Wealth advice from a start-up millionaire

Read this the other day...and it kept circulating in my head. Doesn't have to be about handling a lucky windfall... just how rich people work

http://www.quora.com/Life-Advice/Wh...ou-had-known-at-that-age/answer/Michael-Wolfe

below is just a few excerpts of key points that resonated for me.... not the full list... see above link for that

* You know the expression, "The first 20 million is always the hardest?" That is total crap: it should be "The first 20 million is usually the only."
i.e don't blow it chasing "luck" a 2nd time... i.e recognise what you've got and manage it properly.

* Thus assume the money must last forever.

* You know when people say, "you could lose it all tomorrow?" Actually, no, you can't, not unless you do something stupid.

* Resist the urge to "put the money into play." There is a misunderstanding out there that rich people "play the market." No, they don't. They find a good manager, pick good investments, then they touch it rarely (I can go weeks without checking my portfolio and rebalance about annually). They do not day trade or move money based on day-to-day market swings. I've never met a wealthy person who day trades. It is a sucker's game and only benefits the brokers.

* be honest about the lifetime cost of purchases, taking into account depreciation, taxes, insurance, maintenance, and the question of whether you are spending at a rate that will let the money last forever. "Don't buy anything you can rent" is a mantra that a lot of rich people maintain (which is how they stay rich).

* Diversify. Many folks who work in tech want to take their money and put it back into tech stocks. Bad idea: you don't have any special knowledge of the industry that would make it likely you can beat the market. And, it works against diversification, especially if you stay in tech and have money tied up into options in other companies. If you work in tech, the rest of your portfolio should be balanced away from tech given the exposure you have in your job.

* Buy experiences, not stuff. Take sabbaticals or breaks between jobs. Travel. See new places. You can travel fairly cheaply in most parts of the world. This is another reason not to spend money on possessions like vacation houses and boats that weigh you down

 

dont spend money on vacation houses & boats ?

 

That sounds like good advice

 

How? You can rent out the vacation house and use it when you want for holidays, and same with the boat, you can lease it out or use it when you want

 

I reckon it's more enjoyable and a lot less hassle to rent when travelling! Also one would need to be able to afford a second place .... that means a first one first!
My old neighbour used to have that, a holiday house. And for 20 years, every summer, the whole family would go to the exact same place, do the exact same thing, year after year, after year... Thanks but no thanks
Especially in the case of a millionaire like the article is about, why would you bother?!

 

I have thought about vacation properties, ultimately they are never an "asset" here are my reasons why vacation homes are not always (good) "investments":
1. If your vacation house isn't in the same city you live in, then you'd have to employ a manager to take care of it for you. (As all rental properties need a manager.) This is a hefty expense!
2. If you are planning to have access to this property at least once per year then you will never have any long term renters in the house. These types of renters are notorious for wrecking rental properties beyond the cost of their damage deposit. This, of course, is another expense.
3. Putting your vacation into a rental "pool" with a company that only rents out to people who are going on vacation themselves is another way to do it. These companies are no cheaper than the property manager in Reason 1. These types of renters only want to go during the best time of year to vacation in that spot... which is precisely when you would ideally like to go!
4. Vacation renters are seasonal renters... They aren't paying your mortgage 12 months per year.
5. If you average out all of the expenses associated with a vacation property, you will (in most cases) find that it is just way easier to rent some other sucker's vacation home each year. Let them deal with the headaches and spend more money on the EXPERIENCES while you are there!

And as for the boat... the price you would need to charge to cover all of the associated expenses (Insurance, Registration, docking/storage fees, maintenance, depreciation etc) is usually enough to deter the vast majority of renters.

I prefer camping anyway.

 

Like everything the list isn't a one size fits all. I know someone involved in managing a high rise apartment building here in Sydney; the staff know who is in residence and who is not. They believe the owner of the Penthouse is in residence less than 5 times a year. The penthouse is the whole floor, has an exclusive lift, 360 degree view, no neighbouring buildings, all glass interior walls to maximise view - it is worth multi millions. The owner will own property all over the world.

 

The millionaire next door is an interesting read. Essentially don't keep up with the Jones'. Do your own thing and don't worry about impressing others.
I put the boat comment above in this category.

 

Exactly. Stuff you own is just stuff. Just because someone has more stuff than you, or better "stuff", doesn't mean they are better than you or better off than you. Trying to keep up with the Jones' is a dead end game.

