How to make a million dollars

February 5, 2010

You will likely make a mil­lion dol­lars. The aver­age Amer­i­can earns between $1 mil­lion and $2 mil­lion dol­lars in their life­time. But that’s not what I’m talk­ing about.

This arti­cle will tell you how to end up with $1 mil­lion dol­lars in your bank account. (And, as you’re about to see, you’re going to need it.)

$1 mil­lion at least

I’m 31. If I put $1,000,000 under my mat­tress today, when I came to retire (at 65) that $1 mil­lion would have the pur­chas­ing power of $388,977 today. If I lived until 85, that would give me only $20,000 per year to live on. That’s IF I hit my tar­get of mak­ing a mil­lion before I retire. Sud­denly aim­ing for a mil­lion seems a lit­tle low. For me to feel like a mil­lion­aire when I’m 65 I’m going to need $2,500,080 of today’s dol­lars. (Based on a 3% infla­tion rate). So your tar­get has to be some­where between $1 mil­lion and $2.5 million.

That’s not being greedy. Just responsible.

The way you learned in school

Com­pound inter­est isn’t the answer. Not on it’s own. Sure, if you put $5 in the bank every day AND find a way to earn 10% inter­est, in 42 short years you’ll have a mil­lion dol­lars. That sounds sim­ple, but a 10% return isn’t easy to come by and no one goes to the bank every day. (If you really like going to the bank though, this might be the excuse you’re look­ing for.)

Open a McDonald’s

Another way is to open a busi­ness, a fran­chise maybe. Fran­chises are a good option, but to start one you’ll need about $200,000 in cash –not a mort­gage for that amount, CA$H. Most real peo­ple, with real lives and jobs, can’t come up with that kind of money. And most peo­ple (let’s be hon­est) aren’t com­fort­able with that kind of risk.

Just do this

I’m just going to cut to the chase. I’m going to tell you what I tell my friends to do (because I like you. You’ve become very spe­cial to me). My advice is: buy an invest­ment prop­erty. Now, using some fancy math, I’m going to show you how easy it is and why it makes sense. I’m going to leave you utterly con­vinced and greatful.

The sce­nario: You’ll need to find a prop­erty you can rent. The rent will need to cover the mort­gage, or bet­ter. (If you can find a prop­erty where the annual rental rev­enue equals 11% or more of the property’s sale price you’ll be mak­ing an income from the prop­erty from day one, even with­out the cap­i­tal return I’m about to talk about).

Year 0: You’ve just put $10,000 of your own money on a prop­erty worth $200,000. It was tough com­ing up with that much money, but you did it.  You’re capa­ble like that.

Year 5: Fol­low­ing a 5% property-inflation rate, which is rea­son­able for most major cities (except maybe in the US at the moment), your prop­erty is now worth $240,916. Not amaz­ing, but not too bad either.  (Just trust me on the 5% part. I’m trustworthy.)

Year 10: Now the place is worth $292,166. Ten years ago, when you started, you only owned $10,000 of the prop­erty. But now your equity (the amount of the house’s value you own) is over $100,000. This is really some­thing. And it’s just just some­thing because you’ve mul­ti­plied your money by 10. It’s some­thing because now you’re the kind of per­son who really knows what to do with $100,000!

So now you’re smil­ing more. And you have a nice deci­sion to make. You remem­ber that you were able to get that first prop­erty with just $10,000. And you have $100,000 of equity in that prop­erty. The bank sees this like you have $100,000 in a bank account with them.  If you sold your prop­erty you’d have $100,000. The bank knows this and they don’t want to lose you as a cus­tomer. So, if you ask them, they’ll let you use some of that equity toward another prop­erty (or 2 more, or maybe even 3 more –depend­ing on your salary and smile).

You can do that with­out hav­ing to come up with another cent.

If you sell your first prop­erty after 30 years (using that 5% property-inflation fig­ure) you will have $500,000 in your pocket. ($10,000 got you half a million.)

The actual num­ber of prop­er­ties you’ll need to hit your tar­get will depend on a few dif­fer­ent fac­tors, but 2 or 3 will likely be enough.

