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How To Make Money From A Whole Life Insurance Policy

Did you know that a whole life insurance policy can actually help you make money? It’s true—and it’s a strategy sometimes used by those with higher incomes and net worths.

For those seeking life insurance coverage, a term life insurance policy is typically the more affordable and simpler choice. Both Sam and I opted for matching 20-year term life insurance policies through Policygenius two years after our daughter was born. If we were younger, we would have considered a whole life policy.

However, if you’re a high-income earner searching for ways to grow your wealth beyond traditional investment accounts, whole life insurance is worth considering. Once you’ve built a solid financial foundation and are already maxing out your 401(k), IRAs, and other tax-advantaged accounts, whole life insurance could be another tax-efficient way to make money and diversify your investments.

Difference Between Whole Life Insurance And Term Life Insurance

Before we dive in, let’s quickly clarify the difference between a whole life insurance policy and a term life insurance policy.

A whole life insurance policy is like owning a home with a mortgage. It often costs more upfront compared to renting, but over time, you build equity—known as “cash value” in the context of whole life insurance.

Term life insurance, on the other hand, is like renting a home. It’s typically less expensive and gets you want you want, namely shelter. But you don’t accumulate any equity. Once the term expires, you’re left without coverage unless you renew, much like moving out when a lease ends.

After 20+ years of owning a home, you’ve built tremendous equity, which can be accessed through a loan or by selling the property. But after 20 years of renting, you’re left with no equity—just the memories of living there.

Critics of whole life insurance argue that people can save and invest the cost difference to achieve higher returns, which is true in theory. However, the reality is that few individuals consistently save and invest the difference over many years. Forced savings is a powerful wealth-builder, and one of the reasons why the median net worth of homeowners is 25-40X greater than the median net worth of renters.

Whole life insurance provides lifelong insurance coverage and the added benefit of growing cash value. The policy holder can borrow against their cash value, withdraw cash (although it may reduce the death benefit), and use it to fund premiums in later years. The holder can’t take the cash value with them when they die nor do their beneficiaries get the cash value. But holders get peace of mind and liquidity while they are living.

Ways to Earn Money with Whole Life Insurance

Let’s dive into seven ways you can actually make money with a whole life insurance policy.

1. Buy Early for Maximum Growth

Whole life insurance works best as a savings and investing vehicle over the long-term. After all, the “whole” in whole life insurance is for your whole life. If you’re already in your mid-40s or older, it may be too expensive and you may not have enough time to build up your cash value.

These policies take time to build significant cash value—often years, if not decades. That means the sooner you buy, the more time your policy has to grow and accumulate value. The younger you are when you purchase a whole life policy, the more opportunity it has to increase in cash value and the cheaper it is. Ideally, the best age to get life insurance is about age 30. It’s still highly affordable then, and after age 30, life tends to get a lot more complicated.

Some whole life policies offer an indexed feature where cash value growth is linked to a financial index, like the S&P 500, without being directly invested in the market. Like some structured notes, this whole life policy offers upside potential with downside protection (e.g., growth capped at 8%, but losses are limited to 0%).

Take a look at this chart to see how both the cash value and death benefit can grow over time.

Example Of How To Make Money From A Whole Life Insurance Policy

Scenario: At age 30, you purchase a $1 million whole life insurance policy with annual premiums of $10,000. The annual premium is likely $9,000 more than a term life insurance premium policy.

Cash Value Growth: After 20 years, you’ve paid $200,000 in premiums. Assuming a 5% annual return (through cash value accumulation and dividends in a mutual company policy), the policy’s cash value grows to approximately $270,000.

Financial Outcome:

You’ve gained $70,000 in cash value, a 35% increase over premiums paid.
You can borrow against the $270,000 tax-free for investments or expenses, maintaining the policy and its benefits.
The death benefit may also increase over time if dividends by the insurance company are paid and rolled in.

2. Choose a Whole Life Policy with Higher Dividends

If you’re looking to accelerate the cash value growth of a whole life insurance policy, opting for one with higher dividends is key. Maybe you can also lock in a higher guaranteed interest component, which is more commonly offered during a higher interest rate environment.

