What Are The Wealthy Doing with their Money Now?

What are the wealthy doing right now with their money? That is what I want to talk to you about tonight. And I want to start with a story that I just got today. I was texting one of my friends, a very successful entrepreneur, and I want to read you what she told me. One thing I did when this started was delete all my shopping apps. I took all the money I would have spent and redirected it to every hourly worker in my life. Housekeeper, hair, nails, trainer. Also made a big PPE donation. It's hard to take action with anything other than money right now. I've been trying to send groups emails to high net worths telling them to donate as social pressure. Some of the wealthy people I know are paralyzed with inaction. I donated 20k to this PPE thing and the organization was freaking out that they didn't have an org set up for the tax deduction. People are dying. She texted me in all caps. I'm not thinking about that right now. I spent the day speaking to several friends of mine, people I know who have significant net worths, and I asked them what they're doing with their money and I'll share some specific examples. Some of them will really surprise you. One of the biggest surprises I had is that the wealthy have the same concerns as everybody else, but they often handle it in very different ways. So I'd like to start off with one of the concerns that everybody has first, which is safety. Safety first. And the questions that some of them asked was, is my family taken care of? One person said, first thing I did was Venmo, my brother. Another person said, are all my affairs taken care of if I get sick? See, many of the people that I spoke to have considerable complexity in their lives. They run businesses, they have multiple accounts, they have all kinds of transactions happening at all given times. So there are lots of issues that they wanted to button up. Some of them were lots of emails to their finance people, their lawyers, making sure their accounts were accessible if they were hospitalized, making sure their will was updated. And in general, one of the key things that I heard from people was any big transactions they were currently considering, they just stopped immediately. Everybody hates uncertainty, but in particular, wealthy people with their money hate it. So they just stopped right away, pulled whatever transaction they were doing, such as buying real estate, and said, I'm going to wait and see what happens with this. So you can see in that example, safety first. Everybody shares that, but the high earners or the wealthy that I'm talking about, they had different ways of handling that now, by the way, as I go on, I hope you take away from that example, not that, oh my God, it's so ridiculous that this person had a hair stylist and a nail person. No, I don't take that away at all. She made a lot of money. Good for her for spending it in a way that she loves. I hope what you take away is let me learn what I can from how high earners or the wealthy are thinking and what can I apply to my situation. Regardless of whatever income or whatever net worth you have. That is why I'm talking about this tonight. Staying consistent. So one thing I notice is that the wealthy have the same fears again that everyone else has. They're impulsive, they get scared of the market. Some of them have advisors to help them stay calm. One friend said I want more cash to keep living large or living at his lifestyle even at the expense of not buying into market dips. It hurts to sit on cash, but it removes my anxiety of regular market moves to know that I have several years on standby. So what this person is saying is he knows he's probably losing money over the long term by sitting on a bunch of cash, but he's anxious and he doesn't like to see the market going up and down every single day. So he's just resolved I'm going to try to cut down on my media consumption and and I'm going to sit on this cash, this large amount of cash, knowing that I'm probably losing it over the long term, but in the short term at least I feel good. Another friend told me that he has lots of cash saved, even physical cash in his house because you just don't know what will happen. In fact, there was an ultra wealthy group that one of my friends told me about where they not only saved up a of lot large amount of physical cash, but kept small bills because if they had to go out and buy for example water bottles, they don't want to only have hundred dollar bills. This is a crazy thing I would have never thought but I want to share these examples with you so you know what's going on behind closed doors. Okay? This is the kind of stuff that is never talked about because if people talk about this publicly there's a lot of pitchforks. But the fact is there's a lot of people in the IWT community and beyond who have saved, who have invested, who have great jobs or their own businesses and have built up considerable net worth. So tonight that is why we are talking specifically about their concerns and how they are handling it. Let's talk about growth. There are lots of people eyeing steep discounts on real estate and cars. There are a lot of people I know who are in the. They like to travel a lot. They are itching to get out and travel again, but they basically know there's nothing they can do. And they're just. They're actually very patient. I haven't spoken to investors eyeing businesses, but I'm absolutely sure that behind closed doors, they are waiting to invest at much, much reduced valuations. So the investors are going to be waiting with their large, massive amounts of cash, sitting on the sidelines and waiting until the time is right. Next category. Realizing what's important. One of my friends said, I'm realizing the most important thing is time. And I asked him, what do you mean by that? He said, you can't get back time lost. So we're