Hey Soon-to-Be Facebook Millionaires: Read This

Bill Harris is the CEO of Personal Capital, a wealth management firm. Previously, he was the CEO of PayPal and Intuit.For everyone at Facebook, 

The company’s IPO is a moment to take stock of the tremendous value that’s been created –- for customers, for the company, and certainly for individual employees. In fact, the impact on many employees will be profound, vaulting them from salaried professionals to millionaire investors.

SEE ALSO: Facebook Users: 13 Ways the IPO Could Affect You

But anyone who’s been in Silicon Valley for a decade or more, has witnessed the cycle of booms and busts in the tech sector, the economy, and to individual themselves. What financial lessons have come of this, and how do they apply to this new crop of tech titans? Here are three key ways.

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1. Plan: Create a Personal Financial Strategy

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As Yogi Berra said, “If you don’t know where you’re going, you might not get there.” You need a plan for your financial life, and a strategy to get there. It need not be detailed or complicated, but it must be thoughtful. What do you want to do with your life, and what financial resources will you need? You can do this yourself or invest in a financial advisor, but please do it, and write it down.

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2. Diversify: Build a Global Asset Allocation

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You own Facebook stock. You work in the tech industry. You live the Valley. Your financial life is wildly exposed to the ups and downs of the technology industry. To a certain extent, this is purposeful. After all you’ve chosen tech as your life’s work. But you need a buffer. Build a disciplined diversification plan into your wealth. Do this by creating a global asset allocation across multiple sectors, asset classes, and geographies.

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3. Watch Out for Taxes: Beware of Tax Traps

Unfortunately, there are many ways you can walk blindly into tax traps –- and it can cost a lot. The difference between long-term capital gains taxes and ordinary income taxes can be as high as 20%. On a million-dollar gain, that’s an extra tax of $200,000. Common shares, employee stock options, and RSU’s have different tax rules. In addition to avoiding tax traps, there are many sound ways to reduce or defer taxes on your investment gains. So aim before you fire. Consult a financial or tax advisor to make sure you understand the impact of your decisions — before you make them.

You’ve invested a lot of your time and energy into building Facebook. Now, invest some of it into building your own financial future.