The best way to achieve this is by choosing a mutually traded insurance company. These companies are structured differently than publicly traded insurers. While stockholder-owned companies prioritize their investors, mutual companies are owned by the policyholders. This means you stand to benefit the most.

With a mutual insurance company, the growth of the company itself, along with its competitive dividend rates, helps drive up the cash value of your policy over time. Thanks to the power of compound interest, these high dividends can significantly increase your return, giving you more financial leverage as the years go on. Some examples of mutual companies include Northwestern Mutual, MassMutual, New York Life, Principal Life Insurance, and Guardian Life.

Example Of How To Make Money With A Whole Life Policy: Leveraging Dividends

Scenario: You purchase a $500,000 whole life policy at age 40 from a mutual insurance company with an annual premium of $7,500.

Dividends: The policy pays annual dividends averaging 4%. After 25 years, you’ve paid $187,500 in premiums.

Financial Outcome:

The policy’s cash value grows to about $250,000, fueled by dividends and compound interest.
Over 25 years, the dividends alone have added around $62,500 to your policy’s value.
You can access the cash value through loans or withdrawals, while the death benefit remains intact (less any outstanding loans).

3. Borrow Against Your Policy Instead of Cashing Out

Once a whole life insurance policy has built up significant cash value, it might be tempting to cash out. But think carefully before you make that move. Canceling your policy can trigger taxes on the amount you withdraw, significantly reducing the gains you’ve earned over the years. Then, of course, is the loss of life insurance coverage and the death benefit to your beneficiaries.

Once your cash value has grown enough, you can take a loan against it instead of cashing out if you need funds. This allows you to access cash, without losing the policy or facing tax penalties. Plus, you can replenish the loan later when it’s more convenient for you. This is called the Infinite Banking concept.

Infinite Banking Concept

This strategy uses the whole life policy as a personal financing system:

• Borrow from the policy to fund investments.

• Repay yourself with interest, effectively keeping your money “in-house” while growing the cash value.

Common Uses:

• Real estate investments.

• Tax-advantaged growth while recycling capital.

Keep in mind, however, that if you do take out a loan, it will accrue interest. If you decide not to pay it back, the amount you owe, plus any interest, will be deducted from your death benefit when the policy is paid out to your beneficiaries.

Borrowing from your policy can be a smart move if you use the cash in a way that earns more than the loan’s interest rate. For example, you could conceivably invest the money in the stock market or in a private real estate that could generate much more than the interest cost overtime. Of course, you could also lose money as well so be careful. It’s important to consider the long-term impact on your policy’s value.

4. Watch Out For Tax Traps

The cash value of a whole life insurance policy grows tax-deferred, but there are tax traps you need to avoid. If your policy is overfunded and fails the 7-pay test (see below), it could become a Modified Endowment Contract (MEC). Once classified as an MEC, any withdrawals will be taxed as ordinary income—and if you’re under 59 ½, you’ll also face a 10% penalty. What’s more, once a policy becomes an MEC, its status can never be reversed.

To avoid these tax pitfalls, don’t rush to overfund your policy in an effort to speed up cash value growth. With whole life insurance, slow and steady is the key to maximizing benefits.

If used properly, a whole life policy can grow cash value without triggering taxes, allowing you to fully take advantage of its living benefits.

What is the 7-pay Test?

The 7-pay test is a key IRS rule used to determine whether a whole life insurance policy has become a Modified Endowment Contract (MEC). It essentially limits how much you can contribute to a policy in the first seven years in order for it to still be considered a “life insurance” policy for tax purposes, rather than a “investment” or “savings” vehicle.

Here’s how it works:

The IRS sets a maximum amount you can contribute to the policy in the first seven years, based on the death benefit of the policy. This is the 7-pay premium, or the “7-pay limit.”
If the premiums you pay during this period exceed this limit, the policy fails the 7-pay test and is classified as a Modified Endowment Contract (MEC).
A policy that fails the test is no longer treated as a life insurance policy for tax purposes. Instead, it’s treated as an investment or savings vehicle, which triggers different tax rules.

What happens if the policy becomes an MEC?