spending lots of time with our kids. We're teaching them golf, we're watching movies, we're going on a walk around the block. He said, I feel lucky we don't have to worry about the next paycheck. I know that this time will go away and I will really miss it. I thought that that was just an amazing comment from someone who has a large net worth, but it would just as easily apply to anybody. And I really appreciated him saying that, so I wanted to share that with you. Of course, there are things that the wealthy and particularly the ultra wealthy are doing that that would not be applicable to everyone else. One person told me that in their group of other investors, the advice going around is max out your lifetime gift allocation ASAP, which is up to $11 million, because there's zero chance that that allocation will last once we have to figure out how to pay for this stimulus. So in general, behind closed doors, accountants to the wealthy and advisors to the wealthy, making tax recommendations, knowing that taxes will go up and other deductions will go away. So these conversations are happening as we speak between the wealthy and their advisors because the stimulus, which is unprecedented, is going to result in lots of changes. Most likely. Well, I shouldn't say most likely for the wealthy, but it will certainly affect them in a big way, as it should. I should add that, too. By the way, if you want to throw a pitchfork at me and call me a socialist, by all means, please do. All right, before I get into some of the questions, I just thought I would reflect on why I wanted to talk about this today. I think that one of the things I've learned with I will teach you to be rich is that when I started off, I realized virtually all of the advice out there is written in a way that treats people like they are stupid. It's $3 questions, it's talking only about people in severe debt. And it's always focusing on the tiniest thing you can do. You know, cut back on this or save $2 on that. And I simply refuse to do that. Yes, there are people in those situations. They should use my free material or frankly, they should go to other people who have even better advice if that's your situation. But as I started to write about money and business, I learned that I wanted to write for people who. They're ambitious. They want to live a life of yes, not no. And as I started to help people with I will teach you to be rich. And with their investments and with their businesses, they started to earn a lot of money. And suddenly they realized, man, I have a lot of money sitting around. I don't know what to do with it. And there was nobody they could look. And I love to share what I have learned along my journey because typically all of this stuff is private behind closed doors of lawyers, bankers, accountants, bookkeepers. And I wanted to bring it to the forefront. That's why I went on Tim Ferriss podcast and I talked about what is it like to actually sign a prenup. And that's why I've written about what happens when you have different incomes or your income goes way up or your net worth grows. So I'm talking about this tonight because I don't think there's anything wrong with people who have accumulated a substantial amount of capital. What I do want to share tonight not only is what are they doing differently, but I also want to speak specifically to the people tonight who have high incomes or high net worths. I have a personal belief that if that is you, you should be writing multiple big fat checks to help people right now. And I really believe that that is what we did with our charity donation that we did for Feeding America with I Will Teach youh Be Rich. We did a $25,000 donation, and we encouraged our audience to do it. But it can be as simple as sending an extra check to the person who ordinarily would come by and maybe help with your haircut or your apartment cleaning, whatever the case may be. The amount would not change your life in the smallest. But for somebody else, it could be truly transformative. So there was a quote by Neel Kashkarian when the economy really started going down, and he basically said, Publicly he's like, we have an unlimited checkbook. And he's representing, I believe, one of the Fed banks. He said, we have an unlimited checkbook. For the wealthy that are watching tonight, you effectively have an unlimited checkbook. It is effectively unlimited to the people around you who need help where to them maybe $1,000 or $2,000 could actually change their life right now. To you it would mean nothing. And so I'm doing this specifically to show you, take you behind the scenes and peel back that curtain. But also for the wealthy people watching. I know you don't usually hear people talking about this stuff publicly, always behind closed doors. But you should know that for you, $2,000 means nothing. But to someone else, it could be transformative for them right now. So pull out your checkbook and write the checks to the people around you. It helps. Alright, we're going to do some questions. Cass, we got some awesome questions. People are craving to talk about this because they can't talk about it with anything else, anyone else. And I'm going to share real numbers from people. If you are watching, you should hear these numbers of how much these people have made and are earning. And you have two choices. When you hear them, you can say, oh my God, that's crazy. I can't believe it. That sucks. All this. Or you can say, how does somebody make that kind of money? What can I learn? And let me listen to the type of questions they're asking because if you do that, you too will have questions like this. Here's a person who says, we bring home about $110,000 per year. Our net worth is about 1.6 million. A third is in the house, half is in retirement. My husband and I have a year of emergency fund cash. We're still able to work from home and haven't lost income. But