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Live life like a game

February 3, 2010

As I kid I loved Snakes and Lad­ders. I don’t even know if you can find that board game any­where any­more, but I enjoyed it. (Okay, I just found it on Ebay for $2).

It was pretty sim­ple. Basi­cally you roll the dice to see how many spaces you can move for­ward. The first per­son to the end wins. You hope to land on a lad­der (which lets you skip a bunch of steps). And you want to avoid the snakes (which make you slide back, giv­ing up a lot of your progress).

I real­ized today that I’ve been using Snakes and Lad­ders as a guid­ing alle­gory for my life. Since I was a kid I’ve been using this game to make tac­ti­cal deci­sions about my life.

Life isn’t slow and steady

Think of lad­ders as things that can rapidly advance you ahead of the crowd. These are things that help you to “arrive” faster –to be finan­cially secure, happy, suc­cess­ful, self-actualized ear­lier than you would otherwise.

You’re prob­a­bly famil­iar with the 80/20 rule, which states that 80% of our returns in life come from just 20% of our efforts. The 80/20 rule sug­gests that we should focus on the things that give us the most bang for our buck. The Snakes and Lad­ders idea is sim­i­lar to this: avoid unpro­duc­tive behav­ior and invest the time into build­ing your­self an advan­tage of some kind.

Exam­ples of Ladders:

Mak­ing prop­erty invest­ments made when you’re young. There are sev­eral invest­ment strate­gies you can use. Prop­erty is the one that’s always made the most sense to me. The key is start­ing early. (And I sup­pose the key to that is being dis­ci­plined about sav­ings from a young age).

Get­ting a uni­ver­sity degree. Aside from the increased feel­ings of per­sonal effec­tive­ness and being more inter­est­ing at par­ties, a col­lege master’s degree is worth $1.3 mil­lion more in life­time earn­ings than a high school diploma (and about another mil­lion on top of that if you get a PhD). (You could debate this, on the grounds of cor­re­la­tion ver­sus cau­sa­tion, but if you thought of that you prob­a­bly already have a degree and there­fore you don’t want to).

Hav­ing a trade. Very much like a degree, hav­ing an in-demand trade sets you up well to branch out on your own and really cash in. How­ever, it also seems like those who really ben­e­fit from hav­ing a trade are those with some busi­ness acu­men as well, so they can fully cash-in when the moment is right.

Being a well-known brand. Per­sonal brand­ing is one of the new next-big-things. I encour­age peo­ple to take some actions to dom­i­nant their ‘name space’ online, to make it so that when some­one types in their name in Google, they are the first one that comes up and that they’re happy with the infor­ma­tion being shared. (If you type in Tim Woods in Google you’ll find that I still come behind a Tim Woods who was also known as “Mr Wrestling” and Tim Woods, an Aus­tralian com­poser). But I’m get­ting there.  And, even at #3 in my name space, I’ve had a lot of pos­i­tive feed­back from my efforts online. (I got a job, was cho­sen to judge a national envi­ron­men­tal com­pe­ti­tion and become an inter­na­tion­ally rec­og­nized expert on slang… don’t ask).

Being hap­pily mar­ried. Research shows being in a mar­riage that lasts cor­re­lates strongly with sus­tained career suc­cess and bet­ter health in old age. Also it’s nice to have some­one to share clean-up duties. Long-term, sta­ble friend­ships can have sim­i­lar benifits.

Under­stand­ing risk. Peo­ple have money per­son­al­i­ties. Some peo­ple avoid debt (even good-debt) like the plague. And those poor peo­ple don’t lever­age their money. So they miss-out on long-term benifits –such as being able to retire.

Learn­ing a lan­guage. This one is actu­ally more of an ‘alleged lad­der’. I don’t actu­ally know any bilin­gual peo­ple who credit their suc­cess to their bilin­gual­ism. How­ever, I’ve always sus­pected that if I spoke another lan­guage I’d be unstop­pable, so I’m keep­ing this one in the Lad­der category.

