Epilogue: On Being Wealthy
This Epilogue stands apart from the other chapters in this book.
I say this in part because while I believe every previous chapter has universal application and you should follow the advice contained in it entirely to the letter, I don’t believe that as much about this chapter. You don’t have to act on this advice. Some people, because of personality, risk tolerance, or a different set of beliefs, probably shouldn’t act on this advice.
On the other hand, you should be aware of the most important ideas here, about entrepreneurship and philanthropy. It took me until the third and fourth decades of my life to learn all these things. If you’re not there yet, maybe this chapter will save you some time. Also, I think these two ideas have a lot to do with happiness, which shouldn’t be dismissed as an important goal.
Finally, in this Epilogue I deliver my long-promised definition of what being wealthy means, so you should stick around for that, just before we roll the final credits.
Entrepreneurship
Here’s one main idea on entrepreneurship: the only way to get really rich is through building your own business. The wealthiest fortunes in the world are all entrepreneurial fortunes (or people who inherited fortunes from entrepreneurs). In order to build extraordinary wealth, you have to be a business owner, not a business employee.
Building your own business, of course, will be incredibly risky and stressful. The journey is unlikely to be smooth. It’s not for the risk-averse. You should maintain skepticism and modesty about your financial expectations if you do start a business. Most people do not enjoy Mark Zuckerberg–level financial success. His is a one-in-a-billion type of story.
However, the long-term financial difference between business ownership and business employment is analogous to the difference between owning a single stock and owning bonds. To know what I mean numerically by that comment, I refer you back to the time series comparing stock and bond returns, put together by Professor Jeremy Siegel, that I referenced in Chapter 14. The financial upside for a successful business owner completely dominates the financial upside potential of most successful employees. There is no upper limit to how much wealth you could build with your own business, whereas an employee will always find his or her compensation capped by a business owner.
Being an employee of someone else’s business, of course, can be perfectly rewarding. You can have a nice solid income. But you “are unlikely to” become truly rich.
Exceptions exist to my broad statement. Some “super-managers” rise to the top of companies they did not found, and manage to extract giant paydays. Their stories are one-in-a-million, however, and not the norm. Like I mentioned in Chapter 17 on work, some of my former colleagues on Wall Street are these exceptions, but we’re still talking about highly rare one-in-a-thousand type employee compensation.
I’m not sure that “getting really rich” should ever be a personal goal. But I am sure that if that is your goal, you should work on founding your own company as soon as possible, rather than try to get there as an employee of someone else’s company.
Tax Advantages
I mentioned in Chapter 10 that the U.S. tax code favors the already wealthy. It also favors entrepreneurs. To give just one example, business owners can choose to pay themselves each year through dividends, potentially at a far lower tax rate than they could as salaried employees. Of course, consult your tax preparer before trying any specific tax-efficient strategy available to entrepreneurs. Saying “I read one time that I could do this tax thing from this guy, in a book …” isn’t really what you want to have to tell the IRS someday.
In addition, through careful planning, business owners can enjoy tax deductions that salaried employees may not. A vast group of expenses—such as for vehicles, real estate, electronic devices, travel, meals—may be legitimately incurred for a business that you own. Those expenses, in turn, may reduce your annual income, which reduces your tax bill. Again, you’ll want to employ a tax preparer or CPA to keep you solidly on the straight and narrow with these tax deductions, but you should know that opportunities exist for the business owner who receives good advice. As always, taxes are not the reason to do something, but you should be aware of their effect on your finances.
Finally on the subject of entrepreneurship, I can’t prove the following, but I believe it. The most satisfied people in business are the ones who have built their own thing. Entrepreneurs, in my anecdotal experience, are unhappy working for someone else. That unhappiness drives them to found their own company.
The cliché “Do what you love and you will never work a day in your life” overstates the case, but at least approaches what I’m getting at here.
Optimistically speaking, if you can build your own company as an entrepreneur, building your own wealth along the way, you might feel less like you’re working and more like you are just being yourself.
Being an entrepreneur will fit some people and not others. It’s not a universal rule I insist on. For the second idea relating to wealth, being philanthropic, I feel similarly. This could be an important key to being and feeling wealthy, although I can’t claim universality.
Philanthropy
You may be under the mistaken impression that giving time and money to a charitable, or philanthropic purpose, is only for the ultra-wealthy, or the already retired. Be skeptical of that conventional wisdom.
The best way to feel, or to really know you are wealthy, is when you give some of your wealth away. I’m not talking about huge sums of money. Even modest amounts of your time will make you feel rich. Even modest amounts of money can give you that wealthy feeling. In Chapter 19 on estate planning I mention a life hack for setting yourself up to give modest amounts of money, in a professional way. An OK life-cycle model for giving back to a favorite philanthropic cause is to acknowledge you have more time now, and less money. Later, you might end up with more money and less time. That’s fine. Give what you can, while you develop more knowledge about the problems, institutions, and solutions in the world.
