Kevin O'Leary's Surprisingly Conservative Advice for Making Your First $100k

Earning your first $100,000 might feel like a pipedream for many people. But according to one of the world’s best-known business successes, it’s possible. And in fact, it’s within your grasp as soon as you commit to start building your net worth.

One critical aspect is to make smart money moves now that will pay off later. But what should those moves be? Here is millionaire investor Kevin O’Leary’s advice.

If you have seen ABC’s hit show “Shark Tank,” you are probably familiar with O’Leary — who also goes by the tongue-in-cheek nickname “Mr. Wonderful.”

O’Leary is a Canadian-born businessman, entrepreneur, investor, and reality show personality. He’s well-known for his acerbic personality and bluntness, which is where he gets his wry nickname.

Beyond his public persona, O’Leary has started and invested in a number of companies, as well as other ventures. His estimated net worth is generally estimated at around $400 million.

In a YouTube interview, O’Leary offered these tips for getting your first $100,000 under your belt so you can get ahead financially.

Saving money from each paycheck is at the core of O’Leary’s advice. He said you should be saving at least 15% from every payday.

“That's the key,” he told finance expert Erika Kullberg on her podcast. “My mother did it back in the 50s.”

O’Leary said his mother put half her money into Standard & Poor’s 500 stocks that paid dividends, and also purchased bonds that were yielding between 6% and 7%. According to O’Leary, his mother maintained that portfolio for decades.

“It just grew geometrically over time,” O’Leary recalled. “It was really remarkable. And I learned that way, and that's sort of the way I invest.”

As one might surmise, investing is a major part of O’Leary’s plan.

“If you really want to make $100,000 and do it relatively quickly, basically, save 15% of your paycheck and put it into an index in the market,” O’Leary said. “Sometimes it goes up, sometimes it goes down, but over time, it generally makes 6% to 8%. That compounds. Within seven years, you'll get to your $100,000.”

It may sound obvious, but if you take money from the principal in your investment — the actual funds that you or your company put in — you won’t be earning anything on it, which can ruin the plan to get to $100,000.

O’Leary said he lives off the dividends and the interest from his investments. “That's the strategy,” he said. “I never touch the principal.”

O’Leary doesn’t just dole out advice — he follows his own rules, too.

For one, he said that despite the risky proposals on “Shark Tank,” the bulk of his money is invested “very conservatively in everything from Treasury bills to dividend-paying stocks.”

Another is to make sure no more than 20% of your cash is in any single bank. He said he keeps his companies’ operating money split between five banks because “you never know when the next idiot manager is going to take his bank to zero.”

“I've told everybody to do this,” O’Leary said.

There’s another step on O’Leary’s roadmap to $100,000, and it has to do with asset allocation. O’Leary said he used to go 50/50 — half in stocks, half in bonds. Now, he follows a 70/30 mix.

“I'm still going to stay that way, 30% in fixed income and 70% in dividend-paying large cap, high-quality stocks,” he said. He also said he rebalances every quarter.

As the saying goes, hindsight is 20/20. And like many of us, O’Leary has some regrets about how he managed his money when he was younger.

“I wish I’d had a better focus on stuff that I buy, because I wasted a lot of money when I was young,” he said. “I bought 50 sneakers. Well, I only wear three pair that I like a lot, you know? I bought 20 pairs of jeans. I only wear two I like.”

There’s also a company he regrets not investing in: Ring. He said he offered $600,000, but the company ended up being sold for $1.1 billion. “I would have made a lot of money on that,” O’Leary said.

However, the owner didn’t want debt, so the deal never happened.

The road to $100,000 can be laden with pitfalls, but according to O’Leary, it is far from impossible as long as you start investing — and you invest wisely.

And one final piece of wisdom from O’Leary’s mom: Keep things diverse. He said his mom made sure that she had no more than 5% in any one stock and no more than 20% in any one sector, like energy or technology.

O’Leary believes that’s advice you can take to the bank.