What I Learned Managing Half a Billion Dollars and What You Can Learn From It

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Do you ever wonder what life is like for the rich and not-so-famous? Do you wonder how they invest their money?

Do you wonder how they made their millions or what secrets they might have for you to benefit from?

Today is your lucky day, as I will share the insider details.

For a few years, I worked for a high-net-worth investment planning firm. In total, we had over $500 million under management. 

I got to know the intimate details of our clients and knew what most other people would never know about these people.

Like how much they spend, earn, and save. So what did I learn from dealing with the rich?

Here are the most interesting insights.

#1. Starting A Business Leads To Wealth

Most of our clients were self-made millionaires. Very few inherited their money. They either started their own business or bought a franchise.

While starting and running a business or franchise is not a walk in the park, it offers many benefits that being an employee of a company does not.

For starters, you determine your salary, not someone else. Of course, it helps to have profit so you can pay yourself a salary.

But the benefits don’t end there.

You can take advantage of many tax breaks. If you set up the legal structure of your business correctly, your salary will be in the form of dividends. Income taxes are much less for dividends compared to ordinary income.

Additionally, you get to save a lot more for retirement.

If a 401k plan at work covers you, think about how your company might match your contributions up to 5%.

As a small business owner, you can make employee and employer contributions to your retirement account, and the maximum you can save is a lot more than what you can save as an employee.

In other words, a lot more money in your retirement account.

If you want wealth, you need to consider starting your own business.

While ownership isn’t for everyone, it will pay off if you are willing to do the work.

For example, a client started with one McDonald’s franchise. Now he owns seven. If you get into a franchise early enough and it sees success, this could be you too.

#2. You Can Have Wealth Being An Employee

Don’t you need to start a business to be wealthy, especially if you have zero interest in starting your own business.

There is a path to multi-millions being an employee as well.

The only catch is moving up the corporate ladder and being smart about money.

We had a handful of clients who were executives in various-sized companies. They worked hard to move up the corporate ladder over the years.

With the promotions came a higher salary.

But these people weren’t your typical person. They were smart about their money.

They made it a point to save their raises and bonuses. They contributed the max to their 401k plans every year.

And if they had the option to buy company stock, they did so.

All of this led them to great wealth. Regardless of your income, you have to be smart about spending money.

You can’t be foolish with it and buy anything and everything.

You need to save as much as possible so your money can work for you.

The more you put your money to work, the sooner you can stop needing to work in the first place.

Related: Learn how to slash your monthly bills and save $7,000 a year

#3. The Medical Field Doesn’t Equal Wealth

While I could lump doctors into the group with business owners, I wanted to break them out because they have some special circumstances.

Most people make the mistake and think all doctors are wealthy.

This is far from the truth. The reality is most doctors are dirt poor early in their careers.

This is because they have six-figure student loan debt and are not partners in a medical practice.

As a result, most of their income goes towards saving for retirement, paying off their student loans, and paying their mortgage.

We have doctors just starting and those closing in on retirement.

Those just starting had nothing in taxable investment accounts, as their savings went into their retirement plan to lower their taxable income.

But you could see where the scales tipped the other way when you looked at the older doctors. These clients had large retirement accounts as well as large taxable accounts.

So while it is a lot of education and debt to become a doctor, the career does pay off nicely over the long run.

#4. Be Cautious When Inheriting Money

You might think inheriting a windfall is a dream come true, and it is for most people over the short term.

But over the long term, it is a nightmare.

Here is what I am talking about. Many of our clients that inherited money were quickly going broke.

The reason is simple.

They never learned how to manage their money correctly. Before they inherited their fortune, they were scrapping by.

Then one day, they hit the jackpot and were millionaires.

While they did invest the money, they never took control of their spending.

So every few months, they were taking money out of their account. This went on for years until the accounts were virtually zero.

One client blew through $5 million in less than ten years!

Had they just dialed it back at some point, they could have retired and lived a life of ease.

But now they are working 40-plus hours a week with no chance of retiring since they still can’t control their spending.

Related: Discover the difference between old money vs. new money

#5. Insurance Is Critical

Most people focusing on their finances concentrate on the obvious things.

They are concerned with how much money they make and attempt to control their spending.

But virtually everyone overlooks protecting their money as their wealth grows. And this held true for our wealthy clients too.

Most were woefully unprotected when it came to insurance coverage.

One small accident and they could be disabled for the rest of their life with little in the form of income.

Or one bad break and they pass away, leaving their loved ones to pick up the pieces and the bills on one salary.

The point is, don’t overlook insurance coverage. You must take the time to protect your wealth.

This doesn’t mean you get the maximum insurance coverage for everything in life.

If you have single and in your 20s, you don’t need a $5 million life insurance policy. But you should have something if others rely on your income.

Make sure you have adequate home and auto insurance.

Make sure you have life insurance if you have someone depending on your income, and be sure to have disability insurance.

The stats show you are much more likely to get disabled and unable to work than die prematurely.

#6. Don’t Try To Time The Stock Market

In many of my investing articles, I talk about how no one can predict what the stock market will do next.