Taxation of withdrawals: Any withdrawals or loans taken from the policy are taxed as ordinary income (not capital gains).
Early withdrawal penalties: If you’re under age 59 ½, there’s also a 10% penalty on the taxable amount.
Permanent status: Once a policy becomes a MEC, it cannot revert back to a regular life insurance policy, no matter how much time passes.

Manage your premiums carefully, especially in the early years, to avoid surpassing the 7-pay limit and accidentally converting your policy into an MEC.

5. Use the Benefit for Estate Taxes

One of the major advantages of whole life insurance is that it’s a permanent policy—meaning it never expires. Unlike term life insurance, which only lasts for a set period, a whole life policy guarantees a death benefit no matter when you pass, whether it’s in 20, 50, or 80 years.

For wealthy policy holders, this can be especially valuable if you anticipate you or your heirs may face federal estate taxes. Currently, estates valued above $13.99 million per person (2025 estate tax limit for individuals) are subject to federal estate taxes of about 40%. For married couples, that threshold rises to $27.98 million. However, these lofty estate tax exemption levels are set to expire at the end of 2025 to roughly $6.8 million, adjusted for inflation, unless Congress takes action. There are also state specific estate tax exemptions to consider as well.

If your estate exceeds these thresholds at the time of your passing, your life insurance payout can be used to cover the estate taxes. This ensures the estate’s other assets (e.g., real estate, investments) don’t need to be sold.

Example: A $20 million estate owes $4 million in taxes. A $4 million death benefit from the whole life policy can cover this liability without liquidating family assets or your heirs having to pay out of pocket.

But to ensure this process goes smoothly, please create a death file and be sure to leave clear instructions with your attorney so your beneficiaries understand the purpose of the funds.

6. Reduce Your Taxable Estate with a Irrevocable Life Insurance Trust (ILIT)

A large life insurance payout can increase the value of your estate, potentially pushing it over federal limits and subjecting it to estate taxes.

To avoid this, you can reduce the taxable value of your estate by placing your life insurance policy in an irrevocable life insurance trust. This strategy allows the policy’s death benefit to be excluded from your estate’s valuation, ensuring that the money you leave to your family doesn’t inadvertently increase your taxable estate.

Keep in mind that transferring wealth through a trust comes with its own set of tax implications. It’s essential to work with an experienced estate planning attorney to set up the trust properly and avoid any unintended tax consequences.

7. Work with a Certified Financial Planner and Estate Planning Lawyer

Making money from your whole life insurance policy can be complicated. One wrong move and you could be liable for taxes or impede on your financial goals. That’s why you should talk to someone who can help you map out how to best utilize your policy. A well-executed policy leads to high returns and more money in the bank.

A certified financial planner can make sure you’re maximizing your policy’s cash value. And they can do so without jeopardizing the reason you probably got a policy in the first place—to pay out to your family when you die.

An estate planning attorney can also handle the intricacies of properly mapping out your estate plan. They can ensure that your life insurance policy complements it. Estate planning attorneys are specialized in transferring your assets after you pass. They will guide you through the end-of-life planning process.

Whole Life Insurance Can Help You Build Wealth

After reading this post. I hope you can now better understand how a whole life insurance can make you money and protect your family. It’s complicated, which is one of the reasons why people don’t even bother to explore it, even though there are plenty of other reasons to get a whole life policy, e.g. you have disabled children. Term life insurance, although simpler and less expensive, doesn’t doesn’t help the policy holder build wealth directly.

In retrospect, Sam and I probably should have considered whole life insurance policies in our late 20s or early 30s, given how our finances have turned out. By now, we could have built significant cash value with permanent life insurance coverage at a fixed low premium. We wouldn’t have had to stress about getting medical exams and hunting for new policies at higher rates. Nor would we have experienced a stressful liquidity crunch after purchasing our home.

The challenge, however, is the higher monthly premiums for a whole life policy. They are significantly more expensive than a term life policy that offers the same coverage for a much lower cost. When we’re younger, it’s hard enough to make ends meet, let alone think about how to protect our unborn children that may never come.

So, if you’re still relatively early in your career and feel optimistic about your future and America’s economic prospects, it’s worth looking into a whole life insurance policy. There’s no downside to comparing quotes to a term policy and planning out what your financial future might look like.

