by Erin Lowry
ONE OF THE GOALS I (half-jokingly) set for myself in my early twenties was to beat my dad to being a millionaire. Except, without context, that sounds pretty cruel. It’s not that I, at thirty-two years his junior, wanted to have a million dollars in the bank before he did. (That game is long over.) It’s that I wanted to do it earlier in life than he had.
WATCHING A SELF-MADE MILLIONAIRE HAPPEN
My dad set a goal at twenty-four to be a millionaire by the time he reached forty-two. He didn’t have the advantage of being gifted family money starting out or even having the cost of his college education or MBA covered by his parents. He started investing early and saving aggressively. In fact, he took out a loan when he started his MBA program just so he could invest the money. He sold the investment when he graduated to pay back the loan and pocketed the difference. Then he learned how to make himself a highly valuable employee.
As a child, I observed two things about my dad: he loved running, and he was always listening to language cassette tapes. Around the time I turned seven or eight, he started traveling to Japan for work—so he decided to learn Japanese. I don’t know all the details of how and why we ended up moving to Japan when I was ten, but I imagine my dad’s dedication to learning both Japanese customs and the language certainly helped him be the one picked for the expat assignment.
Once we got sent overseas, my parents lived so below their means that they were able to save about 80 percent of my dad’s income. Not that my sister, Cailin, or I knew any different. My parents didn’t upgrade our lifestyle. In fact, my mom’s Nike gym shorts from the 1990s were a source of real tension in my teen years. I remember trying to throw them out once or twice. My parents didn’t buy flashy jewelry or home furnishings or tech toys. The only time they really seemed to splurge was when we traveled.
These lessons in frugality and self-reliance were passed down not only through example, but because my parents weren’t big on handing us money. Cailin and I were encouraged to be entrepreneurial if we wanted money to make a purchase. We were big on the babysitting circuit, and also created a mini pet-sitting empire one summer. We also dabbled in modeling and acting overseas. Some pachinko game in Japan may still have my voice-over congratulating people on their win.
On the occasions my parents would help subsidize a purchase, it would be up to 50 percent. This family rule extended all the way through to our college educations. If Cailin and I wanted to graduate debt free, then we’d need to earn scholarships in order to subsidize 50 percent of our educations. (Spoiler: we both did. After a fraught decision-making process, I realized it made more sense to go to a smaller, lesser-known school that was offering me academic scholarships and come out debt free than to go to a popular, name-brand school and graduate with $80,000 in debt.)
Then, my parents moved back to America after an eleven-year stint living overseas. Within two years, my dad, a longtime company man, got fired. He could’ve called it quits then and retired early, in his mid-fifties. My parents had a comfortable but not lavish lifestyle that could’ve been supported by their investment portfolio at that point. However, my parents decided to keep working. My mom became a real estate agent, and my dad created his own consulting company.
At first, their goals were to avoid digging into their nest egg and to make enough income to replace what my dad had been earning when he worked for a company. He didn’t think it would be possible, but in less than half a year, it became apparent that he could not only replace his former salary, but earn significantly more. He’s now earning more as a consultant than he did at the peak of his career working for a company.
My dad credits two big things for this lucrative career pivot. The first is technology. It’s a much different world than when he started his career in the 1980s, and technology enables us to make and foster relationships in a whole new way. The second is his marriage to my mom. They’ve always been a team, and she’s such a strong support system. She didn’t shut down the idea of uprooting the family and moving to Asia or panic when my dad got fired after they repatriated back to the United States.
I give you all this context to provide some insight into how my parents’ minds worked. These are people who built a multimillion-dollar portfolio by the time they were in their fifties without the advantage of an inheritance. Of course, you could point to the fact that both are white, able-bodied, straight Americans. There is privilege in all those factors. But that doesn’t discount the fact that they achieved a great financial feat.
I’m incredibly fortunate both to have grown up with a blueprint for how to become a millionaire and to have received the benefits that a financially stable home affords. While I didn’t know my parents’ net worth until years after I graduated college, I knew we never struggled to cover basic needs, and my parents didn’t fight about money while I was growing up.
It’s also no coincidence that my sister and I are both self-employed and entrepreneurial in our careers. We were encouraged by our parents to figure out how to creatively meet our financial desires as children, but we also, consciously or not, know we have the Bank of Mom and Dad for a bailout.
I’ve never filled out a loan application at the Bank of Mom and Dad, but a friend once asked me, “Do you really think you’d take as much career risk if your parents couldn’t help you out?” Being the risk-averse person I am, he raised a sage point. I probably wouldn’t have been willing to take as much risk without knowing I could receive help if everything went wrong in my life tomorrow.
But I’ve digressed from the original point. I want to beat my dad to a million dollars. Sure, some of that’s rooted in my innately competitive nature. But more of it stems from knowing that achieving double-comma net worth, especially without an inheritance, would make my dad incredibly proud.
Except, becoming a millionaire by forty-two wouldn’t actually be beating him. You have to adjust for inflation. I’d need about $1.5 million by age forty-two in order for it to be the same achievement. So, my goal is to hit a million-dollar net worth by thirty-five years old.
