Those Of You Who Have Made It To Millionaire Status, What Advice Do You Have?

This is a real estate board, not a personal finance board.

From personal experience here…

1. Max out your 401(k), IRA, etc. and pay down any student loans aggressively. I know you joke that it doesn’t count, but it does add up over time. 
2. Work until you reach a point where you get compensation beyond salary & bonus - carry, % of dev fee, % of pref, etc. Something like 5% of a $3M dev fee may not seem like much, but once you get 3-4 projects going it adds up rapidly. 
3. When you get a huge payout that is outside of your normal compensation, reinvest the majority that money into your company’s deals or start your own. 
4. Marry intelligently. Tons of ways to do this, from marrying rich to marrying someone who has a similar drive to be successful to marrying someone who simply won’t take half in the divorce, but who you marry will have a dramatic impact on your long term financial health. 
5. Have your dad die unexpectedly and split his estate amongst your siblings. 

Works every time 

This doesn't seem like the appropriate venue for this, but I'll take it in a different direction.

Don't get too caught up in a race to accumulate wealth.  Being a millionaire means nothing.  In it's most basic sense, money doesn't intrinsically mean anything.  It's merely a marker for how much/many goods and services you can purchase.  So do some of that.  Don't forget to save and have goals around that, but you'll get more enjoyment out of spending on a vacation or a night out or not living in a hovel when you're 25 than you will from being able to eat out 6 nights a week instead of 5 when you're in your 70s.  Piling up wealth like it is the counter in a game you're playing against everyone else is an insidious trap (one I constantly am falling back into as well) but at the end of the day your enjoyment of wealth is going to look like an asymptote curve and you're going to get to the steep part way earlier than you think.

Don’t gamble and keep personal expenses low 

One million is a good start, but as someone who has crossed over it I don’t think it means as much as it used to. I got here by being pretty frugal in my 20s. Not out of control or anything I regret, but no way to live forever. But I do think making some sacrifices put me way ahead of a lot of peers. Saving early allowed me to put a down payment on a house early, which in hindsight turned out to be a great investment. Once that house became too small, had more cash for another down payment on a bigger house which allowed me to keep the other house as a rental. It was kind of a balance along the way of investing in 401k, using cash for down payments, and throwing some leftovers in the stock market/small real estate deals. At the end of the day though never felt like I was rolling in cash. Just now starting to get to a point where making good money to be able to meaningfully contribute to some real estate deals. Have definitely gotten looser with spending which eats into investable cash, but now have more of mindsight to earn more rather than save my way to xx millions. More than anything it just takes time and being consistent. Always learning and turning that into better jobs. Still haven’t had the conviction to put more than $50k into a deal as an LP, but I think eventually I will want to take $500k or so and put that into a deal as a GP to try and make some real money. Feel like next 6-12 months could be ideal time to do that from a cycle perspective but not sure I have the confidence or conviction based on my experience/skill set yet. So we’ll see.

Save until you are living slightly uncomfortably and invest in asymmetric upside 

Don’t wait to buy real estate, buy real estate and wait!

just kidding. Sort of.

You can’t really save your way to wealth (at least not quickly), you’ve got to invest. If you’re in the real estate field and you aren’t investing in real estate, I kind of question why you’re not using your “edge” to invest in an asset class where you can generally outperform.  Any time you buy a stock, you’re buying it at fair market price. Now the market could be over valuing it or under valuing it, but generally speaking, that’s the fair price. Real estate is different. Say there’s a death in the family and the estate needs to be settled quickly, a new development has been scheduled to be built next to a home, or an owner needs cash quick. These are just a few reasons. 

Another piece of advice is to invest in yourself. This doesn’t mean just taking out a loan to go back to school and do a masters (although it could mean that), take time to network, go to events, watch YouTube videos, or buy an existing business. For the vast majority of W2 earners, the stock market provides a way to grow wealth if you don’t have a vehicle for it (such as a business). But there are certainly other and (imo) better avenues to create and grow wealth. Small business and real estate are my preference.

Cryptocurrency is the answer here, go all in on a meme coin when it's early in the cycle and watch your net worth and blood pressure skyrocket.

