In the dot-com boom I lost $15 million cash. Yes, I am an idiot. You know what happens when you lose that kind of cash? When you go to zero? You lose your libido. You don’t want to have sex ever again. And even Viagra won’t help. I lost my house. I lost my family. I lost all my fake friends. I was sick all the time. When I passed people on the street who were laughing I was definitely sure they were laughing at me. $15 million cash. One million a week in the summer of 2000. I could’ve saved lives with that money.Instead every night I would lie on the floor and try to mentally force my body to die. [See, "What It Feels Like to Be Rich"]
So now I will save some lives. You Facebook shareholders are about to make a lot of money. One friend of mine made one of the most common features on Facebook we use every day. He’s going to make $15 million. So my message is to him but the rest of you can listen in on the conversation.
1.) The One-Year Rule. 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. Don’t take on a mistress. 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.
(I bought this 5000 sq ft apartment a month after I sold my first business. Stupid!)
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.
2.) The No-Friends Rule. Don’t lend money to old friends. Don’t be so quick to make new friends. Once you make money, everyone will approach you about new investments you can make. Or people will want to borrow money from you.
Don’t do either.
It’s very hard, of course, to deny a friend who says, “listen, I just need to borrow $100,000 for 90 days.” Or “I have a great new start-up that looks like Twitter but better. I’m just raising $500,000 and I left $300,000 for you to come into the round.” I probably lost a few hundred thousand in loans that were going to be repaid the next day.
Here’s what you can say, “I’d love to do it. It sounds great. Right now everything is tied up with my financial adviser and you can talk to him. I have to go by what he says because of all the legal stuff I don’t understand.”
And you aren’t lying. Make your wife or husband or mother or whoever your financial adviser and tell them to say no to everything. But it’s necessary if you want to keep your friends. Particularly in Year One (see previous rule).
3.) Don’t Invest. 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.
4.) The 2% 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. After the other six rules of course.
5.) The Good Health Rule. Believe it or not, your health is now at serious risk if you just came into sudden wealth. More risk than ever before.
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 labor, 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.
Here is the key thing to remember. When you are mugged, your body goes into a fight or flight mode. Adrenaline shoots up. The same thing happens when you start a business. Only difference is: you are mugged every day and you sit immobile at your computer. So once that adrenaline calms down your body is going to do some very weird things. Unless you keep in good health.
(you’ve had a lot of stress)
6.) Try Not To Burn Out. You worked hard to get here. You worked 120 hours a week. You gave up watching “Mad Men”. Your girlfriend cheated on you. Your missed your parents 50th anniversary. I get it. Congratulations.
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, hiring you, paying you, inspiring you, feeding you. You have few chances in life to demonstrate that you’re made of the right stuff and this is one of them.
And what to do if you lose it all? Don’t worry. Do the next item:
7) The Daily Practice
Should you happen to implode and lose everything, here is the technique I used to get off the floor and get motivated again and start new businesses and go from failure to success (and I had to repeat that a few times). Basically, I view the body as four bodies interconnected: physical, emotional, mental, and spiritual. They are all connected. It’s like if one path to your heart is blocked then blood and oxygen won’t flow through your body properly and you will get sick.
It’s the same here, if everything isn’t flowing properly then you’ll get sick, lose all your money, and die. But if you check the boxes on what I call The Daily Practice, your life will be completely different in six months, no matter how badly you fell apart before. Trust me, my life still changes completely ever six months.
Note: There’s no such thing as luck. In the chess-playing world there’s a saying: “Only the good players are lucky.” That applies to business as well. People can say you were lucky. But the truth is you’ll be able to do it again and again, no matter how deeply you fall.
Trust in this and follow these rules and sudden wealth will become permanent wealth.
Source: James Altucher from Techcrunch.com