Exam­ples of Snakes:

Going bank­rupt. Even with bank­ruptcy pro­tec­tion, there can be lin­ger­ing effects from bank­ruptcy that will snake you back down a few steps.

Get­ting arrested. In these days of ubiq­ui­tous infor­ma­tion, it’s hard to hide mis­takes from your past.

Get­ting divorced. For some peo­ple divorce goes smoothly. But for oth­ers it can put an enor­mous emo­tional and finan­cial strain on your life for a very long time.

Can you think of any more snakes or lad­ders? Please add them in the comments.

(Update: Just before post­ing this, I’ve learned the game Snakes and Lad­ders was orig­i­nally called Moksha-Patamu. “Of Hindu ori­gin, it taught the play­ers that vir­tu­ous behav­ior would aid your pro­gres­sion to Nir­vana, but evil would make the jour­ney dif­fi­cult.” I told you this game was deep, didn’t I?)

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A Money Lesson from Matt Weinstein

January 22, 2010

The TED site has started post­ing the best TED-esque con­tent from else­where on the web. My favourite so far is this one from Matt Wein­stein. In it he describes a money les­son he learned in Antarctica.

I find the way he han­dled this really amaz­ing.  I guess, to keep it all in per­spec­tive, he has been suc­cess­ful enough in his life that a bank­ruptcy won’t destroy him really. And there is a huge dif­fer­ence between this rel­a­tive finan­cial dev­as­ta­tion and the real hor­rors being faced now by the peo­ple of Haiti. Still there’s an impor­tant les­son in this about hav­ing the right per­spec­tive toward money. For Mr Wein­stein money didn’t give him secu­rity. He could only really know he was going to be okay in life if he had a com­mu­nity around him.

An Econ­o­mist I heard lec­ture in Lon­don once told me that cap­i­tal­ist (fis­cally right-wing) ideas  are based on a cer­tain under­stand­ing of suc­cess, whereas social­ist ide­olo­gies are based on an under­stand­ing of fail­ure. It seems depress­ing to say it, but as rich as you might be, fail­ure is an ever-present pos­si­bil­ity. The only real secu­rity is invest­ing in our com­mu­ni­ties, giv­ing our time, our money and shar­ing our lives (i.e. shar­ing our mean­ing, our sto­ries).

All that is not given is lost.

P.S. I’m sure all of you have already donated to Haiti relief. (Likely the biggest human­i­tar­ian cri­sis in the past 50 years). But if you haven’t got­ten around to it yet, or you’d like to give some more, I’ve found a great estab­lished char­ity in the coun­try, called Part­ners in Health.

Stand With Haiti

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Dying for a Good Time

January 8, 2010

This is the third time I have sat down to write this post. I keep delet­ing it.

I watched a doc­u­men­tary this week in Swe­den and I can’t put it out of my head. It was about a group of moun­tain climbers attempt­ing to sum­mit the sec­ond high­est moun­tain after Ever­est (K2). I’m not going to ruin the story for you, but the doc­u­men­tary is called “Dis­as­ter on K2.” It didn’t go well.

Watch­ing this made me angry.

A lot of peo­ple (maybe most peo­ple?) say they would never sky­dive because it’s too dan­ger­ous. And yet, the casu­alty rate of sky dives is 0.001%. 1 death every 100,000 jumps. Climbing K2 is another level of risk entirely, 25% of those who climb K2 die. (Ever­est has a casu­alty rate of 9%). I just can’t under­stand an adult being pre­pared to risk so much to get to the top of a stu­pid mountain.

So, what is wrong with moun­tain climbers?! (There are those who cheer on all kinds of risk-taking, like Chris Guille­beau, but I’m not one of them).

Adven­ture hol­i­days have increased in pop­u­lar­ity by 17% in recent years.  So there is a trend here. Maybe we crave dan­ger the more we get the rest of our lives in order. Maybe we want to feel all-powerful. We want to be fearless. What both­ers me is that the climbers who died in this doc­u­men­tary were smart peo­ple. They weren’t kids. They had expe­ri­enced suc­cess in their lives. They should have known better.

This goes back to my the­ory that goals can ruin your life.  We don’t know our lim­its.

