Bill Gates is one of the world’s richest people, earning about €328 per second.
By the time you read this article, he will have earned about €200,000.
We know how he made his money, as Microsoft is a huge corporation.
You might be thinking that Mr Gates can afford to be wasteful with his money and dry himself with €50 notes, but the opposite is true.
He actually gives away almost all of his income to charity. He has donated €30bn since 1994.
Nonetheless, he remains one of the richest people in the world because he, or more precisely his money manager Michael Larson, manages the wealth extremely well.
We ordinary mortals can follow a few of his strategies.
The first is is to live within one’s means.
Mr Gates owns three Porsches, one of which is worth €200,000, but this represents less than 0.001% of his wealth.
The lesson here is to be mindful of going into excessive, unmanageable debt for a depreciating asset.
I am not anti-debt but I would be mindful of offers such as PCP car finance deals that sound too good to be true. They can cause problems down the line.
It took Mr Gates seven years and €54m to build his 66,000 sq ft mansion.
He didn’t have to borrow to finance the project but if he had, I am sure he would have shopped around.
If I were managing his finances, I would have recommended he fix his mortgage for the next five to 10 years with the strong probability that interest rates would rise over the following 60 months.
Personally, I think fixing for five to 10 years makes a lot of sense for first-time buyers.
Of course, the debt to avoid at all costs is credit cards.
Mr Gates once said: “If I borrowed money at 18% or 20%, I’d be broke.”
Paying over 22% on say a balance of €2,000 on a credit card will cost €37 a month in service costs alone, according to Zurich Life.
Another lesson we can learn from Mr Gates is to avoid having all your eggs in one basket.
Diversification is extremely important.
His investment portfolio has grown by about 11% a year since 1975.
It includes a private island, a private commercial plane, and a lot of antiquities.
For average folks the message is still the same: Split your savings and investments into different asset classes that can stand up to various financial storms.
Irish people were and still are obsessed with property ownership despite the boom-bust cycle.
Ironically, Mr Gates would have the same wealth if he had kept it all in the Microsoft shares he owned at the start of the company over 40 years ago.
But it would be a sleepless daredevil to have carried that much wealth in one company.
Some of his investments have been duds and some have been resounding successes.
The one very important message is he has taken a longterm view, following his close friend Warren Buffett’s views of longterm investing: “Only buy something you would be perfectly happy to hold if the market shut down for 10 years”.
The point here is that investing and saving is not for the short term.
Those that expect quick gains are likely to be very disappointed.
If you saved €150 a month for the last five years, you would have grown your savings to €10,333.
If you started to save €300 a month 10 years ago, your savings would have grown to €47,440.
Mr Gates plans to give most of his money to charity when he dies.
He is not leaving a great deal to his children because of the taxes they would have to pay.
Making donations to qualifying charities reduces his inheritance tax.
There are ways of reducing the tax bill facing your children.
One is to “gift” your children up to €3,000 each year, per child, which falls outside of the gift or inheritance tax net.
This is called the small gift exception and is a handy way of passing money (though not necessarily directly at the time) to children.
Given that you can gift this money every year and it can be given by each parent, this can add up to a lot of money that will fall outside of the tax net.
Nick Charalambous is a financial adviser based in Cork