It’s easy to see your workmate’s new car and assume they must be doing well for themselves, but don’t let those overt displays of wealth deceive you.

I’ve spoken to more than a few friends who are financial planners, and they tell me that they’ve seen plenty of new cars and expensive suits arrive at their office, only to find it’s a very different scenario when you take a peek behind the curtains. No matter how smart or successful they are, no matter how old or new someone’s money is, people from all walks of life get the exact same thing wrong.

Material objects aren’t wealth. Money is. They are two entirely different things.

I’ve met teachers with more in the bank than partners of law firms when their salaries were a fraction of the lawyer’s. Why? Because if you’re burning through every single dollar that comes into your account, it doesn’t matter how much you make. Once you spend your money, it’s gone. No one is interested in how much money you had once upon a time.

According to a Schwab Modern Wealth Survey, almost half of the respondents linked their wealth to the money they spent on things and experiences. Only around a quarter said that having a lot of money made someone wealthy.

For a lot of us, our success is tied to how much money we spend. How else can people know how much money we have? It’s rude for me to peek over your shoulder at the ATM, but everyone can tell if you’ve just forked out a thousand dollars on a pair of shoes, or even more on that current year car you bought last week. Now everyone can see the five-star resort you stayed at on your recent vacation and your preference for top-shelf single malts.

The Schwab survey also found that most people believed that ‘wealthy’ implied a net worth of US$2.4 million. To put this in perspective, 1% of Australians have a net worth over $2.5m. Think about the things you’ve seen your friends, family, and work friends buy, expensive things that you assume a wealthy person would buy. It’s highly unlikely that the exterior expressions of their wealth and success match their balance sheet.

The problem is, acting like you’re wealthy doesn’t actually make you wealthy, in fact usually it’s the opposite. There are plenty of parents in big houses with children in prestigious schools who are struggling to make ends meet. While we know that they must be struggling, we can’t help but feel a little bit jealous and look for ways to make ourselves seem more impressive. So we start spending conspicuously. It’s a vicious cycle where we’re all spending to seem rich when our spending is making us anything but. Also, I mean, would you rather appear rich to your friends right now, or have enough money for retirement?

Also, while you might argue that you’re just enjoying your youth or your freedom, the fact is that it gets harder to save as you get older (as shown in the diagram above), so there’s never a better time to start putting money away.

The truth is you don’t need a huge salary to be wealthy. All you need is to spend less than you earn and to put the difference in the bank or income producing asset. Money spent trying to sell your lifestyle doesn’t make you wealthy. So while you may have to smile politely when your friends come back from their third holiday for the year, unlike them, you’ll still be smiling when you’re rolling in cash in a few years’ time while they’re still paying off their credit cards.