On the eve of Facebook’s impending IPO, and all the buzz about the winners of the mega millions jackpot, the rest of us are left to attempt to build wealth out of our monthly savings. At the Personal Finance Conference a book on wealth generation was handed out to attendees, which stated clearly over and over again that the only way to really build wealth — other than to win the lotto — is to build something that other people want, and do it better than everyone else.
The good news is that I accidentally figured that out on my own. The bad news is that building anything is a huge risk, and has much more potential to fail than succeed. While I dream of getting rich overnight (who doesn’t) I personally feel that if I do not “earn” my wealth I would never feel comfortable spending it, even on reasonable purchases for a frugalista in the upper class.
PersonalCapital.com, my Mint.com replacement, is geared towards people who are actually saving and investing wealth (versus Mint’s focus on debt.) They recently added a really cool feature where you can put in your stock options in a private company and track vesting schedules. They even have a “what if” feature where you can put in the amount of the stock in the future and dream about how much you may have down the line, should your company be a huge success. Granted, I’ve already done this in Google Spreadsheets, but actually seeing the graph makes it feel that much more real. The difference between $3 a share and $5 are share becomes huge once all of the stock is vested.
Even so, I carefully plot my expenses and networth ignoring my company stock, not counting the amount I paid up front to exercise. If the company happens to fail, I’ll consider only the amount I paid to exercise a loss. But I’m not going to get my hopes up about the future too much. It’s definitely thrilling to think that I may have a shot at some sort of wealth at some point in my 30s. My boyfriend and future husband has not saved a dime — so it’s on me to build the life I want for myself and my one-day family. Deep down, I know I will be hugely disappointed if this doesn’t work out, at least somewhat. I don’t need $20M, but I’ve always felt that if I could have $1M by 35 I’d feel comfortable to not have to worry all the time about money, despite still having to work FT with kids, and $5M by 35 I’d be set to live the life I want.
So I guess my goal is $5M. That leaves $1.5M for a house (which is not extravagant in the bay area); $2M to invest and let grow, and $1.5M for life, kids, vacations. It’s quite possible that I’d never live in a $1.5M house, and instead move somewhere more affordable, buy a nice house for $800k, invest more, etc. I’d certainly want to start generously donating to charity, and would make sure to include that in my overall spending plan. $5M is certainly the dream.
It’s no April Fools joke that I have a much better chance of achieving that then ever winning the lottery. After my last startup that had no growth momentum, I went to work for a giant corporation, and decided that I never wanted to work for large corporate America again. Building companies is my passion, and it doesn’t hurt that if you get in early you have a shot at wealth.
The other day I read an article by a big businessman in Europe who said the trouble with today’s generation is that everyone wants to be Mark Zuckerberg and get rich quick. I don’t think that’s a problem, the only problem it creates is that company’s build what they can get out at the minimum versus having the time and funding to create something truly revolutionary. But for individuals, these products and companies can be very successful. Failing fast is probably the best advice I ever received in my life. After all, life is pretty short, whether you live to be 50 or 100. Even if you make it to 100, and you figure you will be working about 50 years between 20 and 70, that’s just 10 jobs if you stay at a company for 10 years. But if you stay at most 2 years, and only stay at the ones that have a solid chance for success longer, you can at least have a greater chance of success, especially in early-stage companies. Just make sure your company has a business plan and measurable objectives. If your business says it doesn’t need to worry about how to make money yet, unless you 100% believe in the idea and can imagine how it would eventually have revenues, get out, or don’t get in at all. When your company has a clear, measurable business model, you can tell very quickly if it’s going to succeed or fail, not just by the numbers, but by how management handles changes if they fail to hit those numbers.
But, really, who knows… it’s a crapshoot. I’ll continue to gaze like a starry-eyed dreamer at my PersonalCapital.com chart, showing how my $5M dream just may one day be a reality. In the meantime, I’m well on track to hit my target goal of $200k networth this year, which is all cash and investments. On that path, I may never have $5M, but I’m confident by the time I retire I can gather a million or two, as long as the world avoids any sort of apocalyptic nuclear holocausts… at which point, even $5M wouldn’t help anyway.