Category Archives: Wealth

Getting to Where I Want to Be, Part Who’s Counting Anyway

Returning from a romantic weekend with my s/o, I’m tingling with happiness and love. Here is, for the most part, the man of my dreams – kind, gentle, caring, funny, and willing to put up with my shenanigans as well. We spend too much time staring into each other’s eyes and talking about our plans for the future together: getting married in 2014, trying to start a family soon after, and so on.

That’s where I hit a wall. The story I like to dream of still seems impossible. I’m pushing along as hard as possible, setting my mental health issues to the side, trying to save as much as possible without a so-called frugal lifestyle, and here I am, almost at 30, and feel so terribly far behind. I look at my friends (and I know it’s a bad idea to compare oneself to anyone) and they seem somehow more ahead and settled then I’ll be in the next few years. My Facebook newsfeed is filled with images of too-cute babies, some who aren’t even babies anymore, some who have siblings to boot, and all created by people who are my age or younger. The younger sisters and brothers of people in my class are getting married off, some who are 5, 6, 7 years younger than me, are already popping buns out of their ovens.

Here I am, nearing the big 3-0, with no clear direction in my life other than this fantasy of adulthood that doesn’t seem real at all. A very irrational part of me wants to wake up one day a mother. She no longer cares about a big fancy wedding – in fact, she’s been with her s/0 for nearly 7 years and with that practically feels married anyway. Vows are not necessary to prove love. Many marriages end before the seven year anniversary of a couple meeting in real life, what’s to say those marriages are any more real than the one that we haven’t signed documents or been stuck with needles to verify? I’ve always thought marriage was a silly concept. Either you love someone and you’ll stay with them or you won’t, but having a binding legal contract to tie you to another person doesn’t make sense (unless divorce were to be illegal. Otherwise, the only winners are the lawyers.) Continue reading

The Hard Realities of Aging and Falling to Pieces

A recent article on “life before death” dementia and late-life illness struck a cord with me and my family. While I’ve always been fearful of death, the reality is that death isn’t just a one-time end. Even if you’re “lucky” to reach 100, for everyone, that means many years of degraded mental and physical health. It must be terrible to go through, but it’s equally as terrible for everyone else around you trying to help you progress slowly towards death.

My Grandmother, 83, has a gambling problem. In the last 10, mostly 5 years, she has gambled away her entire life savings of more than $300,000. Everyone knew she had a problem, but no one legally could intervene to help. Now, she’s broke, and at age 83, approaching the age of severe medical problems, even after leading a relatively healthy life (more thanks to good genetics than being healthy.) My mother and her sister’s had already been in uncomfortable discussions around what to do with her — as her social security did not provide enough money to pay for her two bedroom apartment in her Las Vegas retirement community, but she refused to move into a smaller space.

A few days ago, my grandmother fell down. She broke a bone in her neck, which was operable. On the scene of the fall, the paramedic asked her how old she was — she said 64. The doctor’s brought her to a rehab facility after she stopped being combative and arguing with them, and after one day there she told my mother via phone she had been there for weeks. The doctor diagnosed her with mild dementia. Now the question is not how she can afford the 2 bedroom apartment and a $2000 tax bill, but how to afford many years ahead of assisted living.

Meanwhile, her daughters — my mother, and her two sisters — are not in strong enough financial places to step in and help. My parents are concerned about their retirement savings as the stock market has not recovered, and they continue to spend like it is magically going to. I tell my mom over and over to not make the same mistakes her mother did, but she cannot see spending money on clothes and cleaning help as the same as her mother’s gambling away all her savings. In the end, the money will be gone, I tell her, so it’s the same. She ignores me.

For now, they need to figure out what to do with their mother as she gets increasingly senile. She’s always been a bit crazy, so adding real dementia to that crazy could get very bad, very fast. My mother is considering trying to get her to move out to New Jersey to be closer and find a lower cost place to stay, but all is up in the air right now. I don’t think my mother can really handle her mother at the moment, as my dad is in the later stages of terminal cancer and his cancer will likely get worse in the next few years or even months.

Overall, this is a very depressing situation, but so goes life.

 

One Reason the Rich Get Richer: Accredited Investors

There’s been a lot of focus on the 1% over the past few years, with the unemployment rates still high and wealth growth only stable across the richest individuals in the world. One of the most cited reasons why the rich get richer are all the tax loopholes, and these, indeed, help millionaires and billionaires get richer. But one thing that isn’t talked about a lot is “accredited investor” status.

To be an accredited investor, according to the SEC,  must be either a corporation or:

  1. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person
  2. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year

In other words, accredited investors are the 1%. If you’re not already in the 1%, this rule makes it harder to get there. For people who took risks early in life, built companies from the ground up, and became millionaires from their own hard work, this is all fine and dandy – they clearly deserve the privileges availed to accredited investors. However, many with this status have $1M+ bank accounts thanks to mom, dad, grandpa and grandma. And as long as accredited investor status exists, the wealth chasm between the rich and the poor will continue to grow.