 

Yep i agree thats one of the things ive tried to instill in the people around me .I might add to a deafening silence most times .The time will come when you can lash out &buy your toys .A lot of stuff you buy when young is disposable to a point with wear & tear & children .Focus on paying down debt & remember that the first stage of wealth accumulation is wealth preservation.

Im pretty sure most people have fallen into the keeping up trap especially in your 20s & 30s unti you wake up one day & say to your self "i thought i would have more savings or be closer to owning the house etc " Then it hits home that you really need to change your lifestyle to achieve those goals.

I dont really agree about the boat though . A decent small boat can bring you more pleasure & fun & keep you amused for many times its worth .Thats of course you can actually afford it in the first place . You need to have some toy to make life worth living sometimes or its just a drag of endless work sleep cycles. Theres some good memories to be made owning a boat or motorcycle & going out with your mates for a bit of fun .

 

"I dont really agree about the boat though . A decent small boat can bring you more pleasure & fun & keep you amused for many times its worth .Thats of course you can actually afford it in the first place . You need to have some toy to make life worth living sometimes or its just a drag of endless work sleep cycles. Theres some good memories to be made owning a boat or motorcycle & going out with your mates for a bit of fun ."

The other point my brother made with fishing/boats in general, he has 3 children, is that it is safer in a boat than to try to fish with children from the jetty or the rocks. Even on the beach he had problems with the kids wandering off.

 

Boats typically are holes in the ground you throw $100 bills into while having a cold shower. Now, keeping in context with the original advise about the boat, assuming somehting along the lines that your first $20 Million will be your only $20 Million then don't go out and buy that $2 Million boat (the sort that cost $1000 for a day out).

Same goes for flashy cars.

We use to have a family holiday house, it was used at various times of the year and not always in the summer peak. It didn't cost much to build many many years ago back when much of coastal NSW was holiday homes. It cost next to nothing to keep the house. Not like buying a waterfrontage in Noosa or Port Stephens these days.

In all cases having the car, house or boat is fine if it is kept within reason.

 

It doesn't really matter what is the issue/problem/whatever, the important thing is to do it for yourself.

YOU derive the satisfaction, YOU pay the penalties and YOU determine the climb or the fall, the brickbats or bouquets . . .

Nobody else counts except to listen to in case they know something you don't. In the long run, it's how you look back on your deathbed.

Follow your heart and use your head.

 

This +1000

 

And they will never tell you they are 100% in debt and need to work 2 jobs each just to keep all that "stuff".

 

Regarding boats, I recall seeing an interview, it may have been with Michael Caine (?) and it went something like this...

"When you make your first few million, people always say to you ""Michael, Michael, you must buy a boat."" Well, my advice is don't buy a boat, buy a restaurant instead. That way you can at least have a nice meal while you're going broke."

 

Anyone interested in this book who doesn't have it/doesn't have the time to read it/etc, there are some awesome cliff notes on Wikipedia: http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

 

sounds like a plan i'l keep that in mind ^^^^^ :

 

Take away the money of a man who has survival skills and he will survive.

Take away the money from a millionaire who has no survival he will perish.

The most important thing in my book is to never stop learning!

If you are a carpenter, learn how to build with trees and saplings, learn how to make a fire but only using wood.

If you are a concretor, learn to build with stone and to make lime with oyster shells.

If you are a horticulturist, learn how to grow your soil.

If you don't know how to clarify and purify water without the need for mod cons, learn how to!

If you can't build a fire, learn how to!

If you can't fish, learn how!

If you can't chop up a rabbit, goat, pig or roo, learn; and eat it!

If you can't tan a skin, learn!

If you can't navigate at night using basic celestial nav techniques learn.

If you can't walk atleast 10Km in undualating country 2 hours, get fit!

If you can't make a knife from a lump of steel, have a go.

If you can't sharpen a knife without the aid of a grinding stone, learn.

If you can't take a crap without using toilet paper learn how to.

If you don't know where there's safe places to go in an emergency, find out.

Learn, learn, learn, be self reliant.
Many of these skills will never be used by the average bloke in a modern city but...a millionaire is just a name and a millionaire would give up his fortune to a man who has the skills to give him a cup of cool water.

REly on your skills; go to TAFE, go do a course, go learn stuff while things are sweet.

The world can change quickly, so plant those fruit trees as soon as you can because nature will not run at man's pace!

End of rave!