He oozed Success & Prosperity, but his Wealth Creation wasn’t keeping pace with his lifestyle and she knew it…

He oozed Success & Prosperity, but his Wealth Creation wasn’t keeping pace with his lifestyle and she knew it

Julie Edwards looked on quietly as Peter Hamilton gestured to the lavish new sofa which spanned the corner of his refurbished lounge room.  ‘Custom-built Italian leather,’ he said, his eyes filled with gratification as he encouraged his friends to rub their hands over the smooth textured surface.

Julie, Sarah, Luke, Eddie and Mike all indulged Peter’s suggestion because they didn’t want to cause offence, but they knew he was drawing them in closer to reveal some expensive gimmick that he no doubt had lying in wait.  And in all too predictable style, Peter commanded loudly, ‘Okay Google, initiate mood sequence’, and instantly the lights dimmed with the painting above the mantle retracting to unveil a large flat-screen television.  ‘Pretty cool, huh?’ he commented as his friends all nodded receptively to the dramatic feature.

Do you know someone who thinks the more expensive it is, the better it is and the better it makes them feel?

We’ve all encountered a Peter Hamilton at some point in our lives.  You know, that guy who has to have the best of everything, even if it serves no other purpose than to Wow his friends.  Well, Peter Hamilton was the epitome of that guy.  ‘Platinum Pete’ to those who know him best, but just plain old ‘Pete’ to you and me.

Everything in Pete’s life came back to a price tag, and the more expensive it was, the better it was and the better it made Pete feel.  If you drove a 3-Series BMW, then Pete had to have a 5-Series BMW.  If you went on holiday to a five-star resort, then Pete had to find a six-star resort for his next getaway.  And if you had a 65-inch flat-screen television with high definition, then Pete had to have a 75-inch flat-screen television with ultra-high definition!

That was how it was with him.  He lived his life in the constant pursuit of materialistic comparisons.  His group of friends knew what he was like and they grew tired of it from time to time, but, for all his superficial tendencies, Pete wasn’t a malicious guy, so they did their best to overlook his propensity to be gaudy and ostentatious.

Most of his friends who couldn’t afford a similar lifestyle were envious

There was sometimes a groan of dissent or the occasional mumbling under one’s breath, usually from one of the other guys in their circle of friends who couldn’t afford a similar lifestyle.  The friction never went too far, but it was understandable.  Pete could be an intimidating figure.  He had a good job, drove a nice car, lived in a luxury apartment and had a closet full of expensive suits with a selection of high-end accessories to match.  The air of success and prosperity surrounded him, and by all accounts, everyone thought Pete was doing pretty well for himself.

An extravagant lifestyle is not to everyone’s taste

For Julie, however, she knew that everything was not as auspicious as it seemed.  She and Pete had dated for almost six month some years back and that’s how they’d both come to mix in the same circle of friends.  Their break-up had been somewhat bitter at the time, but, not long after they’d split, the anger soon died down and they both recognised that they were better as friends than partners.  As it turned out, money had always been their hot-button issue because they were just at complete opposite ends of the spectrum when it came to money management.

Julie was relatively disciplined with her money management and she had a plan to put in the hard yards now so that she could spend her 50s travelling.  She had no problem saving or investing; however, when she’d been with Pete, she hadn’t saved anything at all.  High-end dining and front-row concert tickets were on the cards at least every other week.  It was true that Pete had always offered to pay, but Julie was also on good money herself and she liked to pay her own way, besides these were very expensive nights out.

The never-ending excess of dinner reservations and live shows were one thing, but then there were the expensive toys and designer clothes which he only worn once or twice at most before they went out of fashion.  Julie had struggled with Pete’s spending from very early on in their relationship because she knew a lot of it was funded by debt.  And not good debt either.  He had at least three credit cards with sizeable balances and a personal loan as well as a car loan.

His situation was always highly leveraged due to his expensive tastes, spendthrift nature and approach to wealth creation.

Now that they were no longer together, Julie could still see beyond the façade of Pete’s veneer and she wondered how much longer he could honestly continue to fund this kind of extravagant lifestyle.

She was genuinely concerned about him because she knew he would have spent a fortune on all the expensive gadgets and high-end furnishings that had gone into his recently refurbished lounge room.  Not to mention the Persian rug that sat at the door.  It would’ve cost him at least a month’s pay, she thought, but, knowing Pete and his platinum tastes, it could’ve been even more.

It was no surprise he met his financial advisor at a BMW dealership

Although Julie was all too aware of Pete’s extravagant lifestyle, the fact remained that she knew he wasn’t just all about spending.  He thought about the future too.  Despite all his spending, Pete valued wealth creation and had accumulated some investments (shares and a couple of investment properties), but, like his lifestyle, his investments were also highly leveraged, and he never seemed to make any progress toward paying them down to make way for new investments.

bmw financial advisor
With such an approach to wealth creation, it had come as no surprise to Julie when she learned that Pete had met Anders, his financial advisor, at the BMW dealership.  It turned out that they both had a penchant for 5-Series BMWs which went a long way to explaining the steep advice fees, Julie had thought with a cynical expression furrowed across her brow.