Marry rich

Your net worth at a young age has much more to do with your income / savings percentage than your investment returns. A couple of quick thoughts:

• Don't adjust your lifestyle as your income begins to scale unless you have life reasons (marriage, kids, etc.) forcing you to do so. If your income scales from $150k > $350k over a few years, save every marginal dollar. A couple years of saving 200k+ will be much more impactful to your NW in your early 30's than trying to figure out how to increase your investment returns on the $50k you saved at 25 from from 10 to 20%. This obviously changes as your time period lengthens, but while you are establishing your foundation it is tough to understate just how important raw savings % is. Also getting in the habit of living below your means now will serve you well throughout the rest of your life / career. Far too many are trading up lifestyle but still living paycheck to paycheck as income increases. 
• Diversify out of real estate. Your income is already massively correlated with the real estate market broadly and is directly tied to any co-invest/deal/fund performance. Everyone's promote just went to 0 and many deals/funds are underwater. The S&P500 is at an all time high right now. Which would you rather have invested in over the past few years? 
• Don't discount liquidity/cash. Promote/Co-invest seems appealing but don't assume your liquidity needs won't change. Life can come at your fast in good ways (wedding, house purchase, kids, etc.) and bad ways (layoff, breakup, etc.). You can't access any of these illiquid investments people are throwing around here easily or without significant pain. Holding cash isn't as painful as it used to me (money markets/high yields savings accounts are yielding ~5%) and if you have any near term goals you are working towards (i.e. buying an engagement ring, saving for a wedding, saving for a down payment)
• Have you and your partner max your 401k's/IRA's,. If you get a company match and get historical average returns you'll be around $1M within a decade in retirement accounts alone.
• Manage your debt. Pay down any student loans and avoid car loans/CC debt. Keep mortgage reasonable. 

Net worth, your life partner, your experience and reputation have a compounding effect.

• First of all, I married someone as frugal, value conscious, and life maximizing as me (and beautiful, good mother and a master of her craft). That makes a world of difference balancing a happy home, financial stability, and living life.  If I were alone, my basic inclinations would have been to live in a mobile home and eat can tuna for dinner, because I suck at planning hedonistic things for myself.  Of my checklist of things to do like spending money on myself, it would always fall down the list.  Your choice of life partner has a profound impact in finding balance.

Vin Diesel said in Fast and Furious (I forgot the number), “money comes and goes, but family is forever.”  I truly believe that.  Money has come and gone.  Family has so far stayed.
 

• Slow and Steady. I made my first million ($500K if I split with my wife), by working, living within our means, investing, and buying a home. That took our first 15 years approximately (late 30’s).  This was despite senior care for my dad, a MBA that cost $120K (but I made more money from it, thank you Berkeley), and later kids. Splitting my cost of living with my wife was key (I live in San Francisco).  

• Price of Admission. I needed and spent my first million and change of net worth to stay in the game to actualize my first business exit that multiplied my previous net worth.  Without some liquidity, I wouldn’t have had the ability to financially persevere - and sometimes, you have to really go through dark moments when you have a business.  Net worth provides optionality and runway, because the preferred (or only) time to harvest might outstrip your resources.  If anything, I felt the best investment was in myself and I bet it all.  It also could have been a total loss.  It was a coin flip.
   
• Fear of loss. Financial cushion for the first time has created a fear I’ve never felt before, of loss.  While everything I’ve been successful at was because I was a pig (the pig and chicken story - for breakfast the pig goes all in and would die to become your bacon, while the chicken lays eggs but lives but can be deemed to be less committed.  A venture capitalist told me this story).  I feel more like a chicken today, and I feel like I would regret it - but not.  I’m not sure.  More below.
   
• On my relationship with money. I would say, how you got to your place in life, shapes your risk tolerance, world view, and future desires.  Busting your butt for corporate makes you want to start your own thing (as an associate/manager I thought I could be a great MD, but I wasn’t cut out to be a Director or VP).  Starting your own thing - depending on how it turns out, makes you think making money is based on luck, skill or some combination.   And very often, the person you were before starting out is different later on.  For me, I realized that family is important, some money is important (but it’s never enough - so you have to put yourself in perspective and compare yourself to only yourself.  I saved slow and steady for 15 years.  I’m better off doing what I did.  And that’s it. Next chapter.)

There are various tactics.  Some observations:

• Ordinary income vs long term capital gains income.  When more of your money comes from LT capital gains, it’s taxed at a lower rate (around 21% federal at the highest marginal tax) compared to 30% or so plus your Self Employment Tax (15.3%) or if you’re W2 7.6% for your Medicare/Social Security (lucky you, your employer pays half).  So ordinary income can be taxed at 38% - 45%.  Add state taxes and I just look at money at 50%.  When I look at the lotto, the number I see is 50%.  But you look at LT cap gains say 30% vs 50% taxation and that 20% spread is juicy.  That means every 5 years, you’re doubling (Rule of 69, makes that 3.5 years).  So, investing or starting a business has that built in advantage of greater after tax income.  Not to mention all your business deductions you took along the way.
   