Readers, do you have a whole life insurance policy? At what age did you decide to purchase one? Have you taken the above seven steps to make money from your whole life insurance policy?

Shop Around For The Best Life Insurance Rates

Want to search for life insurance rates with the best carriers? Check out Policygenius, the leading insurance marketplace. With their free platform, you can get customized insurance quotes in minutes. Compare different policies across the nation’s top insurance companies to make a well informed decision and save money.

During the pandemic, I was able to secure double the amount of life insurance coverage for 30% less money through Policygenius. Sam was also able to get a matching term life insurance policy with the same duration and benefit. Having our life insurance needs squared away has brought us tremendous peace of mind, knowing that if anything were to happen to us, our two young children would be financially protected.

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The Most Common Tax Planning Mistakes For High Earners

If my posts on the mistake of chasing value stocks or the need to invest big money to make life-changing money don’t resonate, consider hiring a financial professional to manage your portfolio. You may not be obsessed enough to consistently invest the amount needed to retire comfortably. Offloading the burden of investing frees up your time and energy to focus on work, family, and hobbies.

At this moment, I’m preparing to do my taxes again. Every year I file an extension (Oct 15 deadline) because of delayed K-1s from private fund investments. So when Empower reached out about highlighting tax planning mistakes for high earners, I agreed. It’s a topic I know all too well.

What I didn’t realize is that Empower offers tax planning as part of its standard client service. No extra invoices, no $300/hour CPA bills. Just integrated advice, included in the management fee. Considering that taxes are often the single largest expense for high-income earners, having proactive strategy baked in is a big deal.

The Importance Of Tax Planning For High Income Earners

When you’re a high earner—think $250,000+ income or the potential to get there—you’ve probably got a lot on your plate: investments, real estate, maybe a business or two. What you might not be paying enough attention to? Tax planning.

It’s not sexy like a moonshot AI stock, but the compounding effect of smart, consistent tax moves can rival investment returns over time. As Empower Personal Wealth specialist Scott Hipp, CPA, CFP® explains, for high-income, high-net-worth clients, tax planning isn’t about chasing one-off loopholes, it’s about proactive, coordinated, year-round strategy.

Let’s dive into four key questions Scott answered that reveal just how much value smart tax planning can deliver. If you’re searching for a financial professional to manage your wealth, choosing one that integrates tax planning into their service is essential, not an add-on.

Empower has been a long-time affiliate partner of Financial Samurai, and I personally consulted for Personal Capital (later acquired by Empower) from 2013 to 2015. I’ve seen firsthand how incorporating tax strategy into wealth management can meaningfully boost long-term returns.

1. Why is tax planning critical for high earners?

When you’re in the top federal tax brackets—32%, 35%, or 37%—every strategic move counts more. Saving 1% on taxes for someone making $100K is nice. Saving 1% for someone making $800,000? That’s four first-class tickets to Hawaii with a couple thousand left over.

Scott says most people think of tax planning as a once-a-year scramble or a hunt for magical loopholes (“I heard Uncle Bob pays zero taxes because he made his dogs employees…”). The truth: the biggest gains come from small, consistent, legal moves year after year.

It’s like The Shawshank Redemption: pressure and time. Maxing out a health savings account, backdoor Roth contributions, charitable “bunching,” and tax-loss harvesting may seem minor in isolation, but over 20 years, they can carve a serious tunnel toward financial freedom.

Here’s the danger: by the time you file in April, most opportunities are gone. If you’re filing 2025’s taxes in April 2026, your deadline for most strategies was December 31, 2025. That’s why Empower’s team works year-round—advisors and tax specialists meet regularly to tweak and optimize before the clock runs out.

2. What’s the deal with the SALT deduction changes?

The State and Local Tax (SALT) deduction cap got a temporary boost after the passage of The One Big Beautiful Bill Act on July 4, 2025. It’s $40,000 in 2025 (up from $10,000), rising slightly each year until 2029, before reverting in 2030.

Who benefits? Mostly taxpayers with AGI under $500K in high-tax states. Hit $600K AGI, and the expanded cap phases out completely.

