Growing up in a family with two hard working parents, a million dollar was an imaginary number. Unless you win a lottery, I figured it would never reach me.
I lived frugally and still am frugal. Joined FW back in 2001 and loved saving money with Fatcash. Hate fees and interest… just working and flowing with time.
Now I’m almost 40, married with a kid and another on the way. Bought my first house few years ago and a second one last year when I got a good deal. Invested in couple businesses. Have brokerage accounts and an IRA and life insurance… Daily living feels like not much changed from my college days (which feels like 4 years ago when it’s almost 20) … browsing SD, shopping online, finding coupon codes…
just randomly, I added up my assets today and I’m not at million yet, but approaching. Almost $600k stuck at real estate and business investments and $200k in liquid. It was perplexing feeling since I feel like I didn’t change much but I have tons of money that I couldn’t even fathom in my teenager days.
Sorry for the long intro… but now that I’m here, I want to grow this baby. What would you guys do (or have already done) when you are a millionaire? buy commercial investment building? buy bonds? go all-in on option? just go and blow?
I imagine that everyone just keeps doing what they’ve always done. If you are slowly growing your net worth (as opposed to hitting a jackpot and becoming suddenly wealthy), nothing really changes just because you reached some imaginary milestone (and a million today isn’t the same as a million 20 years ago). You’re not gonna buy a commercial building, bonds (what?), go all-in on options or Vegas no matter what anyone tells you. You probably couldn’t even if you wanted to, because most of your money is illiquid. Your real question is “what’s next if you have $200K,” cause that’s really all you can “blow.” And you should already know the answer – more businesses and real estate. Probably.
I suppose you can also sell everything and retire in a tiny home in the middle of nowhere, then start a blog about your FI/RE experience
BTW, did you add your wife’s assets too? Maybe you already are a millionaire! Just don’t forget to subtract liabilities (mortgage, etc).
What to do? More of the same! It’s clearly working well for you.
That’s probably a bit misleading / pessimistic though. They say the first million (billion?) is the hardest, and the reason is that whatever level of income / savings you have tends to increase over time so by the time you’re getting close to some milestone you’re earning at your best rate so it makes reaching the next one easier. Similarly, by the time you have significant investment assets, your return on investments matters a lot. If you want to make $1M in a year, that’s really hard with $1M in assets (100% returns are very hard outside of crazy risky things like bitcoins or options), but if you had $10M already making $1M is only a 10% return. Not that a 10% return should be taken for granted, but the stock market has been going up 20%+ for the past several years, so it’s not like it would unusual if you see my point.
To summarize, achieving significant wealth is typical a % return on investment process, so it’s more like a log scale where the middle, i.e. $1.5 while going from $1 to $2, is more than half way there.
Right, but the comment is regarding how much he has, not how long it took him to get it or how long it’ll take him to grow it. He’s only 60% of the way there,even if the last 40% will take half as long as the first 60% took.
Honestly, we just did nothing different than before. After all, it’s worked pretty well so far.
Once we hit midway between $2-3M networth, knowing that push comes to shove we could just retire, made work a lot more relaxing. The whole you cannot fire me, I’ll retire first kinda deal. So if anything, there’s a tendency to not sweat the small stuff as much.
But still the old habits die hard. If you’ve built yourself up on living well below your means, watching your finances, taking advantage of credit card deals, investing wisely, etc…basically getting rich slowly, it’s hard to stop because it just feels wrong. I wouldn’t be surprised if we still grew our net worth while in retirement the way things are going.
You can set a retirement goal (age and net worth) and see how you’re doing based on age using calculators online. They’ll run monte carlo simulation to give you an estimate of how likely you’re gonna make it. If % chance is high enough, you’re doing fine so just keep going.
Same here, retired 3 years ago when I hit my ‘safe’ NW and MegaCorp offered a package. It’s very hard to break the LBYM habit, and given everything’s paid for and travel is cheap thanks to MS etc. there’s not much we’ve had to spend money on. Still haven’t had to touch the portfolio so it keeps growing.
I’d imagine that we’ll end up donating a lot to charity especially when RMDs hit at age 70 (we’re mid-50s now). Definitely not going to leave a huge chunk to kids if we can help it and we’ve told them so.
FIREcalc has always been my goto retirement calculator, and it’s one that the early-retirement.org forum denizens prefer.
Once you start to accumulate a higher NW that it is more important to evaluate risks and guard against losing what you’ve got.
For example : go get an umbrella insurance policy if you don’t have one. Semi-random lawsuits aren’t much of a concern for broke people but if you’ve got $1m to lose then you’ve got $1m at risk.
As you grow more wealth and get closer to your eventual goal(s) then you may also want to cut back on investment risk you might be taking. Right now I’m 70% in stocks in my retirement funds but if I had $5M I’d probably drop that down to a much more conservative portfolio.
How risky are your business and real estate ventures? What happens if one of the 2 businesses you’re invested in goes bankrupt? Do you want to risk 100% of that money for the rare risk that they’d crash and you’d lose it?
To me it’s different - because I’m employed (with a tenured position) and have the pension and have been buying the maximum in savings bonds every year for a while now, I can take more financial risk. It is well diversified in index funds and selected stocks but it is more aggressive than, say, if I had half the net worth. Overall having $1M net worth (with home equity counted in) has not changed much although, as others have stated, my tolerance for work BS is a lot lower. Still I am fairly early in my career and don’t want to live off the rest of my savings until my pension kicks in decades later, and I enjoy what I do, so I’ll keep working.
Assuming you live to an oldish age 70-80. I’ve always thought leaving a good chunk to kids wouldn’t be a bad option because they would be 35-40 yo and established that they’ll LBYM or piss it away. If they’ve demonstrated good habits, I’m open to helping their nest eggs grow and cascade down.
They say making the first million is always the hardest. I think I know why. It’s because you had to try new things to make that first mil. After the first mil, you know how to make and invest money, so the 2nd and 3rd mil become easier and less stressful. Just keep doing what you’ve been doing, but in bigger numbers. your wealth will grow faster and you can take bigger risks. Just don’t go spending it all.
btw, your story sounds just like mine. I graduated college in 2001 and started my finance journey with FWF.
Similar here and start feeling comfortable around the 2.5m range. After feeling like you don’t need to work, then I am tempted sometimes to think of any extra as luxury money to put to things you want or fix and clean up stuff in your life that you have neglected.
I would say things that start happening are
Thinking about insurance like others said
Thinking about estate planning and inheritance if you have spouse or kids. Deciding what approach you want to take.
Thinking about legal protection.
Taking more strategic investment approach and allocation to suit your risk profile.
Looking at reducing stress by various means.