David Zald, at Pro­fes­sor of Psy­chol­ogy at Van­der­bilt Uni­ver­sity, believes the rea­son is dopamine. “There appear to be fewer dopamine-inhibiting recep­tors,” he says, “— mean­ing that dare­dev­ils’ brains are more sat­u­rated with the chem­i­cal, pre­dis­pos­ing them to keep tak­ing risks and chas­ing the next high” (Source).

So there you have it, folks. Clear as day. Mountain-climbing is a men­tal problem.

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Career Advice from Randy Komisar

January 8, 2010

Randy Komisar is a good guy. He’s a Sil­i­con Val­ley CEO. Lis­ten­ing to him speak is like being sat down by your down-to-earth uncle, who wants to give you career advice. Komisar is good at giv­ing inter­est­ing advice about ‘fol­low­ing your pas­sion’ with­out sound­ing trite or overly moti­va­tional.  A lot of us get stuck on ques­tions like “what is my (one) pas­sion in life?!” Rather than wor­ry­ing about the right answer to that ques­tion, he rec­om­mends think­ing of your pas­sions as a port­fo­lio of inter­ests. Then just try to match your inter­ests to the oppor­tu­ni­ties in front of you. As long as you’re mov­ing in the right direc­tion you’re get­ting there.

(If you only have time to watch one of these, watch the first one).

In this sec­ond video, Komisar dis­cusses stay­ing bal­anced. The bal­ance changes as your pri­or­i­ties change. He talks about money, oppor­tu­nity and power (the 3 things peo­ple always wish they had in the career) don’t always come in the same pack­age. We need to be care­ful that our career doesn’t take up too much of our lives and some­times it’s worth it to say, sac­ri­fice money and power in order to increase opportunities.

He also sug­gests that we should never put our­selves in a sit­u­a­tion where we can’t say no, by hand­cuff­ing our­selves to too many oblig­a­tions (i.e. hav­ing too many time or money expenses). Keep your eye on the ball (your val­ues) and, as much as pos­si­ble, give your­self the free­dom to make the changes that respect the balance.

Real­ity check: When Komisar cut back in his life he went from being a full-time CEO to a doing part-time-CEO-temping. He made heaps of money as a CEO and, when he cut back, he made slightly-smaller heaps, but still prob­a­bly more than you and me and every­one who will ever read this post com­bined. It’s eas­ier mak­ing finan­cial sac­ri­fices when doing so doesn’t mean you’ll have to make any real sac­ri­fices at all.

Still, I think he’s giv­ing us some good advice here.

Randy Komisar’s book is The Monk and the Rid­dle: The Edu­ca­tion of a Sil­i­con Val­ley Entre­pre­neur.

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What Matters Now? (60 Inspiring Answers)

January 3, 2010

Seth (the Mac­Daddy of Mar­ket­ing) Godin has gath­ered ideas from 60 bril­liant peo­ple, each shar­ing their insights into what mat­ters at the begin­ning of 2010.

Frankly, if you flip through this slide show and don’t feel at least a tin­gle of inspi­ra­tion, you’re read­ing the wrong blog.

I can’t choose which ideas I’d most rec­om­mend. There is so much good stuff in here, it’s tak­ing my brain some time to absorb it all.

(In response to this slide show, I wrote the fol­low­ing post on craft­ing your­self a Non-Job).

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How to Guarantee the Career You Want: An Introduction to Non-Jobs

January 3, 2010

Your job is not per­fect. Me nei­ther. We have hid­den gifts you and I.

First instinct, espe­cially in the heady days of early Jan­u­ary, is to re-evaluate and con­sider mas­sive life changes.

Have we in fact missed our call­ing? In a word: yes. But it’s an eas­ier fix than you might think.

Have you ever heard the expres­sion: “When you’re doing what you really love, it doesn’t feel like a job?” Do you know why this is true? It’s because when you’re doing what you really love you prob­a­bly aren’t at work. Day jobs are some­times less-than-totally ful­fill­ing. They don’t nor­mally appre­ci­ate or hon­our our full great­ness. They nor­mally can’t. (Because that’s not their job).They are not designed with us in mind, but rather with our clients in mind. But their imper­fec­tion doesn’t mean they are wrong for us. We accept their imper­fec­tions as they accept ours. And that’s not bad.

