3% Wealth Rule
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A strategy for maintaining wealth by limiting annual spending to 3% of net worth, based on Monte Carlo simulations and real-world spending patterns of wealthy individuals.
Core Rule Components
- Spend only 3% of total net worth annually
- Principal will continue to grow with this spending rate
- Will never run out of money following this rule
Real World Example ($20M Net Worth)
- Annual spending at 3% = $600,000
- Monthly allocation = $50,000
- Based on studying wealthy individuals' spending habits:
- Monthly spending ranges: $10,000 to $100,000
- Target lifestyle spending: $60,000/month ($720,000 annually)
Rule Variations
- Some suggest 3.5% withdrawal rate is safe
- Others comfortable with 4% withdrawal rate
- Conservative approach sticks to 3% for safety
Real World Application
- Example: Sam Parr's actual spending
- Targets 3% rule for safety
- Actually spends ~$18,000/month
- Well below his theoretical safe spending limit
Risk Management
- Primary investments in:
- Large publicly traded companies
- Real estate
- Does not specifically plan for black swan events
- Strategy based on long-term bullish view of America
Sam Parr
Host of MFM and fitness influencer
Sam Parr is a serial entrepreneur and business media pioneer.
In 2016, he founded The Hustle, a business news media company that started in his kitchen with just $12 and grew to eight figures in revenue.
Sam led the charge in making newsletters popular when few believed in their potential.
After four successful years, he sold The Hustle to HubSpot, a publicly traded company. Now operating as HubSpot Media, The Hustle reaches 3 million readers daily, employs a team of nearly 100, and has been the launchpad for dozens of its staff to found their own media companies and newsletters.
Sam remains the host of the popular business podcast, My First Million, and continues to start and sell companies. He also co-founded Hampton, a highly vetted community for entrepreneurs, founders, and CEOs, and teaches people to write better through his platform, Copy That.