Yet, for some reason, people still think they are smarter than the market.

And the majority of the time, it turns out bad.

At our firm, we followed a long-term approach to investing. We invested our clients in low-cost, index-based mutual funds and ETFs. This strategy worked well for everyone.

But there was one client who insisted he knew better.

One day, he called in after receiving his quarterly statement. He wanted to know why his wife’s account earned 7% the previous year, and his account lost 3%.

We explained to him that it was because she followed our long-term approach while he was constantly making trades on his account.

Surprisingly, he didn’t accept this. His ego was too big.

So we compromised with him. We took 75% of the money in his account and invested it in an account based on our philosophy.

The other 25% was his to trade as frequently as he wanted in a separate account.

Fast forward to the following year, and the writing was on the wall.

The account we managed earned 5%. The account he traded in lost 2%.

He agreed to let us manage 90% of his money our way, and he took the other 10% to play with by trying to time the market.

#7. Long-Term Investing Is The Smart Approach

To dig further into the idea of long-term, low-cost investing, I wanted to explain the situation we were in.

Most of our clients lost a good bit of their savings during the Great Recession. There was a lot of hand-holding and talking them through things to stay invested for the long term.

Fortunately, most of our clients listened to us and stuck it out.

And this paid off nicely for them. By the end of 2011, just a few short years after the market’s collapse, they were back to where they were before; some even had more money now.

As they have stayed invested for the years since they have doubled and tripled the amount of their investments.

All this was because they stuck it out and looked at the long term.

Yes, it was a scary time, and it was not easy. But the market came back like it always does.

I can’t say when the next recession will hit. I can’t say it will be as bad or worse than the last one.

But if you can stick it out and stay invested, you will benefit in the long run.

And if you have the courage to keep investing more money during this time, you will come out ahead much sooner than the rest.

#8. When You Are Mega Wealthy, You Can Spend As You Please

While watching your spending to build wealth is critical, there does come a point when you can let off the brakes and spend as you please.

We had a client who was spending $40,000 a month. When I first built her plan, my jaw hit the floor.

I couldn’t imagine spending that much money every single month. Sure, I could do that once or twice, but eventually, I would get tired of buying things.

In any case, I was sure the projections would leave her penniless.

But to my surprise, she could spend more than this every month for the next 40 years and still be a multi-millionaire.

How much money did she have? Over $40 million.

So her spending $480,000 a year was much less than the rate her account was growing at.

Therefore, if you want to ignore a budget and spend like there is no tomorrow for the rest of your life, then get to the point of having $15 million or more.

Related: Learn how much six figures, seven figures, eight figures, and more is

#9. The Importance Of Failing

I learned the importance of failing not only from our clients but also from the owner of the company.

From our clients, I heard many stories of failing, picking themselves back up, and trying again.

It never was easy, but each one made a point to mention that the failure they experienced held a key role in their eventual success.

For example, one small business owner was doing great. So great that she decided to expand.

The only problem was that she was still learning to run a business. When she opened a new location and hired staff, she could barely keep up.

Eventually, she lost everything.

She could have taken another path but decided to start a new business.

With her new business, she is now taking things slow and making smart decisions that are well thought out instead of just jumping in.

The owner of the company also was big on failing. So big that he encouraged us to fail.

Not in the sense that he was OK if we made major mistakes, but he viewed failure as growth.

When you only do the things you are comfortable with, you never grow as a person.

You are bound to make mistakes when you step outside your comfort zone. But this is good because you are learning new things and becoming better.

#10. Experiences Trump Things

This lesson is arguably as important, if not more important, than being OK with failing.

So many of our clients were all about experiences and not things.

They would talk at great lengths about family trips and vacations they would take with their kids and grandkids every year and show us pictures.

Very rarely, if at all, did they talk about their new 80-inch flat-screen TV or the luxury SUV they bought.

Life was about how experiences make you happiest, regardless of the amount of money you have.

Related: Here is how to live a life of unlimited wealth

Once, an older client of ours left his eyeglasses in our conference room. Since he lived nearby, I offered to drop them off when I went to lunch.

I was shocked when I walked into his house. He lived like I did when I was in college.

His house wasn’t huge, and it didn’t have every fancy gadget or contraption that most people have.

He lived a simple life and was always full of joy and happiness.

When you don’t spend money on things that appear to have wealth, it is easy to amass a $20 million fortune!

And to be clear, you could take away all that money, and he would still be over-the-top happy as long as he has his grandkids.

#11. Keep Learning

Another lesson I learned was always to keep learning. This includes reading books for education and entertainment and finding a mentor to learn from.

The more you can continually learn, the better your decisions will be.

And this holds true regardless if the decision is money related or not.

We had one client who would teach part-time at the community college.

While teaching the students, he was learning just as much, if not more, from them.

They kept him in the loop about technology, among other things.

#12. Be Kind

While you could make millions by being a not-so-nice person, more often than not, people who are kind and generous are the ones with a lot of money.

All of our clients went out of their way to be kind to others.

Very rarely did I see them complain about things.

Being grateful and kind is highly underrated when it comes to happiness in life.

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