I'm worried about my dad who's self employed and his job might not be doing well. They don't have any income and I don't think they have much savings. I want to help them out if they need it. How dumb would it be to cut back on my retirement deductions which are currently 20% and our daughter's 529 plans because she's 7 years old and take the extra money we put towards our mortgage so that we have all that cash? I think that would be terrific. I think that's really smart. Now you can decide how far you want to go. But things like your 7 year old daughter's 529 contributions, that is such A long term thing and clearly by investing and you've already tackled all the other things that to save that extra few thousand bucks right now would be way more meaningful because you'll have liquidity rather than waiting 12 years for her to use it. So trust me, 12 years from now you'll have the extra money. It won't be a problem or she take out a little loan, no big deal. But right now to have that liquidity to potentially help your dad if he needs it, I think is worth way more. So I think that's really smart and I would do that. Here's a person who says we have a $500,000 annual pre tax income. We have a 1.5 million dollar net worth. We are 32 and 28 years old. We have a full one year emergency fund which is $150,000. We have a 20% down payment fund full which is $300,000. We have excess cash in high yield Savings which is 300,000 and the rest of our net worth which is 750k is invested. We are fully following the plan from your book. Well done. My wife and I have been dreaming and working towards buying a home. After an influx of cash earlier this year from an acquisition. We met our goals. We going to invest the down payment. Sorry. Invest the excess of cash and everything was looking good. However things changed, we are fortunate that our jobs are seemingly stable. But the uncertainty of the times has us considering a world where we should adjust our expectations for that big dream of buying a House in 2021. Can we feel good about continuing to plan to buy a home next year? Assuming the answer is yes, how should we manage our cash over the next year? Okay, this is a great question. A more advanced question for someone who has a substantial net worth. So let's take a look. They're 32 and 28. They've got 1.6 million and all the other numbers. I just said so. First off, you're doing great. You're really doing great and you've already saved up your down payment. So that is awesome. I can't give you specific investment advice for yourself, but I can say this is what I would do. I think if I had your numbers, I would feel comfortable buying a house a year from now. I would keep that money in a high yield savings account. You asked if you should invest it. No, that would be a mistake because you don't invest the money unless you are willing to let it sit for a minimum of five years. Otherwise there's too much risk. If you Invested today, it could drop 20%, 30%, who knows? And, and that's your down payment money. You want that liquid even if you're not making as much as you possibly could over the long term. Again, you presented that another option is to invest your excess cash and then build back up your reserves with the excess income you have coming in. You could do that. But it's also possible that one or both of you loses your job in the next 12 months. So I wouldn't get ultra risky right now. You've won the game. You don't have to play ultra high risk right now. The final thing we will talk about in another question about should you buy real estate right now? And we'll talk about that, but in general it sounds like you're buying a house to live in, not to be an investment. So you've already won the game. Don't get all crazy and risky. Stick with your plan. You're doing a great job. Somebody said, I hired an advice only financial planner. Should the deliverables be audited by two other planners? Okay, this is a great question. So here we have someone who's so diligent that he's built up a substantial net worth. Not only has he decided to hire advice only planner, which is great at a certain level of net worth or complexity, you certainly can hire an advisor, one who charges you a fee only, not a commission, but a fee only to come in and make sure all the little things in the margins are buttoned up. Okay, I've done it. It makes sense. At a certain level or a certain level of complexity, like if you have all these crazy accounts and you have children and maybe stepchildren and all kinds of stuff, but this person is so like logistical and so logistically oriented that he's like, should I have them audited by two other people? I really love this question. So I think that just to get things started, you can you find somebody you trust, you reference, check them and you should probably trust them. I wouldn't be afraid once a year, certainly at the end of the first year or maybe once every three years to have a second set of eyes take a look. It never hurt. It's going to cost you a few thousand dollars, which is nothing to you. But if you really want that comfort, certainly you can have an outside third party firm come in and audit, no problem. To others, that might sound crazy. I admire you for even asking the question. I don't think you need two other people to audit the plan right now. You find somebody you trust, it's probably going to be right. But if it'll make you feel more comfortable, you can certainly have another third party auditor later. Here's another question. What are long term growth strategies for a newborn child who's 3 weeks old? It's a good question. So there are a lot of options you have. You have a 529 which is really common. You have trusts and these are things that would be best discussed with your accountant and possibly your lawyer. A good accountant will have references to a lawyer and vice versa as well. So at these levels, especially