Despite the fact that I’ve seen how this could be achieved in my own home, I’m still a bit obsessive with every self-made millionaire story the media puts out. We all love a good “How I Became a Millionaire” tale, especially if it feels like something we can decode and reverse-engineer for our own gain. It’s why those listicle articles with headlines like “The 10 Books Every Millionaire Reads” or “5 Easy Steps This Self-Made Millionaire Took to Get Rich” or “7 Mistakes to Avoid If You Want to Retire in Your 30s” remain incredibly popular.
After speaking with so many women and men who have spent their careers in the financial services and wealth management industries, I just had to ask, “What are the wealthy doing differently that the average Millennial should know?” Here’s what they had to say.
ASHLEY FOX, FINANCIAL EDUCATION SPECIALIST AND FOUNDER OF EMPIFY
Fox started her career in asset management for JPMorgan Chase, where she worked with high-net-worth individuals whose assets exceeded $25 million. She left her job to build her own business and now works to empower others to build financial success.
Wealthy people value legacy. Everything they do is not for today. For instance, people say, “I want to buy stocks. I want to make money real quick.” Everything is temporary, whereas wealthy people think of longevity. How can my kids’ kids’ kids never have to financially struggle? How can my kids’ kids’ kids run this business I’ve created?
I think we get so consumed with getting rich quick for a temporary fix, and I think that wealth is generational; rich is having a lot of money right now. Wealthy people focus on the preservation of assets and the protection of their assets. Wealthy people don’t operate from a survival perspective, even if they didn’t have money, their mind-sets are totally different. What they value, where they travel, what they read, what they do with their time, whom they associate themselves with, it’s all for the betterment of making them
stronger people. They’re not just trying to figure out “How can I make this money real quick so I can buy this?” It’s “How can I grow this business and protect my assets, put it in a trust fund for my kids, so my kids will be set for college?”
If you take private equity, for instance, they’re setting aside money for five or ten years. They’re not worried about today; they’re focused on tomorrow. The average person only cares about today, and they’re trying to survive today.
Fox then shared some of her memories of working with high-net-worth individuals and the eye-opening moments she experienced:
I sat in rooms with clients who bought art for a living. They had nice, fancy clothes and they bought art.* Buying art helped to build and protect their wealth. The transferring of art from country to country is one way you can preserve money and minimize taxes. For me, it made me think “What the hell are you doing sitting behind a desk when there are people who buy art for a living and you’re sitting here running their portfolios and creating their presentations so that they can keep their money?”
I would see trust-fund babies where the parents would build everything for them and we would sit in meetings and tell them how they were blowing through their money, and eventually it would go to zero. Which made me realize it’s not about the amount of money; it’s the mind-set the person has around money.
Now, this might be a little technical. We had a client who built a company years ago. There’s something called a GRAT [or grantor-retained annuity trust, which is used to transfer wealth and typically enables the recipient to avoid paying gift or estate taxes]. You can put an appreciable asset into a GRAT, and it’ll pay you distributions every quarter or every year or every month until the GRAT’s time limit is up.
What I saw happen was a guy who built a company—and I use the product he created to this day—[had] his company [get] bought by a large Fortune 500 company while his asset was inside the GRAT. That would be like founding Instagram and putting part of Instagram’s ownership into a GRAT. In the midst of that, Instagram gets bought by Facebook, so now your company went from being worth $500,000 to $1 billion. If you took that money out of the GRAT, you would’ve made some money and had to pay capital gains tax. But because it was inside the GRAT, and you give that portion to your heirs, you don’t have to pay taxes. I watched someone save $60 million in taxes. He’d gotten to the point where he had too much money and didn’t need anymore, so all he cared about was protecting it and not paying taxes.
What made it more real is that I use the original company’s products and the products of the company that bought his company. Working with him made everything so real and possible, but I realized I was on the wrong end of the table. Why am I keeping him rich? Who is making Ashley rich? I was trained to see what real money was, and it made me feel that the game I was playing was too small. Then I realized I wasn’t even playing the game—I was on the sidelines making sure the players were fit to play. But no, I deserve to be in this game, too.
SALLIE KRAWCHECK, COFOUNDER AND CEO OF ELLEVEST
Krawcheck has been in wealth management for more than twenty years. She served as the CEO of Merrill Lynch Wealth Management and of Smith Barney before cofounding Ellevest.
I know very few people who inherited money. The people I know oftentimes got into the right business line at the right time and worked their tails off. For some, it was in financial services in a period of time before that took off. For some, it was in technology as that took off. For some, they went to China. This is advice we don’t often give young people. It is so much easier for you to be successful and for your wealth to grow if you’re in a company or business that is growing or if you’re in a country that is growing.
If you’re in a company that grows 10 percent a year and you are average, you’re growing at 10 percent a year. If, on the other hand, you’re at a company that’s shrinking 10 percent a year, you have to be 10 percent better than everybody else in order to stay still. Then to really grow, you have to be 20 or 30 percent better than everybody else—and nobody is.
