Recently had to put some thought into how much money I needed as I was offered a decent amount for the equity in my business. Basically had to make the choice of either selling or raising more equity and rolling over my current equity value and keep going. Bird in hand or two in the bush?
What's the number where u can walk away without asking yourself what if?
You didn’t have the option to sell some shares and roll the rest?
I think my number would be 15-20M
8M
My thoughts on selling a business have always been if I am offered X today, then surely if I continue when I’m doing it’ll be worth a multiple of X then.
Point is, I’d need a lot of money to walk away and it would be entirely situationally dependant. If it’s your business, passion project etc and provides you with a good life - why would you want to walk away?
I break it down into career phases. I'd say $3-4MM in this current phase. $1MM for house, $1MM for kids, $1MM for investing plus something for a safety net is the loose allocation/rationale. At that point as long as you're meeting your monthly expenses plus a little extra you're good - what else do you need really? To be clear I wouldn't just sit on a beach for 20 years sipping mai tais, I would still do something but it wouldn't involve a 70+ hour per week grind.
That said I've seen business owners net a $10MM+ payday later in their career and insist it wasn't enough and jump right back into the next one.
I agree with this logic for the most part. The challenge is once you hit that point in PE/IB, the job has gotten at least a little bit easier and the incremental comp you earn each year goes way up. By then you also have more life pressure (provide for family) and if you haven’t been careful, lifestyle inflation / keeping up with peers. Easier said than done to leave at that point.
Once you get this far (assuming you are referencing the $10mm?), your needs are more than met. Keeping up with peers is self-imposed.
At the risk of negative forum reaction I will share a personal anecdote. I was born into a middle class family that has since become Rich so have had a lot of exposure to people to who $10mm is but a fraction of their net worth. I've asked and heard conversations about "how much is enough" and just about all of them have said it's never enough. These are almost all smart, humble, kind people many of who had humble beginnings; I think the point of my story is more about human nature once you "get there" so I think the broader conversation of a walk-away number is a bit of an academic exercise of daydreaming because if you're hungry enough to get there you'll keep going.
Don't disagree with you. The key assumption there is that the job gets a bit easier. I haven't found that to be the case personally and in many respects it's gotten more difficult - more traveling, more responsibility (including sourcing), higher stakes, etc. Once you reach partner it may be a different story because you will have more autonomy / more authority regarding growth objectives and how hard to push generally.
$5M would definitely be enough, but even $2-3M would be fine.
you can put this money into REITs and make 4% from dividends, plus the value will be growing with inflation.
4% on $5M is $200k per year, on $2.5M it's $100k per year. $100k in dividends is $85k after tax per year or 7k per month. if you don't need to save, 7k per month is enough to have a fun life even in expensive cities like NYC. and if you're traveling the world and staying outside of US, you'll be absolutely balling on 7k per month.
Inflation is far greater than 4% my friend. Honestly my grocery bills are twice what I used to pay and going out is almost twice as well. A lap dance used to be 20$ at flash dancers and now it’s 40$.
Real estate value grows with inflation if not faster (inflation is calculated off of rent prices), so you'll have 4% dividend on the principal that grows with inflation or faster.
I'll offer my experience and how thoughts on "the number" have evolved. I did MF PE for a few years, then transitioned to a large HF, currently a PM at that HF. I'm mid-30s, live and work in Asia with wife and kids. When I first started out, I thought $3-4m would be enough and my target was to reach that number by my mid 30s. However my career has gone better than expected and my current net worth is around $15m. This number would certainly be enough to retire on from a lifestyle perspective, but once you've reached a certain status, you care about maintaining that standing and societal impact. I'm a competitive person so it's hard to just "walk away" in my mid-30s. That said, there are definitely days where I wonder why I put up with the daily grind when my high school classmates work 1/2 my hours and 1/10 my intensity despite having no net worth to fall back on.
This is off topic but could u share how your compensation is structured at the pm level? Was just curious because there arent enough senior level data points for pms here. Also are u at a single manager?