Do Not Diversify
When it comes to choosing your philanthropic interest, I’d urge the opposite of Chapter 13’s advice on investments, specifically regarding diversification. With philanthropy, focusing on the fewest number of causes and institutions will serve you better. Don’t diversify your philanthropy.
Be modest about the number of causes you could conceivably support. An infinite number of problems exist in the world. You are just one person with limited time and money. You will likely help more if you humbly decide to focus your efforts, with more profound engagement. You will likely help more if you commit to understanding the problem as best as you can.
Concentration on one problem or one institution gives you the chance to do a deeper dive into barriers and solutions. Why does the problem exist? Why does the problem persist? Why have existing organizations not solved it yet? What are the advantages and disadvantages of existing organizations? How might you apply your talents to help alleviate the problem? How might you support existing organizations with your time, talents, and money? How might you come up with innovative approaches to the problem, inside or outside of existing organizations?
The more you concentrate your energy, talents, and money on the smallest number of problems, the more likely you are to come up with answers to these questions. These questions and answers will help you figure out a way to help the most.
Give to Feel Wealthy
On the issue of philanthropy, I believe the following:
You will always feel poor—no matter the size of your wallet—if you haven’t got an hour or a dime to give to something beyond yourself. By extension of that logic, you could have a huge bank account and sizable monetary net worth but still feel broke if you haven’t figured out where and how to give some of it back. The rich man with no philanthropic interest will feel a gnawing inside himself. What do I believe in? What do I stand for?
Conversely, you will always feel at least a little bit wealthy if you have got that hour, and that dime, to give. There’s no need to wait until the end of your life to enjoy that wealthy feeling. Start now with a little bit of time and a little bit of money. You will feel wealthier.
Finally, when it comes to philanthropy, be optimistic. If you’ve studied a persistent problem in the world, and you’ve concentrated your talents and resources on coming up with a way to make it better, you can and will make a difference. Making that difference may be—at the final reckoning—what makes you feel the wealthiest.
What Is Wealthy?
One of the weird truisms of life is that the more money you make or have, the more people you will know in your life who have more than you in the bank, or who earn more than you per year. Comparisons with those moneyed peers will always leave you feeling that you have less than others. The really weird paradoxical truth is that this happens at every single financial level you might attain. As a result, it is impossible to be “rich enough” by a pure monetary measure and in comparison with others.
No amount of commas and zeros in a bank account can ensure that you feel, and are, wealthy.
Would I personally still like to wield an American Express Black Card at the posh nightclub like a samurai? Sometimes, maybe. Did I find driving a Maserati around town with my brother one weekend years ago thrilling, and do I wish my net worth allowed for that more often? Kind of, sort of, yes, I’ll admit it. When I’m stuck flying economy class, delayed for 2 hours on the runway feeling like sweaty vacuum-packed meat, do I long for a private jet to whisk me away from all this? Of course.
But the Amex, the Maserati, and the jet cannot make me wealthy. In fact, because they cost so much to obtain, they make being wealthy that much more difficult, by my definition.
Wealthy is not an amount of money. It’s the amount of time remaining in your life during which you don’t have to earn money to provide for your lifestyle needs. It’s the freedom to pursue activities that infuse your life with its highest meaning, without regard for what that activity earns. If you have enough in the bank to never have to earn money again, that’s step one to being and feeling wealthy. But remain skeptical, because that is not enough.
If you know what activity lights you up and gives everything meaning, that’s step two to being and feeling wealthy. Be optimistic that you can discover what that specific activity is, for you. That might be—I hope it is—work. Maybe even a business you started. That might include—again, I hope it does—a philanthropic activity you engage with deeply.
Combine steps one and two, and voila! You are wealthy. Stated as succinctly as I can, what is wealthy?
Wealthy consists of having enough money on a monthly basis to cover your lifestyle costs for the rest of your life, such that you can work at whatever lights you up personally, regardless of the financial compensation for that work.
Getting to this stage of wealthy, for most of us, will take nearly a lifetime. I’m skeptical that most people I know, even the ones with more zeros after their name, have gotten there yet. But this is the goal toward which our financial behavior—heck, our entire life’s effort—should aim.
Modestly speaking, I’ll admit, I’m not there yet myself. This book was an absolute pleasure to write, however, honestly lighting me up with joy as the highest expression of my life’s meaning. I’m optimistic that you, the reader, benefited reading this book as much as I did writing it.
If you did, I have a final favor to ask of you. Please share this book with someone you love who may benefit. Second, please let me know what you liked @Michael_Taylor on Twitter or write to me via the contact page on my website, www.bankers-anonymous.com.