When you think of something like traditional media, there aren’t a lot of people that are thirty-five years old and went into traditional media right out of college who are very wealthy right now. Maybe there are a few, but those are exceptional individuals. However, there are a lot of people who went to Wall Street in their early twenties who did very well with technology. It sounds so obvious, but I don’t know that we really emphasize that it’s important to pick the right company, the right industry. It’s easy to say and, of course, much harder to do. Make sure you’re always thinking about industry dynamic before you join an industry and company dynamic before you join a company.
COLLEEN JACONETTI, CPA, CFP®
Jaconetti is a senior investment analyst at Vanguard Investment Strategy Group, with more than fifteen years of experience in the financial services industry.
Save early and often. People don’t amass a ton of wealth without saving. Being knowledgeable about what you’re investing in and the cost of what you’re investing in makes a big difference. I wouldn’t say from an investment perspective that people who are very wealthy do anything differently. They still need to broadly diversify. They still don’t want to overpay for the quality of products they’re receiving. They’re just in a different spot as far as they may or may not have debt. Some still may have debt if they’re buying multiple properties and balancing debt and savings.
The financial decisions of how to invest may not be dramatically different, unless people are going outside the stock market and investing in their summer home with the idea of renting it out when they’re retired. Or they could be using gifting strategies because they have so much money they’re managing taxes. That’s not an investing conversation as much as a tax and financial planning conversation.
When it comes to investing, everyone has the same principals of rebalancing, diversifying, and buying assets in the right spot, but are they more aggressive? Are they overweighting certain factors in the market or certain sectors? They may be doing that because they can afford to lose that amount of money, whereas other people may not be as comfortable. It comes back to the fact that they may have a higher risk tolerance than people who don’t have as much wealth yet. Although, sometimes when you’ve amassed a lot of wealth, it’s actually the opposite. Why should I take risk? If I have $5 million saved, I’m comfortable. I’ve had client conversations where they’re comfortable in 100 percent bonds because they don’t need any more money, and instead of shooting for the stars, they’d rather pass on money to a charity or to family members rather than taking a risk of the $5 million dropping to $3 million.
BRANDON KRIEG, CEO AND COFOUNDER OF STASH
Krieg spent fifteen years working as a trader on Wall Street before leaving to launch Stash, a micro-investing app.
That’s me, I’m completely self-made. I do not come from money. I think I had about three hundred bucks on me when I moved to New York onto my friend’s couch. I can tell you, forgetting about myself, just seeing what my friends are doing—and I have a lot of friends who are owners of hedge funds and very successful—they do exactly what Stash does. They are very well diversified in their investments, and they continue to add to their investments on a regular basis. So, when they get more cash, they buy more of their investments. I’ve been seeing that for a long time. That’s how I’ve been seeing the best investors treat their own money.
It’s funny, I look at my really successful friends, and no one trades. The thing about money in general and gaining wealth is that there is no fast money. I don’t believe in fast money. I don’t think fast money is real. Fast money leaves you just as fast as it comes to you. There aren’t get-rich-quick schemes in investing. Most get-rich-quick schemes, they’re Ponzi schemes, or illegal.
For me it’s time-tested things that work, for both the super-successful and wealthy as wel
l as beginners. Be well diversified and keep adding money all the time.
JILL SCHLESINGER, CFP®, CBS NEWS BUSINESS ANALYST AND AUTHOR OF THE DUMB THINGS SMART PEOPLE DO WITH THEIR MONEY
Schlesinger started her career as an options trader, then spent fourteen years working for an independent investment advisory firm before becoming the host of the BetterOff podcast and the nationally syndicated radio show Jill on Money.
The dirty little secret is that it’s not complicated. They just either inherit wealth and don’t squander it and live within their means, or if they don’t have access to money, they just start saving early. Guests on my podcast start by answering, “What’s the best financial decision you ever made?” Forty percent of those answers from successful people are “I started saving early.” “I opened an IRA in 1986 with $2,000, and I just kept doing it every year.” It doesn’t matter as much how well you do, your performance. It matters that you save, and no one in the industry wants to actually say that, but that’s really the simple truth.
DOUGLAS A. BONEPARTH, CFP®, FOUNDER OF BONE FIDE WEALTH
New York City’s financial advisor for Millennials, Boneparth spent eight years working as a financial advisor before attending NYU’s Stern School of Business and then launching his own financial advisor practice.
Patience. Many of these people did not build their wealth overnight. The amount of time, energy, and money—meaning their own investment in themselves and in their businesses—should be the focus. Getting caught up in the allure of the fact that they actually are wealthy is not the lesson at hand. Ask yourself, “What did this person do to reach that level of success or accomplishment?” Figure out how you can replicate that in the context of your own financial life. Every time someone goes by in a nice Porsche, I used to think, “Oh, that guy’s lucky.” Now I think, “They worked their ass off.” Or “All flash and no cash.” You never know who is leasing that Bentley and who bought it in cash!