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Personal Capital CEO Bill Harris on the biggest mistakes that newfound millionaires should avoid.
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Approximately is -- statistic 1000.
People are newly minted multi millionaires from today's FaceBook IPO but despite their flood of newfound wealth.
Billie Harris CEO personal capital of the former CEO pay -- and into it.
Says it could all be gone on a flash of these new multi millionaires are not careful he joins me now bill nice to have you here -- and we want the advice and just a minute but.
-- people who yesterday.
Weren't worth hundreds of millions of dollars and today they are mostly employees who were paid in stock up.
-- -- the number one thing that they should do once they get that money.
Well the number one thing is take -- deep breath and go to anything silly.
Most people really don't it value -- there.
Long term financial prospects and obligations and so.
Take a moment examine your financial life make a plan.
But you know some of these people are our kids what's what's -- -- they're twenty nothing.
And they don't know how to make a plan.
Does the step that you feel needs to be taken is to hire Smart person hire somebody who can actually help you with your money.
These people are Smart people.
But they don't on a daily -- have is their job is to understand what the tax rules -- understand what the financial.
Planning.
Literature is.
And understand.
How to put their entire financial life -- -- into perspective yes they need help.
What -- the three most important things are putting some of them on the screen but.
One of them -- diversified financial assets but the other one don't get murdered by taxes.
How do you avoid that if if one of these people is standing before you and -- bill helped me -- -- now worth 600 million dollars.
What would you tell them to do is to how not to get killed in the -- Well there's there are a lot of complexities that that's one of the reasons why you have to go to a tax expert but.
It depends.
Whether you've got -- -- use stock options held shares it depends then in terms of how you exercise and how you sell.
What the tax burden will be and it could be anything from ordinary income at very high rates too long term -- capital gain a much lower rates.
The difference can be at 20% different -- other which if you got a million dollar gain.
The difference between those two treatments can be 200000 dollars.
OK so taxes don't do anything silly you know Dave Ramsey one of our experts is often said don't just live.
Within your means live beneath your means there's a great tendency look you see it with athletes who.
Get a huge contract next thing you know they're driving up a Lamborghini couldn't talk -- of Ferrari and and and maybe there's a little bit that they should spend to make themselves feel better get that under this system but then what is the number one message about.
Barring a lot of fancy things that they Mark Zuckerberg -- a very modest house I heard.
Yes he does send and I think I think that the biggest message is.
I think about your money not in terms of the next months or even years in terms of the rest of your life.
If you're twenty something -- you've got.
Sixty plus years that you have to provide for yourself your family and all the rest of that now and what seems like a lot of money right today if you -- right around and spend it.
Is not a lot of money that kind of her rise.
So yes plan yes diversified everything that almost everybody in this situation has is an incredible concentration risk.
Not only in the individual stock.
But also in the industry and even the geography these people work in the tech industry that -- in Silicon Valley and everything about their financial lives is over exposed to -- It's a diversification which is important for anyone.
Is absolutely crucial for some and in this situation make sure that you across asset classes geographies sectors have a well diversified financial plan.
Excellent advice don't concentrated all where he -- Bill Harris is the former CEO of personal capital nice to see -- thanks so much for the advice.
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