• My 3 Finger Business Rule.  Everyone focuses on the business.  How well you’re doing.  How much revenue, head count, locations, etc.  That’s all any outsider cares about.  That’s only one finger.  The other two fingers are the relationships between the internal partners and with the external partners.  You need all three to be in balance to actualize (ie add to your net worth in cold hard cash).  Also remember, nobody ever went bankrupt taking a profit (I think I heard that from Sam Zell).  Remember what I said about my wife.  Your partners are your temporary spouses.

• Higher net worth, experience, and reputation helps you play future games. Everything you are doing now can compound for you later. 

• Lastly, I hear about imposter syndrome.  Or what are you going to do next.  I believe and I heard this example on a Tim Ferriss podcast, a story about Civil War generals Grant and Sherman.  Grant had to follow up his war success with a run at president and later as a finance businessman.  He could not stop.  With the Peter Principle, he was good at being a general but bad at politics and business because the wrong type of people surrounded him. He was a celebrity.  Grant died broke and sad.  Sherman on the other hand, did not feel compelled to live up to his greatness beyond what he knew how to, and he died rich and happy.  Our perceptions of what we should be doing is a making of our own imagination and what we value.  Do I value family more?  Yes.  Am I grateful to have a job?  Yes.  Do I want to have a creative outlet?  Yes.  Do I have to be a billionaire?  No.  Do I have stories to tell?  Hell yeah.  
   

Ramblings of a post-career/business cycle, not so rich (but comfortable) 40 something year old.  Thanks for reading.

Find a niche and move into a commission-based or ownership role as soon as possible.

Spend less than you make - just because you had one great year as a broker and made $1MM doesn’t mean you should live a lifestyle that requires that kind of annual income to support it. The brokers that killed it in 2021 and 2022 and overspent are more likely to act in ways that will hurt their reputation in the long run…all because they’re desperate and need commission $$. If you have savings you can play the long game, and the ppl that play the long game always win in real estate

Invest your savings, not just in real estate. I’ve seen many brokers that sunk a bunch of their own cash into their clients deals, only to see those LP investments become totally illiquid or even worse, worth zero.

It’s not how much you make it’s how much you keep. There are a lot of ways you can minimize your tax liability if you’re a real estate professional. There could be an entire thread on this so I won’t go into detail, but take advantage of all the real estate friendly tax loopholes

I have achieved net worth in CRE and can share some tips. Investing in your own deals was the key to success. Developing a side business has also been useful - these can be either your own projects or your own store. It is important to be flexible and willing to take risks and look for real estate investment and business development opportunities in your area.

The number one thing you can do is to avoid lifestyle creep. Fight it at every stage of life because lifestyle creep only compounds (and shoutout to the person who said your choice of life partner is a huge factor here!)

This doesn't mean depriving yourself of things you really want. Buy what makes you truly happy. Just realize that it's really easy to ratchet up your material standards but brutally hard to cut them back. Hedonic adjustment is real. You used to go out for a $40 meal which made you happy. An $80 meal felt like a huge treat. But if you start just getting $80 meals all the time then all of a sudden your baseline for "that's just OK" is $80 and you need a $160 meal to get that high. Then apply that to every part of your life. Now if you are a foodie and the fancy meal really does bring you joy then go for it. But it's so easy to slip into a lifestyle ratchet where growing wealth barely keeps pace with your reset baseline. And that's the problem because you don't have any buffer if you hit a pothole.

It's all the little choices over years and years along with the big ones. Just as it's hard for human psychology to grasp the power of compounding your assets steadily over decades and decades, avoiding the compounding your baseline cost level is just as if not more powerful. Get lucky+hard work and you will find yourself with a nicely appreciated net worth RELATIVE TO a baseline spend level which has grown at a slower rate and that delta is your piece of mind + freedom. 

Marry someone who is a millionaire. 

$1 million is not a lot of money. It doesn’t “feel” any different than having $100k in your bank account. You probably don’t start to feel rich until you feel like you have more money than you could reasonably spend in a lifetime. That probably requires $100m+, but the problem is that human nature ensures you’ll be comparing yourself to the next rung of status and wealth. There’s always someone richer, bigger, better. The takeaway is simple: avoid envy and ignore what others think/say/do; find happiness in yourself, your relationships, and commit yourself to acts of selfless service to the word. That will bring you true fulfillment and happiness, not the zeros in your bank account.