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Reaching A $10 Million Net Worth At Age 45

Started by Sam, October 16, 2018, 12:21:54 PM

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Sam

I thought this was a good comment (not me) to highlight from the post: https://www.financialsamurai.com/what-to-do-when-stock-market-volatility-returns/

I take risk very seriously – too seriously to where I think it limits our returns. That being said, wife and I went from a net worth of about 0 upon finishing my education/training age 27 to about $10M at current age of 45 (she's 44).

This is how I mitigate some of the volatility risks personally. Doesn't mean my way is right for everyone, and I appreciate how I do things now may be different than how I did at the onset of my career, at $500K net worth, at $1M net worth, at $3M net worth, etc. More wealth = more choices.

1- Diversification both within and outside of the stock market are key for me. As a matter of fact, most of my growth is outside of the lofty stock market at this point. Only about 15% of my NW is in the markets. 85% is not. Let's talk about each.
A- I hold about 12 mutual funds in the markets currently. Going with index funds is more steady than what I do here, but I generally prefer sector funds for me that are currently in healthcare, biotechnology, technology, semiconductors, Nasdaq, China, broader international. Returns last 12 months 12%. I think dollar cost averaging is fine at the beginning of a bull run or during times of low volatility. Right now I prefer CONSIDERING buying on the dips after I see proof of stabilization. I did so in February, I am considering it again right now, but am not certain yet if I will be a net buyer or seller until the next major recession. So what do I do with the cash on hand, read the next section about the other 85% of my assets.
B- The other 85% of my assets/investments help to diversify in a market where volatility is returning or in a bear market. I have another 15% of NW in cash currently earning 1.5% in a savings account, looking to move into a CD at 3% to be held until after the next recession, to be used as gunpowder for the next bull run. This is very safe money, which is also a cushion for my business which allows me a 7 figure take home income and growing. Business ownership is a great way to also propel unlimited earnings potential while cutting work hours to other workers as the business grows. Another 45% of my NW is in commercial real estate generating about $300k/yr in revenue – another form of diversification and good to have when markets turn bearish/volatile. Remainder is in primary residence and value of the business, which hopefully will continue to appreciate as I approach full retirement age of 67.
2- I live in a low COLA area, helping to preserve and grow wealth without taking on excess risk.
3- Couponing. Yes, given my business ownership it probably saves me at least tens of thousands every year (possibly into the hundreds of thousands).
4- I like my cars but buy all lightly used (5K-25K miles). To me, the huge savings here equate to more money for all types of investments.
5- Private school for my kids since elementary. This is one of the best investments I can make to ensure they will not be coming to me for money (most of the time) in adulthood.
6- Don't smoke, don't drink, good BMI don't take health any health risks. Never hospitalized. Health = wealth.
7- No shortage of scams out there. There are no shortcuts. Don't invest with a friend or a solicitor.
8- Surround yourself with like minded people and learn from those who are wealthier, rather than criticism or jealousy. I have friends worth 10X myself.
9- It's only money. Grow it, protect it, don't obsess over it. Love what you do and it will come. Carpe diem, tomorrow will take care of itself.
10- When you have enough, buy time – your most valuable asset.
11- Tithe and help others around you. It's good for the soul.
12- Don't let stubbornness or political polarization adversely impact your financial decisions. Know we all make mistakes and know what you do and don't know. This will cost you in returns.
13- I personally don't understand the FIRE thing very well, it scares me not just financially but fear of boredom and limiting services to my fellow citizens is on my mind. FIRE seems risk in volatile/bear markets. One thing I know, I am confused about more financial things than not, so I learn from everything you all post!

********

My observations are:

1) Looks like $10M isn't enough since he's still working and also said "when you have enough, buy time"

2) How do you know your kids won't come to you for money after sending them to private school since they are accustomed to you paying lots of money when the alternative is a free education? I would feel they might feel entitled to money more since their friends are probably wealthier than average too.

Any observations from you guys?
Regards,

Sam

md42

It sounds like this person is factoring their business value into their net worth. I wonder how much of a portion of their net worth that represents? How confident are they in their ability to sell their business at any point and capture that value?

I've owned a services business for ten years, have been approached to sell, but it's not where I would like it to be ($1 to $3M). Still I don't include this in my NW as I'm not confident I can sell it when/if I decide to or that it will persistently hold it's value. What's your advice on the matter? Do you consider your business as part of your NW? What do other business owners do?

Sam

Quote from: md42 on October 30, 2018, 08:27:40 AM
It sounds like this person is factoring their business value into their net worth. I wonder how much of a portion of their net worth that represents? How confident are they in their ability to sell their business at any point and capture that value?

I've owned a services business for ten years, have been approached to sell, but it's not where I would like it to be ($1 to $3M). Still I don't include this in my NW as I'm not confident I can sell it when/if I decide to or that it will persistently hold it's value. What's your advice on the matter? Do you consider your business as part of your NW? What do other business owners do?

Simply use a more conservative multiple to value your business. Your business is very much a real part of your net worth!
Regards,

Sam