if you have a big net worth, you want to be thinking about efficient tax planning, et cetera. I don't know why I answered this question tonight. This is. I don't know. Talk to an accountant. All right, see here. Okay. And then we'll take some questions if we have any that are relevant cast from tonight. Yeah, type it in the question box. It's on the lower half. And no, we will not be answering what our favorite cooking seasoning is. Oh my God. Some of the questions tonight I was like, do you guys understand this is for high earners? We're not talking about tacos, baking soda or I don't even. What is it? Baking soda even. Why are you asking this question? Here's another pre question that came in early which typically determines the quality as I've discovered. I've just accepted a job offer that includes a life changing bonus and salary. And she adds, yes, it's possible even now. K, are you listening? Yes, it's possible even now if you are a top performer to land these jobs. Just so you know what's going on in the marketplace. The one year emergency fund for the family is taken care of. I'm struggling with what to do with the leftover savings. The majority is going towards the basics, fully funding retirement index funds, donating to meaningful causes. Given the economic turmoil though, I'm wondering how to think about finding other high leverage opportunities either to do social good or to increase returns. And FYI, household income is about 500k. Okay, I love this question. So this person saying I have excess cash, what should I do with it? I want to do good. I also want to get some returns. Perfect. Let's talk about it. This is exactly what I love to hear. So on the social good side, one thing that I have learned is find an organization that you support and contact them. Tell them I want to donate a substantial amount. They will have somebody with from corp dev on the phone with you within two hours. Okay, do it and tell them this is how much I want to donate. Can you guys offer me any advice or any resources to help get even more donations? One of the things that we Learned when, when Cas and I did a fundraiser last year and we did this IWT fundraiser just a couple of weeks ago, was it's one thing to write a check, but it's even more meaningful to get the people around you to contribute. And this is the key insight of charitable giving that I have learned so far. And I'm very new to this, but I would say over the last few years we've raised close to half a million dollars for different causes, maybe 400k. And so like, you can write a check, great. But it's even more powerful to get the people around you to contribute something. Something. Why? The people around you probably are not going to contribute as much as you, but by getting them to write even a $50 check or $100, even $10, you're starting to change their mind, to realize, wow, I can actually write a check and make a difference. And if you can do that with the people on your Facebook page or your Instagram or your family, suddenly you haven't just written a one time check, you've actually planted the seeds with maybe 50 people or 100 people. And even though their amounts are smaller, they might continue giving and they might help other people. So I find that to be incredibly meaningful. Write a check, by all means, write a big check, but try to get the people around you to contribute something as well. Tell them that you'll match their amount up to 20 grand. Okay. And I want to give a special shout out to one of my co workers, Nasrin, who heard on a Monday all team call, where I told them I was so proud to work with the team and that IWT was going to donate $25,000. And she came up with the idea of saying we should also encourage our list to donate. I didn't do that. I didn't even think of that. She came up with it and she said, I think we should do this. What do you think? And I said, that is a great idea. And that was the genesis of us sending the email out and posting on social media and getting other donations from our community, which actually contributed even more than the 25k we were going to do. So I'm thankful to Nazareth. Thank you very much. The second thing is, what should you do to increase your returns? Okay, you have a couple of options here. The option that I like in general is to take the investments I've been making and Just do more of them. Lots more. So whatever you've been contributing, let's just pick easy math. $5,000 a month. If you have the capital, double it. And double it for whatever time period you want to. Dollar cost average in it could be 6 months, 12 months, 18 months, whatever the case may be. So that's one way you can increase your returns if you believe that the market will eventually go up. I believe it, but that's up to you to decide. The second thing you can do is that I have some friends who are choosing specific individual stocks right now. And I typically don't encourage this. But if you've got your portfolio fully built out and diversified, I've always said, take 5 to 10%, have some fun with it. So they're looking at stocks, and they're kind of just like trading. They're picking things that look interesting, and they're seeing companies that are like classic American companies that are down 20, 30, 40%. And they're saying, well, this is a bargain. But remember, the people picking individual stocks, which I ordinarily do not encourage, have already built out their entire portfolio. They finished the I will teach you to be rich plan. They've even finished, usually, the advanced personal finance course that I have, which takes you even more in depth. So don't start picking individual stocks unless you're at that level. All right, Cass, how's the questions looking over there? Which takes you even more in depth. So don't start picking individual stocks unless you're at that level. All right, Cass, how's the questions looking over there?