But even high earners over $600K aren’t out of luck—if you own a pass-through business (S-corp, partnership, LLC taxed as such), you might use the Pass-Through Entity Tax (PTET) workaround. Here, the business pays state taxes, making them fully deductible federally, and you get a state tax credit. As of 2025, 35+ states have a PTET option.

For the right clients, SALT changes + PTET can unlock deductions worth tens of thousands—money that stays in your portfolio instead of the IRS’s coffers.

3. How does Empower approach complex high-earner situations?

Let’s say you’re a business owner with significant investment income, passive rental income, and real estate holdings.

With Empower, you basically have a “tax specialist on demand” baked into your fee – no surprise bills. The process starts with:

Reviewing the past three years of returns for missed opportunities. (You’ve got three years to amend and claim a refund.) Empower can spot thousands in overlooked deductions.
Holistic planning based on your goals. Tax strategy isn’t in a vacuum—it’s tied to your investment plan, estate goals, and cash flow needs.

Common missed opportunities for self-employed clients:

Not deducting health insurance premiums.
Missing the Qualified Business Income (QBI) deduction.
Ignoring home office deductions.

More common errors Empower can help catch:

Capital loss carryforwards lost when switching preparers/software
Incorrect Backdoor Roth processing
Missed Foreign Tax Credit
Wrong cost basis for stock sales (ESPP, options)
HSA distributions taxed in error

From there, Empower looks forward—maybe setting up a solo 401(k), timing income, or planning capital gains. The idea is to create an ongoing tax playbook, not just fix past mistakes.

4. What real-world tax savings have clients seen?

Missed health insurance deductions are surprisingly common—and costly.

S-Corp owner: CPA added health insurance premiums to W-2 wages (correctly) but never told the client they could deduct those premiums above the line. Amending three years’ returns saved ~$6,000 in federal taxes.
Sole proprietor: Deducted health insurance as a Schedule A itemized deduction, but couldn’t benefit due to medical expense thresholds and not itemizing at all. Amending saved ~$7,500.
Medicare premiums: Many don’t know they qualify as self-employed health insurance deductions. Catching this can save $1,000+ per year.

These aren’t flashy hedge-fund-like wins—but they’re guaranteed returns via tax savings, often compounding over years.

Key Strategies Empower Uses for High Earners

Scott shared a few proactive moves that come up again and again:

Bunching Charitable Contributions

Standard deduction in 2025: $15,750 (single) / $31,500 (married). By combining two or more years of donations into one tax year, you can exceed the standard deduction, itemize that year, and take the standard deduction the next—resulting in a bigger total deduction over time.

Bonus: Donate appreciated assets or use a Donor-Advised Fund for even more efficiency.

Tax Loss Harvesting

Selling investments at a loss to offset gains elsewhere—then reinvesting in similar (but not “substantially identical”) assets—can lower your current-year tax bill while keeping your portfolio allocated. All Empower Personal Strategy clients ($100K+) minimize your tax burden with proactive application of tax-loss harvesting and tax location.

Roth Conversions

Moving funds from a traditional IRA to a Roth IRA lets you lock in today’s tax rate if you expect to be in a higher bracket later. Future withdrawals? Tax-free. This is especially powerful in lower-income years before RMDs kick in.

Saving Money On A Good CPA

A good CPA might charge $150–$400/hour just for tax consultations. Meanwhile, many don’t offer proactive planning at all, focusing instead on compliance and filing.

Empower builds tax planning into its overall wealth management service for clients with $100K+ in investable assets. That means:

One fee, one integrated plan.
Advisors and tax specialists in the same room (or Zoom) all year.
Proactive calls before the deadlines—not “we’ll see you next April.”

The Bottom Line

Big investment wins get the headlines, but year after year, quiet, boring, proactive tax moves can be worth just as much, sometimes more. For high earners, ignoring tax planning is like leaving compounding on the table.

If you’ve got $100K+ in investable assets, Empower is offering Financial Samurai readers a free consultation. Even if you’re confident in your current plan, a second opinion could uncover thousands in missed opportunities.

For a limited time only, book your free, no obligation session here. An Empower professional will review your investments and net worth, and offer some suggestions on where you can optimize, all for free.

Empower’s Tax Optimization Services

Tax optimized investing (tax loss harvesting, tax location, tax efficiency): available to clients investing $100K+.