Non-jobs are an anti­dote to less-than-completely-fulfilling careers. They offer a ful­fill­ing ‘third place’. A place, that is not our job and not our home-life, where we grow in the ways we crave.

If you want a non-job, it’s yours. All who apply (them­selves) can have one.

Maybe you’re a writer, deep down. Or you really enjoy paint­ing. Maybe you’re a hilar­i­ous dancer with a call­ing for YouTube. What­ever it is you have to share, what­ever you’ve been wait­ing for, the oppor­tu­nity to show off, put that into your non-job. Make it part of your daily life.

5 Steps to Non-Job Success

  1. We can change what we do, but we can’t change what we ENJOY doing. The non-job is for us, not for credit. So do some­thing fun, some­thing enjoy­able, some­thing that takes you to a flow-state.
  2. You prob­a­bly already know what your non-job should be, so give it some of your time. Make it your prac­tice, your cre­ative prac­tice. From now on, con­sider your­self a painter or dancer, as much as a lawyer, or mar­keter of mag­a­zine ads. We are artists as long as we practice.
  3. Break some rules. Exper­i­ment. Enjoy it. Dis­cover how you like to work, when you’re non-jobbing.
  4. Gather evi­dence of your art and share it. Again, not for the credit, but because our crafts have mean­ing in them and mean­ing is for shar­ing. Shar­ing mean­ing is always a gift, regard­less of how much it is appre­ci­ated. And it feels good to give gifts. So sell it on Etsy. Start a pho­tog­ra­phy blog. Wrap it for Valentine’s Day. Some­thing. Get it out there.
  5. Finally, be grate­ful about it. Now that you’re a suc­cess­ful dancer, who’s work has been viewed by lit­er­ally tens of peo­ple :) around the world, find a way to encour­age oth­ers. Be involved in your new com­mu­nity. Say some­thing to your tribe about how you work. Explain your crazy moves. This helps to build com­mu­nity around you and that keeps you going.

If you’re lucky, even­tu­ally, maybe your non-job will pay the bills too. But that can take years. In the mean time, you don’t need to be starv­ing to be an artist.

So, this year, take time for your non-job. Take time to develop a new cre­ative prac­tice. It’s a great way to put into your life what­ever it is that you’re miss­ing: to make sense of the world, gen­er­ate com­mu­nity, break rules, feel suc­cess­ful, express your­self, explore, to feel an increas­ing sense of mas­tery, to experiment.

And it feels good too.

(Today’s bril­liant pho­tos are care of this per­son and this person).

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The Far-Better Way to Make New Year’s Resolutions

December 26, 2009

Who does res­o­lu­tions any­more? We are all sophis­ti­cated and smart enough to know we can­not be fooled. Not again. (If you’ve ever pur­chased a 12-month gym mem­ber­ship, you know what I’m talk­ing about.) We’re wise to our own ways.

Just trust me for a moment and I’ll show you that res­o­lu­tions can actu­ally work. This process can be enjoy­able; it can be pain­less and if you fol­low these sim­ple steps you’ll soon be push­ing your credit card over the counter at another fit­ness centre.

Here are the steps I’ve fol­lowed since I was 19 and they’ve always worked pretty well for me.

Step 1

Start nice. Rather than jump­ing right into it and beat­ing your­self up about that tubby waist­line of yours, we’re going to come at this from a dif­fer­ent direc­tion entirely. Let’s start with a fond look back over the past year. Ask your­self some nice ques­tions. Has this been a good year? What was the best thing about this year? What am I so glad I did? Is it kind of sur­pris­ing how much I was able to do in just one year?

Start­ing smooth like this is the most impor­tant step in the whole process. You’ve worked hard this year. You deserve a lit­tle appre­cia­tive self-talk. This will also remind us how good our lives really are, which makes us happy. And, it’s giv­ing us valu­able insight into what makes a good year, for us.

