In the dot-com boom I made a little bit of money and then proceeded to make every mistake possible with that money. It was like reading a Stephen King horror story written in blood across your bank statement.
Several years later, I included the story in the intro to one of my books and gave the book to a potential investor. He read the intro and said, “I can’t invest in you. You’re a functional idiot.”
And yet, I’ve seen the pattern repeated so many times with so many people can I at least enjoy the company of other idiots?
So to help out others who will pocket some of the $600bb in quantitative easing, I have a few simple tips for greatly improving the chances of success if you have sudden fortune thrust upon you, either through your hard work or simply by chance.
Don't change your lifestyle at all for at least one year. No new house or apartment. Don't buy a fancy car. Don't buy expensive artwork. This is not to say these things are bad. It's just that you need to let the new wealth marinate your soul a little bit.
Get comfortable with it before you try on new clothes that might not fit yet. Once you buy some massively expensive toys or homes, it changes your whole perspective and might make you much more foolish than you were when you were first climbing the ladder of success.
Remember: One year.
What's the rush? You just made your money. Put it in a savings account for one year at least. Or under your mattress. No stocks. No paintings. No private investments. Try not to start a business again so quickly.
A friend of mine recently won $3 million in a poker tournament after being broke for many years (all his life). Right away he wanted to buy a hotel.
Don't do it.
This was right before the entire housing crisis and recession that followed. Thank God he took my advice. If you feel absolutely compelled to do some investing then follow the next rule.
If you really feel that Google is going to $5,000 per share and you have to buy some stock at $500, don't put more than 2% of your money into it. Then, if it all goes to hell, you've only lost 2% of your money (or more likely, 1%, since Google will probably never go down more than 50%).
This is hard for entrepreneurs who come into sudden wealth because they are used to making their money by having most of their net worth tied up in one investment (their business).
But this is probably the most important rule on the list.
Believe it or not, your health is now at risk if you just came into sudden wealth.
A friend of mine had a very stressful business in the online gambling space. He was worried the Feds were going to outlaw him and arrest him. He was broke and the business was always in a state of running out of money.
High, high, stress.
I thought he was going to have a stroke or a heart attack but he always stayed in great health. Then he sold his business and made about $50 million. Three months later he was on a ski slope in Aspen, enjoying the fruits of his labour, when he suddenly had a major heart attack and only survived because of immediate medical care. He was essentially dead for five minutes on the operating table.
Your body, in a high adrenalin situation, will postpone punishing you until the situation is over. But don't think when the stress is over that your body will forget. It doesn't.
You must focus on health after achieving sudden wealth.
Your business was brutal. I know. I've been there. Clients and customers are sometimes hard to deal with. And now you might have employers who just bought your company that you have to report to.
But don't burn out just yet. You need to be responsible and show the people around you that they all made the right decision in trusting you, in buying your business, in buying your goods and services, in working for you, etc. You have few chances in life to demonstrate that you're made of the right stuff and this is one of them.
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