Tax planning guidance (analysis and recommendations – identify gaps and opportunities in your tax strategy before you file with your advisor and tax specialist): available to $250K+.

At $1M+, clients receive the above, in addition to access to a CPA, at no additional cost.

Disclosure: This statement is provided by Kansei Incorporated (“Promoter”), which has a referral agreement with Empower Advisory Group, LLC (“EAG”). Learn more here.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is the leading independently-owned personal finance site today, established in 2009.

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How To Eliminate That Intense Financial FOMO You’re Feeling

Back in 2012, I thought I had finally conquered financial FOMO after walking away from a well-paying finance job. But after having children, I’ve noticed more and more relapses. If you’ve found yourself battling the desire for more money than you truly need, this post is for you.

Ever since returning to San Francisco from our 36-day trip to Honolulu, I’ve been feeling a greater sense of FOMO. The first week back hit especially hard when Figma IPOed and surged 333% on its first day. Suddenly, we were right back to frenzied markets, with retail investors piling in at sky-high prices.

In Honolulu, my focus was on mainly three things: 1) family, 2) exercise, and 3) remodeling my parents’ in-law unit. Those three priorities consumed all my bandwidth. Between supercommuting and construction, I was spent most days, with little time left to think about chasing investments.

Pickleball and then the beach were my escape. While waiting for the next game, conversations revolved around recapping rallies, kids, or which store sold the best Pirie mangoes. Careers and investments never came up, except when I asked a couple players about Honolulu’s cost of living. The vibe was refreshingly present, grounded, and calm.

The Return Back Was Somewhat Jolting

I had never taken my family on such a long trip before, so the contrast with life back home was especially clear.

With just the four of us at home, family logistics became simpler, familiar camps smoothed out childcare every other week, and the remodeling burden was finally lifted. With all that mental headspace freed up, my mind inevitably drifted back to the markets and to the unsettling realization that the AI boom was racing ahead without me.

On the pickleball courts here, the chatter couldn’t have been more different. Nearly everyone was talking about tech stocks, the bull market, and the next big AI play. Why? Because nearly everyone either works in tech or invests heavily in it. There was no escaping the mania. I found myself longing for the calmer rhythm of Honolulu again.

The Moment That Reduced My FOMO Tremendously

Then something unexpected happened that broke my financial FOMO fever. The first weekend back home, I went to a neighborhood gathering at a local park. Familiar faces were everywhere, including one dad I occasionally hang out with. He works in venture, so I asked whether he ever felt the same financial FOMO I’d been struggling with since returning.

He shrugged. “Kinda, but not really.” Why would he? He spends his days looking for the next big winner, so opportunities are always flowing across his desk. Though he did mention once passing on a company that went on to be a huge success.

That surprised me. If anyone should feel FOMO, it’s investors who had the chance and said no, far worse than never getting a look at all, which is the reality for most of us. If I never had the opportunity, then there was no missing out in the first place. But it also made sense he didn’t feel much financial FOMO since he was already immersed in the hunt for more.

We kept chatting. He asked how my summer had been, so I shared some stories from our time away. Naturally, I asked about his summer too, expecting to hear about some big trip since his family had traveled a lot before. But instead, he told me they hadn’t gone anywhere. He’d been too busy working. Two months into summer, and he was still grinding away.

That was my “ah hah” moment. Suddenly, my financial FOMO evaporated. Here was someone, at least twice as wealthy as me, stuck at home because of work. It reminded me of my banking days, when I had to ask for permission to take vacation—like a kid asking his parents for pocket money. What a crock!

I’m sure his hard work this summer will make him millions more. But he’s already rich. At our age, I don’t want to sacrifice too much time with my kids for incremental wealth that won’t materially change our lifestyle. 18 summers isn’t a lot. I’ve got enough passive income to cover our family’s basic needs. That freedom, I was reminded, is worth more than chasing the next big score.

The Six Steps To Reducing Your Intense FOMO

Financial FOMO comes from comparison, insecurity about our own progress, and the fear of missing a once-in-a-lifetime opportunity. It tends to peak during bull markets, when it feels like everyone else is getting rich except you.

