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The truth about Millionaires.

Everyone wants to be a millionaire.  I always had it as a goal, a first step.  First I wanted to do it by the time I was 25, then I set it for 30.  Now I have a goal of doing it while I am 35.  But this time I have a firm plan to get there.

First off most people think that if you are one you will be set for life.  In many cases that is correct, but in most cases it took risk to get the million and most people who have it take those same risks and lose it.  There are ways to earn without too much risk, but mostly that is very slow.  Other people simply go crazy, they get the money too easily and spend it all.  Over 80% of lottery winners have a negative net worth just 5 years after they win.  They get this huge lifestyle, and then spend spend spend, and when the money runs out they borrow like crazy.

I personally know a lot of millionaires.  I don’t know of any who made the money trading time for money or having a job.  I know a few who won it, but the VAST majority worked hard, ran a business and invested the profits.  Some are in farming, some are in insurance, other have a business in one form or another but most are in real estate.  And all of the millionaires that I have asked about this invest heavily in real estate.  Time and time I hear that no matter how you make your millions that real estate is the best place to store the money.  Another common factor among those that have made and kept millions is that they live WAY below what you expect.  They drive older cars, they don’t shop at the fancy shops.  Most of them live on less than 60k per year.  That is still 5,000 per month.  While they were making their money they lived on much less.  Those people you see shopping at all the ritzy malls and spending thousands of dollars are usually people who earn a lot, and spend even more and have a negative net worth.

So what does it take to have a net worth over a million dollars.  I define it as all assets, at the price you could sell it for today minus all debt.  It is hard to value a business so I usually set that as valued as 8 times last years earnings as long as you project those earnings to go on.  Using that measure I actually was a millionaire once during the years that my business was really profitable, but I could not project that computers would become a commodity and that my business would start to lose money at huge rates until I was in the hole.

Also you can only grow your net worth from your personal profits each month.  If you have $3,000 in monthly expenses you need to deduct that from your income before you see if you have enough.  For me I have about $3,000 that I must spend each month to stay current.  About half of that is servicing debt, and could be gone if the interest rates were not so low.  If I am starting with a net worth of zero and I want to be a millionaire in 2 years I need to pack away about $42k per MONTH.  That is a crazy number, and that is why people with jobs don’t hit it.  Even if you had 8% interest on your side and you wanted to do it in 10 long years you would need to save over $7,000 per MONTH.  This is why less than 1% of the people are millionaires.  Even if you earned $120k per year and spent only $3k per month it would take you 10 years of constant effort.  The biggest problem is that when you earn that much, you usually hang out with other people who earn that much, and they start talking about their new cars, second homes and their vacations, and you feel “less than” for living on such a meager $3k per month and you can not maintain it.  It is like a bucket with a ton of holes in it, the more water you pour in the faster the holes take it out, and it never really gets full.  So the answer is clearly not a job, even a high paying one.  You have the limit of how much you can earn because of who you work for and with.  So a business is really the only answer, but to have a good business you need to be as good or better than all of the other businesses out there, or you need to have an idea that really sets you apart.  If you have a really great idea that can duplicate all over the world you can even become an instant billionaire.  This is what they folks at YouTube, Facebook and Twitter have done.  The first ones cashed out when the company was only 7 months old.  The second two have yet to cash out, though twitter just sold 2% of the company for $200 million, making the company worth over $10 billion.  But it is hard to come up with such an idea, most usually stumble upon it early.

So now we all have an up hill battle to climb.  So if you want to be a millionaire in 2 years from today you need to come up with an idea that makes you $50k per month on a constant basis.  Or if you want to build and sell a business you need make one that earns $125k-$150k next year, and that number is AFTER your take from the company because the company will need your or someone like you after you sell it.  The way you design a million dollar company is much different than the way you design a company that just pays your bills.

When you are looking for a large net worth you need to keep in mind the laws of large numbers.  One of the easiest ways to get there is to sell a product over and over.  Even if you only make $10 each time you do it, that means that you need to sell 100,000 items.  So plan your business accordingly.  If you need to sell 100,000 items that means that about only one out of every 1,000 households needs to buy your product.  Depending on your product that may mean that only 1% of the population even needs to know about your product.  But to even get 1% penetration may be a hard thing to do.  But one good viral video could do it for you, or one good endorsement.  Thousands have made it rich this way.

You can also get there by helping others reach for their dreams.  Imagine if you could help people earn a living and you got a cut of what they did.  For me this was always by hiring sales people.  I basically would set their wages to where they would get 40% of the profits that they generated.  I would pay for their phone, a place for them to work, I would help them close deals and I would design the products that they sold, I would even pay for them to have a base salary in case sales were slow that week.  The more successful they would be the more successful I would be.  If I have 3 or even 4 of these people it would keep me busy.  Imagine if I had 30 or 40, and if they averaged making $2000 for themselves per month, that means that each one would make me $3000 per month.  That alone is a million in a year!  Becoming a millionaire is REALLY a team sport.  I don’t know anyone who has worked to get a million who did not have a team behind them.  Most people I know help out people all of the time because the more people they help the more they make in the long run.

If you want to make it rich selling something, or helping other people get rich you need a system to manage the entire thing.  A system is really the key.  The good part is with a little math you can start to think about the system now, you can design the system now that will take you to the millions you want to have.  A good system with the right principles will take you there.  Run a simulation on your system, if it does average will it get you to where you want to be, is your system too small?  Is your system too hopeful, does it require that something unknown will happen to catapult you into your success, if that is the case it probably will not happen.  You can’t predict such things.

I really hope this helps you put your dreams in perspective.  And I hope you start to think how duplicating a successful system will get you there.  You need to focus on people, you need to focus on results.  Your plan must have the muscle to get you to your goals.

When you get your millions remember the little guys, remember to give back.  Millionaires are some of the nicest, most humble and most generous people I know.  Most millionaires are not they greedy people the movies and media make them out to be.  They usually are very humble because they know that peopled helped them along the way, and that being nice to people and helping others is the key to their success.  They feel lucky that they made it.

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