I recently worked for a startup that was sold to a large company that has since went public. While I did not own a large number of stock options (2000), I was not eligible to transfer my shares to shares of the acquiring company because I was not an accredited investor. Instead, I had to sell my shares for $3 a share, netting a profit of $5k. This was a nice bonus, for sure, but had I been able to convert my handful of shares into the now-public companies shares, I would have netted approximately $52k.

The idea being accredited investors is that you should have a large cushion of money to take on high risk investment opportunities. In this case, it was very clear that the risk in converting my 2000 shares to 2000 shares of the acquiring company’s stock would have not been high risk, but it kept me from making this conversion.

In the case of my prior company, I am not upset about this since the company was ultimately acquired for its technical resources, and I was not one of these resources, but it is still a little disconcerting that in a company of 10 full time employees, where more than half are millionaires, the rest of employees do not have access to the same wealth. This is more concerning in my current situation where I traded in a somewhat cushy six figure salary for a job with many more stock options. Should a similar situation happen again upon an acquisition, there would be greater cause for upset.

Beyond this specific instance, there are many other reasons why accredited investor status helps the wealthy get richer. Accredited investors gain access to a variety of investments that, while risky, are often not that much riskier than the investments that one can make in the traditional stock market, and, more importantly, they have a much higher growth potential.

As with any investment, diversification is key to success, so if you’re not a millionaire it might be difficult to properly diversify. This is the only reason I understand the rule and find it remotely fair, but again, there are many high-risk investments that aren’t limited to the wealthy… it’s just the high-risk investments that have high-return potential that are limited.

  • If you fit into this category you may be eligible for many investment opportunities such as hedge funds, commodity funds and special public funds that other investors are not allowed to participate in.
  • The key is that many higher risk, and thus higher reward, investments are only available to qualified “accredited investors.”
  • The main benefit to qualifying is that you gain access to investments, and greater returns, that “average” investors can not access.
  • Quite simply, it comes down to convenience and privacy for the investment managers. By marketing securities only to accredited investors, a fund or company can avoid many of the filing requirements to which most public companies are subjected.
One benefit of being an accredited investor is being able to be an “Angel” investor in a very early stage company. This is indeed one of the riskier investments, thus not something I’d recommend to a person who has a networth under $1M. Some famous investors such as Ron Conway and Paul Graham are well diversified, having made 190 and 129 angel investments, respectively.

Angel investments can range quite vastly — the typical investment of an angel investor ranges from $10,000 to $250,000; however, they are known for investing up to $1.5 million dollars in any given venture, according to Go4Funding. To invest in 100 companies for $10k each, that is $1M, thus making the $1M accredited investor rule make a little bit of sense. Still, I believe that the government should not be able to tell you if an investment is too high risk for your portfolio. If I want to invest $10k of my personal funds into a startup that I think has a lot of potential for growth, I should be allowed to do this. In reality, I had to pay $20,000 to “buy” my stock options of the private company that I work for, but I would not be allowed to invest in a company that I do not work for because I only have $150k in assets.

Meanwhile, there are other investment opportunities open to accredited investors that are less risky than angel investing. For example, let’s take a look at Second Market. Second Market is a company that helps owners of private stock sell their stock before the company goes public. So, for instance, an accredited investor could purchase shares of Facebook stock before it goes public for a price which she believes will be substantially lower than the price it will go public for. The investment is risky — a private company may never go public despite its success, and it is not clear on what the price will be when it hits the market even if it does — but ultimately most of these investments in big, fast-growth private companies net investors serious growth.

According to SecondMarket, “For regulatory reasons, in order to view listings and place indicative bids on securities through SecondMarket, you must be an Accredited Investor or Qualified Institutional Buyer (“QIB”). However, you do not have to be an Accredited Investor or QIB to list your assets for sale.”

In short, this is one major reason why the rich get richer, and the rest of us are unable to access the same investment opportunities available to the 1%.

I’m not alone in this outrage. There is a movement afoot to allow the 99% to invest in startups. A law is currently in Congress that would allow the rest of us to invest up to $1,000 in private companies. While I believe that the government should not be able to limit investments to $1,000, it is a start. Please do your part and sign this petition to support crowd funding. It is a small step in the right direction.

Your Personal Price Tag: How Much Are You Worth?

What are you worth? What is the dollar figure per hour that makes you cringe on either end of the spectrum? I was never taught to value myself, my time, or my ideas. Of course I was expected to make a living, but no one in my family expected me to be successful in the financial sense. And why should they? They all thought I was going to be a starving artist, or a designer eeking out a middle class life.

Then I entered a completely different life. And I had to teach myself what I’m worth. I still struggle with that question. Every time I make a mistake, I knock off another few thousand dollars on that number. If I successfully complete a project, I rarely mentally re-coup my losses. When it comes to salary figures, you can look at Glassdoor and Payscale to get a general idea of what people in your position, by title, are making annually, but that doesn’t really provide a fair picture of what you personally are worth.

