🐧 How high-net-worth founders allocate their wealth

If you’re a long-time reader, you know I enjoy nerding out over asset allocations.

Today in 10 minutes or less, you’ll learn:

• 🏖️ Hampton’s 2023 Wealth Allocation Survey
• 💎 How Wealthy Tech Entrepreneurs Allocate Their Assets
• 📊 What’s the Relationship Between Wealth and Financial Goals, Mindset, Spending, Working Hours, and Debt

FROM OUR LABS

💰️ Want to pay less taxes in 2023? (as an expat)

I’m psyched to partner on a live event with Ankur and Jess from Carry, where we’ll uncover what the best tax and financial experts say about 2023 tax-saving strategies you need to know (as a US expat or digital nomad). 🧠

Date/Time 📅

6pm PST, December 7, 2023 (10am SGT December 8, 2023)

Our goal is that this ends up being the most valuable free event you’ve EVER attended.

Here's everything we'll be covering:

• How taxes work as an expat or digital nomad (and the biggest mistakes people make) 🌏
• Tax-saving strategies (and why so many people end up paying more than they likely need to) 🤑
• If you’re a business owner or side-hustler, how your business structure could be costing you more in taxes (and what to consider instead) 💼
• Q&A and much more❓

You won’t want to miss this action-packed, live workshop.

It’s going to be chockfull of tax-saving value.

Sign up for the workshop

P.S. Even if you can't attend live, we'll send a replay to everyone who signs up.

🚀 12 lessons on how Hampton’s founders allocate their wealth

Hampton is a private network for high-growth entrepreneurs started by Sam Parr, founder of The Hustle (sold to Hubspot) and Joe Speiser, serial entrepreneur (two successful exits).

They’re one of the rare groups that publishes a Wealth Allocation Survey. Tiger21 is the other I know of. (h/t Thibaut Briere)

Here are 12 lessons I learned:

1/ Most (58%) founders were in the $1 to $10 million range, with 89% making their wealth through tech entrepreneurship

The survey had 89 responses, with total net worths from89% made their wealth from tech entrepreneurship, with the rest making their moneys from real estate or inheritance.

2/ Most respondents were between 31-50, with 75% being married and 2/3 having kids

Hampton includes a few Gen Z, but its membership heavily skews towards Millennial and Gen X.

3/ Members think long-term about their financial goals, to the tune of 11-13 years

At every net worth level, people aim for a goal roughly 2-10x their current wealth. Members think long-term about their financial goals, with most averaging 11-13 years.

After crossing the $50-$100M+ net worth threshold, that timeframe nearly doubles.

4/ Primary reason for financial goals were for security, generational wealth, and simply needing a goal

What’s striking to me: As net worth increases, peoples’ goals change and become less driven by security and more by just having a goal for the sake of it.

In another analysis, Hampton showed that feeling secure was linked to maximizing ratio of take-home pay to burn rate.

5/ Average risk tolerance and wealth did not seem to be related

Some people like to argue that to get wealthy, you need to take risk. The data here doesn’t support those conclusions. I’d argue it’s more nuanced.

Charlie Munger, famous investor, had this to say about risk and wealth: “The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.”

6/ Most wealth was accumulated in personal company stock, followed by public stocks, bonds, real estate, and cash

Here’s the golden nugget of insight. Most of Hampton’s founders are heavily concentrated in their personal company. But outside of this, they have a spread of stocks, cash, bonds, and real estate — similar to Tiger21 entrepreneurs.

7/ Nearly all founders across net worth levels are using an accountant, with many also using a tax specialist and CFP

100% of entrepreneurs worth less than $1M are hiring an accountant, spending ~$9.1k on average (but no other services).

Entrepreneurs with $1-$5M are commonly hiring an accountant, tax specialist, and CFP (financial planner). On average, they spend ~$7.2k on an accountant, ~$3.6k on a tax specialist, and ~$9.1k on a CFP.

8/ Reported take home pay had wide variance, but caps out at $1-$5M

A majority of entrepreneurs making $1-$5M tended to take home under $500k.

For entrepreneurs making over $5M, the proportion taking home over $500k increases.

9/ Personal burn rate increases as net worth increases

“Live below your means” is a common refrain amongst personal finance writers. This is fair when you’re just starting on your financial journey. Create momentum.

The flip side: don’t let money hold you back from spending on what you love. You may only have certain timeframes in your life when you can take a backpacking trip across Europe or take your young kids to visit your grandparents in your home country.

10/ No relationship between wealth and hours worked per week

“Work smarter, not harder” comes to mind. It’s evident that the number of hours worked is not correlated with net worth here.

I’d guess these entrepreneurs are using delegation, automation, and scaled platforms to leverage their time more effectively. 1 hour generating $10k, instead of $100 worth of value.

11/ 75% of Hampton founders did not have personal debt

Finally, personal debt seems to be avoided by this group. While credit cards, personal loans, and business loans with personal guarantees are all valid ways to access capital, ¾ of Hampton founders here do not have any on their personal balance sheet.

12/ 2023 was generally a good year of business

Most founders had a decent year in terms of revenues and profits. Media, agency, DTC, and SaaS were the most impacted in terms of profits.

🌐 Beyond your borders

📃 Busting the biggest myth about double tax treaties. International tax is complex and people get this detail wrong all the time. Michael Rosmer does a good job with explaining how tax treaties work (link)

🌏️ The world’s best countries for remote work 2023. European countries top the list, but where’s the Asia and Latin America representation? (link)

🇵🇹 Portugal extends expat tax breaks despite housing concerns. Foreigners will get their tax breaks until the end of next year (link)

🇸🇬 Singapore and Zurich become the world’s most expensive cities. Beats out Hong Kong (3rd) and NYC (4th) on the one list you don’t want to win (link)