As a PM, typically you get a cut of the performance fees generated from your PnL. Yes, I'm at a SM.
societal impact? don't you just flip stocks? what value do you think you bring to the world? liquidity in markets lol? you think the world won't survive if you retire? you have 0 impact in a grand scheme of the world. but you can lie to yourself if it makes your life less miserable.
and saying that you're a competitive person is also pointless. there are things that are worth competing in. and there are things that are not. like, is it worth to dedicate your life to competing in video games, or competing in who can fart the loudest? what are you competing in? in asslicking so you can climb the corporate ladder and lick asses a bit higher? wouldn't it be more interesting to compete in traveling the world, exploring life, learning cultures, meeting people?
the answer is clear. you put up with daily grind cause you don't know what to do with life, and it's easier to have a certain life when you go to work, perform tasks, and collect gratification in the form of job titles and money from well-performed tasks.
Yeah, unlike you, I do actually think that investors generate value. We do both public and private investments. How do you think innovative companies raise money without us investors? In addition, I serve on a few non-profit and charity boards, which I enjoy.
Even when I leave my current place, I will continue being an investor because that part I genuinely love, just with less pressure and stress. And no, I don't believe traveling, luxury, sports etc. alone would make me happy because there is zero impact on others from these activities. You are right though that I haven't found something else compelling enough to pursue - still thinking about it and working on it.
It's never going to stop going up sadly.
$2-2.5M. I don't plan on having kids and may not marry either. With that, I could buy a nice place (mortgage free) in a LCOL location and spend most of my pursuing hobbies, golf, surfing, scuba diving etc. I'm not a big spender and can live on $1K a month for bills + food. That leaves me with another $40K each year for things like travel / events etc. I'd create some additional income through writing articles on Seekingalpha on spaces I'm knowledgeable in, and finally write a book on something I'm interested in, but that'd just be to keep me focused on something rather than to live on.
If you really want to retire it's early, it's important to set a base line of expenditure which you don't grow much from. If you continually scale your outgoings to your income, you'll never be able to sustain early retirement. You need to be comfortable living off whatever 3-4% of your walk away number is (assuming you don't plan to work in another role). I'm basically banking all of my comp above the salary I earned as an associate, I lived very comfortably on that and can continue to do so.
I think about this a lot, because I hate working.
I think “the number” is heavily dependent on one thing, is the finance professional going to be a bachelor for life, married to an equally successful person or a loser, or have children.
The bachelors for life can retire very early obviously. Probably hit the easy 3-5mm and walk away from it all at 35. If your marry an equally successful person and eschew having kids, you’re in the same boat, but I think closer to 5mm+ is necessary because the wife probably likes doing fancy things once in awhile.
If you marry “down” in wealth, then you’ll probably need to keep working because you now have two mouths to feed on just one paycheck, plus future expense are now doubled as well. So this situation the number must at least be 5mm.
The real separation point in my opinion is the decision to have kids. That really requires money, because assuming we are talking about well adjusted, successful finance people, I’m assuming these people want to give their kids the best of everything. Great education costs, leaving your kids debt free costs and potentially having their backs and helping them throughout their life also costs. So I think in this instance, wanting to live your current lifestyle forever, live near a tier 1 city if you want to, give your kids a debt free, top tier education and make sure they have a little safety net, requires 10 - 15mm.
Once I hit 10mm, I am going to instantly quit. And that 10mm will include my cash, taxable investment account, 401ks, Roth IRA and equity in all my apartments.
I know everyone’s situation is different, and my silver bullet that I’m not counting, is my future inheritance. I never include that amount in my planning. I just assume it’s on me and my wife to keep grinding, but I’m well aware my father and father-in-law are wealthy. So I’m cognizant I might get to retire early once I see what I inherit. But I treat it as a dream, so I don’t lose motivation to keep working.
Seems reasonable. The other factor here is cushion. Yes 3-4% withdrawal on average is probably reasonable over a long horizon. But on any given year, you might have a nasty down year. If you’re trying to pull early retirement off with 3m and you have other people (kids) that depend on you, and the market crashes for a bit, you are going to be horribly anxious for that period of time. To the extent that it sounds more stressful than just having a job.
Agree with your thought process. Similar position I take - I don't bank on inheritances and assume it all falls to me and my spouse. Anything I do receive is gravy, but I don't bank on it and also think it's good to be self-reliant and keep that internal motivation.
Same as Taylor Mason: at first 100m, now 1bn.
$10MM+ Present Value
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