If this hasn’t been the best year, think of the best times you’ve had in your life in general.

Flora quote

Step 2

While your brain is in this happy place, notice what you’re really happy about. What kinds of thing do you really appre­ci­ate? Again, what is a good year for you?

If it helps, a good year for me involves some­how grow­ing closer to my fam­ily and friends. It involves learn­ing and shar­ing mean­ing, and try­ing to be gen­er­ous –to build my com­mu­nity. This is how I think of a good year.

Step 3

If you haven’t already writ­ten some­thing down, now’s the time. Instead of writ­ing a big to do list, try writ­ing down a cou­ple of tips for how to live a good year. Some lessons learned.

Daphne at Joy­ful Days has taken this a step fur­ther and writ­ten her own per­sonal creed: Think deeply. Speak gen­tly. Love much. Laugh a lot. Work hard. Give freely. And be kind.

Gretchen at the Hap­pi­ness Project has writ­ten down her per­sonal com­mand­ments: Be Gretchen. Let it go. Act the way I want to feel. Do it now. Be polite and be fair. Enjoy the process. Spend out (by which she means to stop hoard­ing and to ‘trust in abun­dance’). Iden­tify the prob­lem. Lighten up. Do what ought to be done. No cal­cu­la­tion. There is only love.

My creed is hid­den in Step Two.

Step 4

If this isn’t enough for you and you want to write some REAL res­o­lu­tions, then now is the time for that. Go ahead and write them.

My advice, as always, is: “Be good to your­self” Is, what you writ­ing down on paper, what you REALLY want to do, or just what you think you will want to HAVE DONE. Make your gains as pain­less as possible.

Step 5

Have you for­got­ten some­thing? Briefly think through the major areas of your life: hap­pi­ness, health, finances, rela­tion­ships and lifestyle. Are there any cor­rec­tions you should make?  (I.e. should you start sav­ing for retirement?)

And there you have it.

Step 6 (read only in case of failure):

If you’re back to your naughty ways again by Feb­ru­ary, don’t worry too much. (I know this doesn’t apply to you, but it might help the other guy read­ing this. Any­way, I told you only to read this part in case of fail­ure). There is a rea­son we do this every year.

If you’ve done Steps 1 to 5 and you’re sure your goals and/or creed are right for you, then yours is a moti­va­tion prob­lem. Step 6 is here to help.

Lack of moti­va­tion means either you don’t have a clear pic­ture of what you want or you don’t have a clear pic­ture of the con­se­quences of fail­ure. We’ll fix this with two more activities:

Pos­i­tive moti­va­tion:

Develop a clear pic­ture of the better-future, when you’ve reached your goal. You’re pub­lished author and you can hand out your own book as a Christ­mas present next year, look­ing jus­ti­fi­able proud of what a genius you are.

Neg­a­tive motivation:

Now focus on the worse-future if you don’t meet your goal. You feel like a com­plete fail­ure, in writ­ing as in every­thing. You are not the per­son you thought you were after all. You are unwor­thy of love. This is manip­u­la­tive, but it’s okay because you are the one manip­u­lat­ing your­self. You are only doing this to help.

Now you should under­stand why your res­o­lu­tions are impor­tant and be well on your way to los­ing that big tum of yours.

Happy New Year!

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Julie and Julia: A Friendship Made in Hollywood

December 20, 2009

** Spoiler Alert: This post is bet­ter read after you’ve watched the movie, prefer­ably right after. **
Yes­ter­day I watched the movie Julie and Julia. (It’s Christ­mas hol­i­days, don’t judge.) And it was rec­om­mended by my friend the diplo­mat, so I was watch­ing it for Queen and coun­try. For the most part it is a charming […]

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Caring Advice from Old People

December 18, 2009

Seth Men­achem is an LA direc­tor who, in his spare time, asks elderly strangers for advice. I grew up far away from my grand­par­ents and I’ve lived over­seas, away from my own par­ents, for a long time. Maybe this is why I love these clips from Life Advice from Old peo­ple.
These are two of my favourites:
:

Day-to-day […]

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