate mortgage are better options and don’t require paying anyone a commission.

You’re Less Attractive to Salespeople

If you don’t look like you have much money, fewer people will try to sell you things you don’t need. For example, walking through a mall in a nice suit can attract attention from salespeople. At best, this could be a tiny inconvenience, where people try to get your attention and pitch new products and services to you. At worst, they could talk you into buying a product or service you didn’t plan on getting and don’t need.

Kim explains that buying new things is fine, but you want to be in control. When you dress like you’re poorer, salespeople may choose not to waste their time with you and instead set their sights on someone they believe has a better chance of buying what they’re selling.

You’ll Have Better Relationships

If you look like you have more money than you do, it also may attract people for superficial reasons. People may want to get to know you simply because they believe you have money and status, which could somehow benefit them. You may simultaneously intimidate or repel those bringing authentic relationships to the table.

On the other hand, dressing down can attract other likeminded individuals who aren’t obsessed with money, status and the opinions of others. These people are more likely to form genuine bonds with you, leading to more fulfilling relationships.

You Learn To Be Humble

When you overcome the idea that you need to dress to impress, you become a more humble person. Kim points out that it’s always important to remind yourself of how well you have it compared to most people on the planet.

While dressing to look poorer can help you build wealth and provide advantages in various ways, it’s important to realize that as many as 700 million people globally live on less than $2.15 per day.

Looking poor can be a means of saving, investing and building wealth. Nonetheless, you can also use some of the money you save to give back and donate to help impoverished people. Training yourself to be humble can not only improve your own finances but also enhance the lives of others.

Final Take

Most people think that looking like they have more than they do is the best way to portray themselves. However, spending all your money on extravagant clothing and accessories will do the opposite. When you dress like you’re poorer, you’ll be free to make your own definition of success, save money and learn humility — improving your overall quality of life.

This article originally appeared on GOBankingRates.com : Personal Finance YouTuber Tae Kim: 9 Reasons Looking Poor Is Important