What Advice Would You Give A New 32-Year-Old Multimillionaire?
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This answer originally appeared on Quora. We have left it as is, unedited. Answer by Michael Wolfe (CEO, Pipewise, Inc). - Assume this is the last big money you will ever make. Big stock options hits (I'll assume this is the source) usually happen zero times in a career, and in rare cases, they will happen once. If you had one, then assume this is it. Very low chance you'll do it again, and if you do, it may take years. This is not a predictable way to make money. 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." - Thus assume the money must last forever. Really do the math about what your lifetime expenses will be across things like raising children, handling sick parents, schools, insurance, taxes, market swings, buying a house, health care. Even a few million dollars does not go very far at all.- Do nothing with the money for six months. Fast decisions are almost always bad decisions. Keep the money in cash or conservative instruments. Spend some time thinking about what you want to do with your life, doing lots of math about how much money you need to save, and be patient... the money isn't going anywhere. (Well, unless you do something stupid...)- Get a good financial advisor, estate planner, and accountant. Meet with them early on to help you get started thinking about estate planning and managing your portfolio. But again, more slowly. Get to know them and gather information, but don't be in a hurry to make big decisions.- Create a plan focused on wealth preservation. You know when people say, "you could lose it all tomorrow?" Actually, no, you can't, not unless you do something stupid. Work with a great advisor who will help you put together a balanced, diversified portfolio based on a conservative risk profile.- Take care of the fundamentals first. Do you have enough savings to retire on or at least have flexibility in your job choices? (Regardless, continue maxing out your 401Ks and IRAs). Check. OK now do you have schools and kids and parents and all future expenses taken care of? Check. OK, now did you buy or rent a primary residence that you are happy with? Great. Now, anything left? If yes, then go ahead and have some fun with it, but remember the advice above to rent, not buy, and be conservative.- Assume average returns. The days of 8% annual appreciation are over, if they ever existed. Don't assume that your investments are going to beat the market or that there will be some miraculous market turnaround. Work with your planners around conservative assumptions.- 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 are 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. Continue Reading
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