Looks don’t tell the entire story, and some people create the facade of looking rich to hide their poverty. It’s better to be rich than it is to look rich, and there are some ways that people can tell if you are only looking the part. These are some of the obvious signs of someone who isn’t as rich as they appear.

A High Debt-to-Income Ratio

Your debt-to-income ratio measures how much of your money goes toward debt payments each month. If you earn $5,000 per month and pay $2,000 per month in debt obligations, you have a 40% debt-to-income ratio.

Most mortgage lenders will approve your application if you have a debt-to-income ratio below 43%. Using that gauge, people can assess if someone is rich or just pretending. 

If most of someone’s paycheck is going toward credit card debt, mortgage payments, and various loans, they aren’t reallyrich. They have simply taken on a dangerous amount of debt to fund their lifestyle.

A Lack of Emergency Savings

Another telltale sign of someone who’s pretending to be rich is no emergency funds. An emergency savings account gives you the financial flexibility to cover living expenses in the event you lose your job. 

While very few people want to get fired, it’s something that you cannot anticipate. Not having an emergency savings account means someone will have to take out loans to cover living expenses if they get fired.

Excessive Credit Card Usage

Credit cards are beneficial financial products if you use them responsibly. You can get great rewards while building your credit score. However, keeping a balance will result in high interest payments, and falling behind on payments can hurt your credit score.

Using a credit card for many big purchases without sufficient income to cover monthly expenses is a red flag. It’s better to trim your expenses and shop at thrift stores than it is to get the latest fashion. 

Living Beyond Your Means

Comparison is the thief of joy, and it can also be the thief of your finances. Spending more than you make each month can result in a negative debt cycle that gets worse with each passing month.

If you find yourself living beyond your means, you have to write down your budget and track every expense. Cutting your credit and debit cards will help you remain conscious about how much you spend instead of letting small purchases add up into big expenses.

Relying on Your Credit Card for Daily Expenses

Can you rely on your bank account to cover daily expenses for a few days if you can’t use your credit card? While credit cards have many perks, you shouldn’t rely on them for daily expenses. If you use your credit card for daily expenses but can make those same expenses with the money in your wallet, you’re in a good spot.

Poor Investment Choices

Investing is a core pillar of any path to long-term financial wealth, but the wrong investments can slow you down. Gambling, putting all of your money into speculative options that expire in a few days, and buying assets without knowing much about them are some of the poor investment choices you can make.

One common indicator of people who pretend to be rich is individuals who have exciting portfolios. In reality, investing is supposed to feel boring. It is supposed to take many years for people to reach their financial goals. 

Hidden Financial Stress

You can’t always see hidden financial stress. People who pretend to be rich make a concerted effort to keep up the facade. However, any hint at stress about spending, overdrafts, or maxed out credit cards can expose themselves in conversations. Stress, in general, can be a sign of hidden financial stress, as money issues can impact other areas of your life. 

How to Address Hidden Financial Issues

Acknowledging that a financial issue exists is the first step to addressing it, but most of personal finance comes down to knowing your number. Creating a budget, cutting expenses, and regularly investing money can get you back on the righttrack.

You also have to stop comparing yourself to others. While it may be tempting to buy a nicer car just because your neighbor has a nice car, it doesn’t mean you should incur that expense. Stay in your lane and focus on actions that will move you closer to your long-term financial goals.

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