My personal finance guide for millionaires and billionaires
This guide is primarily targeted at people who have 6-figure incomes and at least 7-figures in assets. But everyone can benefit from the Banking and Spending sections.
If you’re a billionaire: Hi! Hit me up at [email protected]. We should get coffee or zoom.
This guide is focused on simplicity. You can optimize further than the things I’ve described here. But many people recognize that saving time is more valuable than constantly optimizing for small amounts of money. Only one of those is replaceable.
Banking
First Republic is hands down the best bank I’ve ever worked with. My banker is fantastic. I’ve know her for 10 years and she always surprises me with how much she is willing to do. And that’s when I had a whopping $5,000 on deposit with them. I had 100x that at Chase and didn’t feel like I got more service than if I had just a normal account. Same with Wells.
The only real requirement is you need to keep $3,500 in your checking account. They charge nothing for ATMs, provide refunds for ATM fees charged by the ATM owners and — something that is extremely rare — refund international ATM fees.
Their offices are generally in affluent areas (one is in the same building as a VC) and mostly coastal. If branch access is important to you and you aren't on the coasts, look elsewhere.?
My personal banker is Ashley Churchill out of their Portland office. Yes, personal banker! Instead of dealing with a random pool of people, I have one person I can email with requests. It doesn’t matter if you’re actually based in Portland. I’ve lived in Portland, New York and San Francisco. Ashley has been with me the whole time.?
Office: (503) 471-4903 | Email:?[email protected] (I don't get any financial benefit from this.)
I’ve yet to hear “no.” Except when I asked about auto loans. They don’t have them. They will finance your condo, house, jet or boat, though!
Spending
If you don’t pay off your credit cards each month, pay them off before anything else. Rewards cards have extremely high APRs. Once you’ve paid them off, come back here.
(There may be better offers out there for the AmEx cards; they change frequently. You can search for them. As I’m not – and don’t intend to be – a credit-card blogger, I won’t be regularly updating this.)
Investing
For investing, I split it into two categories: marginable assets and other assets. (Assuming you have >$50,000 in marginable assets, otherwise this isn’t meaningful.)
Margin allows you to borrow against your stocks, but margin rates vary widely. As of November 2021:
In an otherwise competitive field, these differences are astonishing.?
Why pay to borrow money you have? Because you don’t pay taxes until you sell a stock. If you had $1M in stock and wanted to take $500k out, you could end up with a tax bill of $250,000. (Depending on state, holding period, etc.) But you can borrow against that money and use it for your every day expenses for just the margin rate and never pay taxes on the growth.?
Be careful, though. Although you can typically borrow about 50% of marginal securities, the dollar amount will change as the security value moves up and down. I stick to no more than 20%.
A great use of margin loans is to convert short-term gains into long-term gains. Let's say you need money 9 months after buying a stock. At that point, the gain will be taxed at up to 37%. But if you take a margin loan for 3 months and then sell it, you will be past the holding period requirement and the highest tax rate is 20%.
Ask Elizabeth Warren or Bernie Sanders how they feel about this.?
Retirement assets?
This used to be a lot more complicated given different trading commissions. Now that they’re basically all at $0, just pick the one that looks easiest to you. This might be the same company that does your company’s 401k. (Fidelity and Vanguard do a lot of this.) It's simpler to look at everything in one place.
A few other things that might make a difference:
领英推荐
For most people, they'll be better off with mutual funds than trying to pick stocks. I stick to stocks where my knowledge of the space gives me unique insights.
Insurance
There's the usual insurance that most people have: auto, health, homeowners, etc., so I won't go into them.
The one that a lot of people miss is liability insurance, also know as umbrella insurance. And it's not the flimsy $5 kind of umbrella you find at Duane Reade during a rain storm. It covers a wide range of things that aren't covered under the policies and increases the limits of your other policies. Things that are often covered are libel, sexual harassment, accidental damage and harm to others. (It does not cover punitive damages assessed against racists who injure people during a white supremacist rally.) Just as important, it covers legal defense for those claims.
Umbrella insurance is cheap compared with other types of insurance. It is around $150 per year per million dollars covered. You can typically buy this from the company that sells you auto and home insurance. In fact, some insurers require that you buy the other policies from them in order to underwrite umbrellas insurance.
Giving
You made a lot of money, even if a million isn’t what it once was. But it's more than what most people have. Give some of it away. VC and early Googler?Hunter Walk ?has a?guide to giving away money . His post has a lot more on this topic, including how to figure out how much to give.
I prefer larger donations to fewer charities than small donations to a larger number of charities. If you donate $50, they will spend $40 in further mailing to get more money from you.
The most important thing when donating to charity is to?not?sell the stock before you give it to charity. You need to transfer it directly. Charities typically have a development person who can help with. If you have stock bought for $2,500, sell it for $10,000, you will have a taxable gain of $7,500. If you transfer the stock, you get to deduct the full amount.?
Ask Elizabeth Warren or Bernie Sanders how they feel about this.?
A better way to give money (and stocks) is through a donor-advised fund. You put your donation in to a special fund and get the tax break right away. You can decide actual charities and timing of donations later. This is especially useful for people who have highly variable income. Do the donations when your tax rate is 37% and defer your donations when your tax rate is 20%.
Fidelity and Vanguard both offer DAFs. The fees are high (0.60% yearly), so less of your money goes to charity, but it is a good way to handle donations from a convenience and tax perspective.
A much cheaper version is from startup Daffy . It looks really interesting to me from a fee perspective. Their fees are close to what the market should be. My only concern is what would happen to the money if Daffy goes under. I don't want a Constitution DAO fiasco where the money I gave is in limbo. (I've asked Daffy's CEO about this; if I hear back, I'll update.)
Campaign contributions
This one I’m torn on because representatives should represent the people, not corporate lobbyists and donors.?
But some things are so high-impact. It might be better to give $25,000 to a climate change PAC than a charity working on the same cause.
I’ve donated to GrowSF , which is trying to make SF more livable. I also donated to Stacey Abrams’ Fair Fight . I like to think I played a small part in flipping the Senate. Donations to PACs and campaigns aren’t tax deductible.
Most importantly, tell people you’re giving! It may seem gauche, but peer pressure works. If we tell people we give, others might follow.
Thoughts? Where am I wrong? Leave comments and let’s get smarter together.
Disclaimers
I am not a lawyer, CPA or financial advisor. But those who have followed me for a while know that I know my stuff when it comes to finance.
This is a general outline of what I think are the best approaches and what I do. My experience and situation may vary from any one individual.