Hypothetical Mike … and, Beyond!

The story so far:

Hypothetical Mike (the hero of our story) has super income-earning powers (ranging between $250k and $350k p.a.) … his powers also extend to corporate high flying, not to mention having a super-strong handshake 😛

His mission: to amass $10 million within 14 years.

But, like every superhero, he has a weakness: he keeps too much of his current $1.7 million networth in cash … $1.3 million of it to be precise.

Cash is kryptonite to financial superheroes like Hypothetical Mike!

Does HypeMike – as he is known in superhero and rapper circles – need to fly higher and higher in order to fulfil his mission? Or, can he simply destroy that stash of kryptonite and let the natural laws of investing wisely take over?

In an unusual twist, we let the readers decide the outcome of this story …

For example, here is what Steve said:

What are Hypothetical Mike’s Talents and hobbies? Based on what he likes to do in his spare time. I might recommend starting a business, that could bring in an income and later be sold for a nice return. This could help him reach that goal quite well. It would be less like running a business cause it would be something he enjoys anyway.

If HypeMike were a mere mortal, I would agree with Steve: you and I should ramp up our Making Money 201 activities in an attempt to accelerate our income … 

… but, HypeMike already has his MM201 ‘money tree’ (i.e. his relatively high-paying job); coupled with his $1.7 million starting bank and his 14 year timeframe, he need leap no tall buildings to reach his Number.

A relatively mere 13.5% compound growth rate will do the job … PROVIDED that HypeMike doesn’t lose his main ‘super power’ i.e. his ability to keep earning superhero-like salaries.

Hypothetical Mike shouldn’t do ANYTHING to jeopardize his job, hence his income stream (e.g. moonlighting might be against company rules, or might distract him, tire him out, etc., etc.).

On the other hand, a number of readers commented that HypeMike’s money – merely sitting in cash – is his real problem. For example, Brad said:

If you are successful at running this business (you said you turned it profitable) then you should be in a position to negotiate larger and larger bonuses or equity ownership. Seems like THAT is what you are talented in. Don’t feel like you need to start investing in real estate or small biz because that is how OTHER people might have gotten rich.

I do agree that you should keep some cash positions if that makes you feel secure, but also to keep the bulk of your invest-able assets in at least an S&P500 index fund.

In my [AJC: emminently unqualified] opinion, Brad is 100% correct.

Hypothetical Mike should take a close look at Brad’s advice and follow it!

[Disclaimer: Brad is likely just as unqualified as I am to offer personal financial advice … always seek professional advice!].

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7 thoughts on “Hypothetical Mike … and, Beyond!

  1. What if HypeMike’s career path isn’t a cool $350k until he decides to retire, but a ever more challenging, steep upward curve?

    Most high paying jobs like that – bankers, lawyers and other professions, often have a forced promotion curve that ends up with HypeMike “being made partner / VP / Don Corleone” … or not. On average, someone like Mike will have a 50/50 shot at “making it”.

    If HypeMike “makes it”, his work life will suck hard, but depending on the job he could make 2-15x of his already very good current salary. Achieving the $10M goal will be quite easy then.

    If HypeMike is thrown out the saddle (or decides that working more than 80 hours a week doesn’t allow him to fulfill personal goals), he ends up leaving his current high-paid job and needs to land a job in the real world. Salaries there may match what he makes today, but there is also a good chance that they won’t be as good. Let’s assume he will need to take a 30% salary hair-cut. The $10M goal becomes quite a bit harder to reach.

  2. HypeMike, having made it to the top, might consider giving advice to us mere mortals? Tell us, is it worth the 70+ hours per week?

  3. Jake,

    I like those odds- 50:50 seems pretty good. By the way, I already run a small / medium sized business in a small country in SE Asia, don’t think I’m on the ‘forced promotion’ curve.


    I’m not working anywhere close to 70+ hours per week, it’s more like 50 – 60 hours per week, 5 days only. Weekends are spent not working however I’m always thinking about how to improve the business so in that sense I’m never really ‘off’.

    I’m pretty small potatoes really. There are about 10+ millionaires around the world so what I’m doing is not that special. Above average, yes but not a superman in any way.

    And there is no guarantee I will be doing what I’m doing. I like to experience many things so perhaps don’t have the personality to stay the course and keep climbing the ladder- I like to do it for the fun and experience of it. So maybe another option for me is to lower my number and retire sooner, much sooner as the cost of living here is so ridiculously low, like $30K per year.

    Only concern I have is that I would live, on average, another 40 years according to the life expectancy charts and therefore I’d like to get a savings level of about 150 – 300 years of my current annual expenses so I can ride out any inflation or loss of purchasing power events, that’s roughly where my 10 million number came from – the high end of the range.

    The story of my path: no secrets. Just try and keep adding value to any company you work for (minimum 10X your salary), focus on quality not quantity with your work hours and have a little luck in your life. I think anyone could do it as I’m not particularly talented or special…. However I’m grateful for the lucky breaks I’ve got in my life.


  4. ” I’m not particularly talented or special”

    @ Mike – Fortunately, we’re talking some ‘hypotherical’ Mike here and not you, as you wouldn’t want your boss to hear that 😛

    As to the Rule of 150 – 300 that you are setting yourself; what price ‘guaranteed’ $30k (indexed for inflation) for life?

    But, where you live, could you not buy enough real-estate (for cash) to provide $60k – $100k (semi-automatically indexed for inflation) to provide 100% – 150% buffer on top of your required $30k living expenses a LOT cheaper than $10 mill.?

    Perhaps, this will allow you to have your early retirement cake and eat it?

  5. AJC,

    Good question. To get $5k – 8K per month of free cash coming in I’d have to buy 4-5 million dollars of property today where I live. Seems like I could do better by waiting till price to rentals are more in line. That’s why I’m holding parked cash.

    I’m still looking to make a move. And I’m not the type to keep holding forever, once I find a good deal I’ll jump.

    -Mike (not HypeMike)

  6. I’m trying to put myself into Hyper-Mike’s shoes. Maybe my feet can fill enough of one not to fall out. My wife and I are in a similiar situation (but with much a higher set of monthly expenses thanks to where I live).

    In the Seattle area, rental prices are low compared to property values. You need to put in well over 50% to have a chance of getting positive cash flow. That is even with the recent drop in housing prices here.

    So I would need to be a “remote owner”, not something I would be good at doing.

    So I think I should continue to leverage my business/technical skills and do businesses based on that.

  7. @ Neil – Again, this is a MM301 (a.k.a. life after work … or, in your case, life after you sell your businesses) strategy.

    You could pay 100% cash to generate the required cashflow and/or buy a different type of property and/or in a different area. You should have plenty of excess cashflow if you keep 25% of net rents aside to pay a professional property manager to do all the work for you.

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