The truth of the matter is you are worth what you can sell yourself for. You are a product, just like any product your company is selling. There is always a certain amount of money your company is willing to pay for the product of you, and a certain amount of discount they are hoping to get based on your insecurity. If you price yourself too low, however, they will start wondering what is wrong with you. So, you must have a pricing strategy in regards to yourself and your value.  The trouble is, so many variables are hidden, and they sometimes change on a daily basis. Continue reading

Happy Holidays from your Favorite Agnostic Jew!

It’s that time of the year again. Wasn’t it just Chanukah / Christmas 2010? I swear I was just writing my “2010 wrap-up” post yesterday. In any case, it’s somehow almost 2012. I’ve made it through another year. So has the world. Huzzah! 

The past year has been one of incredible growth professionally and personally, a few (ok… one) major mistakes, and new doors opening to great opportunities. I really feel like I’m getting older, not just in terms of how long my feet can handle mini stilettos, but also in how I’m relating to the world.

I went to my 10 year reunion in November — I can’t remember if I wrote about that here or not — and saw a bunch of old classmates who hadn’t changed. They were still living in the same town, for better or worse, and I had been away — for 10 years. It was just a little over 10 years ago when I left home and went to the midwest for college, and then packed my bags to move to San Francisco with a barely-paid internship and absolute terror over what the future might hold, and every possible morsel self doubt one could swallow.  Continue reading

Girls Just Want to Have Fun

When I was filling out the “10 financial commandments for your 20s” post, one of the commandments said that you should be focusing on having fun in your 20s. That one bullet sent me into a bit of an identity crisis. I started to try to remember what I consider fun… and it was really difficult to find something. I’m struggling to find anything outside of my job that is fun in my life.

I’m turning 28 next month, and while the birthdays before this one haven’t felt significant, I am starting to feel, well, old. Now, I know some of you who read my blog are much older than I am, and I don’t mean that you’re extra old. I’m just saying that — as the world around me ages — I question not just what I’m living for, but also what I’m not living for. One thing I’ve realized lately is that I’ve died a few times so far in my life. For instance, the young me that I once was died a long time ago. She doesn’t exist any more. She might not be buried under ground, but she’s just as dead as a corpse. And although I never loved her, I still miss her and need to take the time to morn her passing. I also need to remember what made her happy, and try to bring some of that back into my life. Continue reading

My $20,000 Bet: The Biggest Risk I’ll Ever Take

Given that my largest one-time purchase ever has been on my $7,000 car, it was difficult for me to write a check today for $15,000 to “early exercise” the majority of my mostly pre-vested stock options. Perhaps I should have sought out more advice before doing this, but I feel like my life has a way of working out and this was a smart risk to make.

Worst case scenerio — I find out that over the long run, this risk has cost me $15,000 plus whatever interest I would have made investing that money elsewhere. Best case, I could become a millionaire, or even a billionaire. Most likely outcome is somewhere closer to the first option, but why not take the risk now when I’m young and can handle the set back.

The whole equity situation at startups is so tricky. You really can only get the best value out of your options if you’re able to exercise early, at the strike price, before the stock value is raised in a later funding round. But early is also when it’s not very clear how the company will do over the long run. It’s exactly like buying a lottery ticket, except maybe you know that the winning lottery ticket was sold within one specific town. You have some insider information that within this “town” someone is going to win big. Everyone else, still, is going to lose. But if you were able to pinpoint the town, or even the exact street the store is on, would you buy a ticket?

That’s what I’ve done. I wrote out my check, stared at it for a few minutes before handing it off to my boss to exercise most of my stock options. I believe that of all the companies I may work for in my life and have in this past, this is the one to bet on. The team is great, the product, while early, is solid and something that companies are willing to buy and spend quite a bit of money on. I’ve been involved in many aspects of the business, enough to know the market and believe we have a shot at really building something special.

My last startup — where I never bought the stock — never had a business model. There, it seemed silly to buy the stock. And even they managed to get acquired for a small sum. No one besides the founders got rich off of it, but at least anyone who exercised their options got their money back plus a little pocket change.

Still, as I drive around in my busted car with no air conditioning, I can’t help but think… should I have taken that $15k and spent it on a nicer car vs. exercising my stock options that a few years from now could very well be worth nothing. I guess I’ll just have to wait and see. My dream is to have a million dollars by the time I’m 30, and given I’m half way to 28, this is really the only possible way.

Taxing the Rich, Class Warfare, and the Quest To Be in the Top 1%

With $3,000 extra after my recurring bills are taken care of per month, I know I have a chance, albeit a tiny one, to ride the tailwind of the rich to my own wealth. As I dream of prosperity, I also acknowledge the class war that is brewing throughout the world, and in America.

The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.

For the white collar workers of the world, and even those with mid-level government jobs like teaching at the nation’s public schools, wealth — as in ascent to the top 1% — is not even fathomable. The only goal regarding finances is to be able to pay the mortgage and children’s doctor bills.

Then there are those in my bucket… the 20 somethings with a dream of one day being in that top 1%, knowing it’s unlikely, but in the least working in an industry where odds are better than playing the lottery in becoming a millionaire, in the least. Continue reading