I’m not sure anybody is truly immune to financial FOMO. You can be wealthy, financially independent, retired, or even work in venture capital, and still feel it. But FOMO left unchecked can push you into bad investment decisions, such as buying at peaks, overextending on margin, or constantly second-guessing yourself.

Here are six tactical yet practical steps that may help you manage FOMO better:

1) Build a Core Portfolio You Rarely Touch

One of the best ways to combat FOMO is to remind yourself that you already own a piece of the future. If you’re invested in equities, real estate, Bitcoin, or venture, you’re covered. Even holding something as simple as the S&P 500 means you’re participating in the ongoing growth of our economy. The exact mix of your asset allocation is up to you. What matters most is having a stake in assets that can carry you forward, so you don’t feel pressured to chase every hot new opportunity.

I keep the bulk of my public equity investments in broad index funds. Meanwhile, about 40% of my net worth in real estate, and 15% in private companies.With a solid core, it becomes much easier to tune out the noise and ignore the hype cycles.

For example, if AI truly sparks a wave of IPOs, new startups, and thousands of newly minted millionaires, at least my San Francisco real estate should benefit. I recently experienced a rental bidding war for one of my properties and that’s before the AI IPO wave has even arrived. Investing in the picks and shovels helps ensure you will financially benefit, no matter what.

2) Allocate a “FOMO Fund”

Instead of trying to suppress the urge to participate, give yourself permission, but with guardrails. Roughly 40% of my public equities are in individual growth names, mostly tech. This way, when I see headlines about breakthroughs, like quantum computing, I feel like I’m part of the story rather than left on the sidelines. Of course, during the next correction, I will also lose more than the average index fund investor too.

I’ve also carved out a dedicated “FOMO Fund”—about 5% of my overall portfolio—for speculative money. That’s where I can dabble in individual private companies, new venture funds, or even short-term trends. If it pays off, great. If not, it won’t derail my financial plan. By containing the risk, you scratch the itch while protecting your long-term wealth.

3) Systematize Your Investing With Automation

One reason FOMO hits so hard is because investing often feels optional and emotional. A simple antidote: automation. Dollar-cost averaging into index funds, ETFs, individual stocks, or funds removes the decision-making stress. When money flows into the market on a schedule, you don’t sit around debating whether to chase the next hot stock. Instead, you’re already steadily invested, no matter what the headlines say.

For example, after opening a new personal Innovation Fund account earmarked for my kids with $26,000 ($500 bonus if you invest over $25,000), I enrolled in auto-invest at $2,500 a month. It’s enough out of my cash flow to feel involved without feeling strain. One year later, that’s $30,000 invested; after 10 years, $300,000.

Without automation, it’s easy to fall off track because life gets busy. I have over 30 investment accounts to manage between the four of us. Inevitably, I’m going to miss something, which is why automation is so important to free up mental bandwidth.

I’m concerned my kids may have little chance of becoming financially independent on their own in an AI-driven, hyper-competitive world. Therefore, every dollar I automate for them helps reduce that concern, while ensuring their money is working even if I get distracted.

Make investment contributions automatic through monthly auto-investing to help you reduce financial FOMO

4) Use Opportunity Cost as a Filter

Before jumping on the next hot idea, I try to ask: What am I giving up if I do this? Am I sacrificing cash flow, peace of mind, or time with family? Am I risking capital I’ll need in five years for housing, education, or flexibility? During bear markets, I certainly get a little more moody. By forcing yourself to weigh trade-offs, you realize some FOMO-driven decisions don’t actually pass the test. I

As someone who enjoys investing more than spending, this opportunity cost exercise often flips for me. I tend to think instead: What is the opportunity cost of spending money on something I don’t really need versus the potential returns if I invested it? Buying this unnecessary $120,000 Range Rover could turn into $300,000 in five years if invested well!

Still, the reality is that not all investments work out, especially the most speculative ones. Corrections and bear markets are a natural part of investing. Which is why it’s worth asking a different version of the question too: What are the joys I’m giving up today in exchange for an investment that may never pan out? That balance helps keep you grounded, whether you lean toward spending or investing.

