If I asked you what you would do to make one million dollars in 12 months from now what would you say?
Humour me. Stop reading! Pull out your phone or grab a piece of paper and write it down.
I posed this same question not too long ago to a few colleagues and friends. A few jumped right in with ideas. They were confident that they had the answers. Most were stumped. A few felt it was such an outrageous question that they came up with some outrageous suggestions. Their baffling responses motivated me to write this article.
It all starts with some basic math
Here’s the good news. You will most likely make a million dollars over your lifetime. Let me walk you through this – Lets say you make $50,000 a year and can save 40% of that. It will take you 50 years x $20,000 per year to get there. See? You are a millionaire ..In 50 years! That’s a long time to make a million.
Now back to my question – what if you had to make a million in 12 Months! How would you go about it?
Here’s the thing, if you think about a million as a whole the thought of achieving it becomes daunting. If you break it down you start recognizing how real achieving a million dollars could be. The process of breaking down the numbers is called millionaire math. (discussed by Grant Cardone in his popular Millionaire Booklet)
Here’s how this works:
If you earn a salary:
- $50k x 20 years
- $100k x 10 years
- $250k x 4 years
If you earn by the hour: Earn $115 per hour, every hour of the year
If you sell a product:
- 5,000 people buy a $200 product
- 2,000 people buy a $500 product
- 10,000 people buy a $100 product
- 1,000 people buy a $1000 product
If you sell a subscription:
- 5,000 people pay $17 per month for 12 months
- 2,000 people pay $42 per month for 12 months
- 1,000 people pay $83 per month for 12 months
- 500 people pay $167 per month for 12 months
- 300 people pay $278 per month for 12 months
By breaking it down you see how a lofty goal becomes something much simpler and achievable.
Breaking the myths
There is a big myth that the only way to become a millionaire is to start your own business. Now knowing millionaire math I hope you see that this isn’t true. The reality is, according to Rich Habit Study, millionaires fall into three groups:
- The Savers (Salaried individuals that save and invest their way to a million)
- The Executives (high salaries, big bonuses, stock options)
- Business owners
There are significant differences in how compensation works for each category. What separates these groups is the “time” it takes to get to a million dollars. If you want to make a million dollars in 12 months your best bet is starting a business (or a side hustle). Actually a majority of the world’s millionaires are a combination of savers and business owners.
Developing a millionaire money mindset
Great – you now know how to get to a million dollars. That’s not enough. If you get there you need to make sure you keep the million and grow it right? If you want to do that you need to change the way you think about money. You need to start thinking about money the way the wealthy do and build the following mindsets:
Live within your means (until you no longer have to):One striking thing you will notice about wealthy people is how they live within their means. There are some famous examples. Warren Buffett still resides in the house he bought for $31,500 in Omaha, Nebraska in 1958. The house is now worth ~$650,000 and according to him is his third best investment to date. Sam Walton, the founder of Wal-Mart, drove a 1979 Ford F150 pickup truck. Not a Ferrari a Ford. Bill Gates flew commercial, like the rest of us, for years. Azim Premji usually stays at company guest houses. Does this mean they are cheap? Quite the opposite. They chose to live within their means early on. Warren Buffett stays in the same house today because he is happy there. He has the luxury today to move into any home he wants because he lived within his means early on.
Living within your means implies that the amount of money you bring in each month is less than or at least equal to what you spend. The next time you find yourself looking to buy something new ask yourself – Do I have enough money saved up for this?
Simulate being broke (Save and Invest): If you are already a saver then good job! A majority of all millionaires save money. It’s how they got there in the first place. So if you are not saving today then start now.
Word of caution here if you happen to be in debt make sure you address that first. This article could be a good starting place. The next step is to set up a system for saving and once you start your system you then automate it. A simple example of this was when I started my first job. I received monthly payments at the time and I chose to save 35% of every paycheck. I then instructed my bank to withdraw this amount 2 days after my salary hit my account. This money I moved into a mutual fund investment. In essence what I was doing was simulating being broke. I couldn’t spend money I did not have and that forced me to live within my means. I automated the process of saving and investing.
If you are not comfortable with investments then start off at least with savings first. But remember you actually lose money everyday it lies in your account because of inflation.
Earn more and give more: Let’s view wealth accumulation through the lens of the simple profit equation.
Revenue (increase this) – Costs (reduce this) = Profits (so you can have more of this).
The sad truth is that too many people spend time obsessing over reducing their expenses.
“No more dinners out for me this year!”
“I’m cutting out the coffee this month”
The problem with this approach is that you give up the things you love for an insignificant gain.
I can almost hear your scream
“But Roshan you told me to live below my means!”
Don’t get me wrong, millionaires optimize their costs. However they spend most of their time on increasing and growing their revenue. Look back at the millionaire math – it’s all about growth.
If your scratching your head on ways to increase revenues – let me give you a few suggestions:
- Have stuff around the house you don’t use anymore? Collect it all and sell it to someone else
- If you are a saver: go get yourself a raise, start a side business
- If you run a business: create new revenue streams, explore other business opportunities
You could also adopt the growth mindset is by looking at “who you can help”. Are you an expert at yoga? Bump into someone you could help at that very coffee shop you swore to stay away from? Having a growth oriented mindset means you figuring out how you can help this person.
Rule of thumb: Think about helping the person and not about how you will make money. If you help the person money will follow.
Help 2000 such people and charge them $500 in exchange for your time and you are a millionaire.
I’m ready to become a millionaire
At the end of the day the true millionaires are the ones that are not obsessing over every penny. The successful millionaires:
- don’t complain,
- take ownership and responsibility,
- make things happen for themselves,
- save and invest,
- build automated systems,
- track how their money grows ,
- invest in growing themselves and
- keep learning so they can improves themselves and everyone around them.
I just showed you how to start making a million like a millionaire. Now stop for a second. Forget the million.
Let me ask you this – what you would do to make $100,000 in 12 months from now?
How would that change your life?