High-flying lifestyle meets aggressive investing

It had become clear to Julie, when she’d met Anders for the first time, why it was that Pete was drawn to him.  Anders was a lot like Pete in that he had a big personality which lit up the room and expensive tastes to match.  However, Anders was without the same endearing qualities as Pete and Julie got the sense that Anders was all about the show without much substance to back it up.  From the very early days of Julie and Pete’s relationship, she had been concerned that the aggressive, debt-laden wealth creation strategy which Pete would often brag about would ultimately wreak havoc on his personal finances, perhaps even more so than his excessive spending!

To make matters worse, after Julie had met Anders, it was abundantly clear to her that Pete was not getting the direction he needed to rein in his finances.  If anything, Anders was enabling the problem rather than addressing it.  It was evident to Julie that he could smell Pete’s platinum tastes a mile away and Pete, for all his shortcomings, couldn’t see past the marble reception, opulent boardroom and the champagne lunches.  Like a moth to a flame, Pete was drawn to the high-flying message that Anders espoused and the seemingly profligate advice that reflected it.

Without a second opinion he was unaware the problem was not being addressed

It was the sad but unfortunate truth, thought Julie, Pete’s life was a perpetual cycle of money-in-and-money-out for not a lot of substance gained.  She wanted to help Pete by encouraging him to at least get a second opinion or referring him to a financial advisor who would look beyond all the bravado and could deliver a hard message in a constructive way.

However, she remembered how hard it had been to raise this topic when they were together, so she couldn’t imagine the level of resistance she would invariably encounter now.

Let it go Julie,’ Pete would say with frustration whenever she’d tried to broach the issue.  ‘I’m on good money and my career is as solid as a rock.  I know you have your plan, but I have mine too,’ he would add, at which point Julie would usually reply with a call for caution in the hope that he would at least think twice before booking their next dinner reservation.  ‘You’re too conservative, Julie.  What’s the point of having money if you don’t enjoy it!?’ Pete would then say, echoing the same line that Anders ostensibly rolled out at least three to four times in every meeting.

It was this repeated argument that ultimately ended their relationship, but not their friendship.  Now, almost two years later, as Julie ran her hand over the smooth surface of the Italian leather sofa one more time, she let out a somewhat defeated sigh.  She still cared about Pete, yet she knew there was no helping him until he was prepared to help himself.

As she cast her eye out to the balcony where he was now opening up a relatively expensive bottle of wine to share with his guests, she could only imagine that the costs were mounting and Pete would eventually have to tighten his belt.  She hoped she was wrong and that he had emergency savings set aside for a rainy day, but deep down she knew that he was probably still living from pay cheque to pay cheque with little to no buffer to weather the unexpected.

Poor Wealth Creation advice and mounting debts finally collided with his expensive tastes

To everyone’s surprise, except Julie, it was only a few short months later that Pete’s financial situation began to unravel.  Mounting debts collided with expensive tastes and a sudden and unexpected fall in the value of Pete’s share portfolio triggered a margin call from the bank which he couldn’t meet.  In response, Pete was forced to sell a percentage of his shares which reduced his dividend yield and led to a domino effect across his finances.

Anders was no help to him either.  As Pete’s financial advisor, he’d done nothing to encourage prudent money management, instead his wealth creation strategies had enabled the very behaviour which had gotten his client into trouble.

No less than a few months after he’d first encountered turbulent financial waters, Pete was forced to sell his apartment and one of his investment properties to weather the impending storm.  Although most of his friends were shocked because they had thought he was doing very well for himself, in that same breath, some of them quietly thought ‘Platinum Pete’ had at last got what was coming to him.  But, none of them ever actually said as much.  After all, they all knew he was a nice guy who just had a distorted idea of what money was and what it said about a person.

The realisation that he’d been living (and investing) well beyond his means hit hard

To his credit, when Pete had to make substantial cut backs to his lifestyle, he handled it very well.  In large part, this was thanks to Julie.  She stepped in and helped him to cope with the changes and ensured their friends rallied around him.  Pete was still on a great income and his career was solid, but he had just been living (and investing) well beyond his means and it had all caught up with him.

Julie never said to him ‘I told you so’, but she did have a discreet word with her financial advisor, Lachlan, who agreed to meet up with Pete for a coffee and share the disciplined wealth creation advice he needed without an expensive price tag to match. Pete never queried what Lachlan drove which gave Julie confidence that he had seen the error of his ways and he was now a changed man when it came to his finances.

He still has an air of success and prosperity about him, only now he had the personal finances to support it

Five years later, Pete had made excellent progress with his finances and with his attitude towards life in general.  His friends no longer referred to him as ‘Platinum Pete’ anymore.  That was the Pete of old and now he was just plain old ‘Pete’ to everyone.  It had taken a harsh dose of reality to set him straight, but, in the end, he had shed the bravado and superficial tendencies and now enjoys a much more balanced lifestyle.  He also shares a stronger and more fulfilling relationship with all his friends, valuing them and time spent with them as opposed to constantly comparing material possessions.

If you contrast Pete’s life now with what it used to be like, it couldn’t be more of a polar opposite.  He now looked for value beyond the price tag and he got gratification from the company he kept rather than the possessions he owned which gave Pete a much stronger foundation from which he was able to grow his personal wealth.

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Adrian McPhee

Adrian McPhee

Working as a Brisbane based financial adviser for several years at both corporate and boutique financial advice firms. Adrian firmly believes all Australians have the capacity to secure a more prosperous future, and seeks to help clients realise this outcome.

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