Losing Money Quickly

Just look at the Figma IPO. I suspect FOMO drove many investors to pile in on day one, paying $100–$133 a share. Fast forward just a few weeks, and the stock is already down about 40% from its peak. I would much rather have spent $25,000 on a memorable family vacation than invested it in Figma and watched $10,000 vanish in two weeks. YOLO!

Chasing hot IPOs at extraordinary valuations is dangerous, so please be careful. Instead, consider investing in these companies before they go IPO so you can sell to investors who experience maximum FOMO.

Always remind yourself that you can and will lose money when it comes to investing in risk assets. Sometimes, this fact is easy to forget during a bull market.

How to reduce financial FOMO and not chase hot IPO stocks like Figma

5) Define “Enough” Clearly

FOMO often creeps in when you don’t have a clear baseline for what success actually means to you. If your target is always a vague “more,” then no matter how much progress you make, someone else will always appear to be ahead – whether it’s their bigger house, higher net worth, or latest hot investment. That mindset makes contentment impossible.

What helps is defining enough. For me, that’s when passive income reliably covers our family’s basic living expenses. Once that box is checked, every dollar beyond is truly optional. I can put it toward growth investments, donate it, or try to spend it guilt-free on experiences.

After I hit a passive income target, I try and shift my mindset back toward an early retirement lifestyle. This means less striving, more enjoying. Anchoring to “enough” quiets the noise, and reminds me that I’ve already got enough.

Once you know your number and can sustain your lifestyle, you realize chasing endlessly isn’t freedom, it’s another form of bondage.

6) Change Your Environment

Finally, FOMO isn’t just about the markets, it’s about the people around you. Living in go-getter cities like San Francisco or New York means you’re constantly surrounded by the most ambitious and competitive people. Many of whom are making big money in tech, finance, or startups. The conversations, the headlines, even the birthday gatherings, it all feeds into a sense that you’re in this constant battle where you’re often falling behind.

One way to dial that back is to physically change your environment. Moving to, or even spending extended time in, a slower-paced city or town gives you space to breathe. Suddenly, not everyone is talking about the latest IPO or AI fundraise. Conversations shift to family, community, or quality of life.

It doesn’t mean giving up ambition or opportunity, you can still build wealth anywhere. But by lowering the ambient noise of competition, you reduce the constant comparison game that fuels financial FOMO.

Final Thoughts On Getting Rid Of FOMO

Markets will always swing from euphoria to despair, and there will always be someone making more money than you. But with a sound core portfolio, a small space to take punts, and a clear definition of enough, you can stay disciplined while still scratching the investing itch.

FOMO doesn’t disappear, but with the right systems, it can be managed so it doesn’t manage you.

Readers, do you experience financial FOMO? If not, how do you manage it so you don’t feel like you’re constantly missing out on financial gains? Interestingly, the vast majority of people I speak with in real life say they don’t really struggle with financial FOMO. That makes me curious — what strategies do you use to tame this beast?

Invest in AI So You Don’t Get Left Behind

AI is set to disrupt the labor market in a massive way, for you and for your kids. One way to hedge against that disruption is to invest in AI itself.

With Fundrise’s venture capital product, you can gain exposure to leading private AI companies like OpenAI, Anthropic, Databricks, Anduril, and more. The minimum investment is just $10, and new accounts currently get a $100–$200 bonus.

I recently opened a new account for my children with $26,000 and will auto-invest $2,500 a month for the foreseeable future. My hope is that by riding the AI wave, they’ll benefit from the very disruption that might otherwise work against them.

Fundrise is a long-time sponsor of Financial Samurai, and Financial Samurai is an investor in Fundrise products. Our investment philosophies are aligned. Overall, I’ve invested more than $350,000 in Fundrise Venture.

Fundrise Innovation Fund Financial Samurai investment amount and dashboard - Overcoming FOMO in AI by investing in AI — My current Fundrise Venture investment dashboard, excluding the $26,000 I recently invested for my children

Pick up a copy of my USA TODAY national bestseller, Millionaire Milestones: Simple Steps to Seven Figures. I’ve distilled over 30 years of financial experience to help you build more wealth than 94% of the population and break free sooner. When you’re ahead, that FOMO starts to disappear.

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