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5 Ways to Make Money

You miss 100% of the opportunities you don’t take. You’re rejected by 100% of the girls you don’t ask out. If you are afraid of failure, then you’ve already failed. Those who dare to fail greatly, often achieve the greatest success. Life is too short not to take risks. So take that opportunity. Ask out that girl. The only thing standing in your way is fear. And the only thing we should fear, is fear itself.

Over 2 years ago, I wrote a post describing how if you live modestly, graduate debt free, have dual incomes with a spouse, and invest in stocks and real estate, you could be a millionaire by age 36. That is completely doable. To me, money is something that takes a while to save up, but once you work enough for money, you can get money to work for you.

I was born into a relatively poor family. My dad was a farmer and my mom was a city girl. We luckily had the opportunity to move to Canada when I was young. But even then, my dad had to work very hard to make ends meet. It wasn’t easy for us. My parents had to work hard to get where they are. And when I see today’s international students, sent to America from China/Korea/Japan, loaded with cash and whose parents invest in real estate and buy expensive cars for them, I don’t think they realize how money is made. When you are born into wealth, you don’t know how to make money. When you start from the bottom and work your way up, then you know how to earn money.

1) Study a major and find a job that is in high demand. According to this article, the best jobs right now are Nursing and Software Development. Therefore, you should study Computer Science or Medical Science, because those fields are in high demand and have high salaries. This is the first step. Find a good occupation. Making enough initial capital requires working for several years to save up money.

2) Invest your money. Invest your money in a basket of risky and non risky assets. Ideally, invest 75% into stocks (small cap and mid cap) and 25% into government bonds. Bonds are guaranteed returns, so they are always safe. Stocks will provide high return but require more risk. Each paycheck, after the necessary budgets are accounted for, should go into investing. This is how your money will make more money. As you get older, shift more into bonds / T-bills, so it becomes safer.

3) Buy real estate. Now is a great time to buy real estate. Houses are very cheap right now, because of all the foreclosures and the recession. Investing in real estate means you can repair the house and furnish it, then rent it out, and hire someone to manage it for you. You can buy many properties this way, and ones in favorable locations such as Florida, Hawaii or SoCal will have high demand. Trouble is, real estate requires a lot of initial capital to work with (several hundred thousand), but property has historically been the best way to accrue wealth.

4) Start your own company. Entrepreneurship is risky, but rewarding, especially for software engineers and web developers. It’s very easy to start a web business, develop a web or mobile application, develop a facebook, xbox or iphone game, and start making money off it. Find a niche for your product that caters to people. Market it. Develop it. Expand it. There is great consumer demand right now for mobile applications, mobile games, and for emerging markets like India and China. These can all be exploited (for example taking an idea abroad). The opportunity is out there, but it requires a lot of time, effort, money and risk to do this.

5) Use your talent to become famous. This is the most risky method. But there are those lucky few who have the God given talent and/or good fortune to become discovered. Musicians, Composers, Comedians, Actors, Writers, Directors, Athletes all fall into this category of making money. Lately it has become easier because of Youtube to become discovered, but still very rare. However, if you have a unique talent such as singing or writing songs, acting, or playing football, this method will easily lead into the millions of dollars. Usually only charismatic people can make money this way, and it requires a lot of skill and luck.

And that’s 5 ways to make money! A person could conceivably, have all 5 ways at the same time. You could be a superstar who is working a day job on the side, investing in real estate and stocks, AND having your own company! Read Think and Grow Rich for more details on growing wealth. The most important thing, I think, is that people think money is the solution to all of life’s problems. Money cannot mend a broken friendship. Money cannot bring back a deceased family member. Money cannot get you the girl of your dreams (unless that girl is materialistic). Money cannot make you more charismatic. Money cannot make you taller, younger or more handsome. Money cannot make you undo your past mistakes. Money cannot cure cancer or other such diseases. Money is merely a means of surviving, and it’s not as difficult to earn it as people think. And most of all, Money cannot buy love or happiness.

Entrepeneurship

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All my life I’ve wanted to be an entrepreneur. When I was a kid, I’d tinker around with all sorts of things to try to find a solution to what I perceived to be a problem. In middle school, I must’ve made a ton of quite useless inventions, including a retractable pencil and a pencil that had multiple objects that can be attached or detached to it including compasses, erasers, etc. During high school, I made various websites and thought about having a unique forum based website where downloads and information can be all contained in a forum rather than the conventional header – div/table – footer way of navigating a site. So in a way, I believe that I am quite unlike my parents in that I didn’t want to work for anyone, I wanted to be at the helms of management. I have not succeeded yet, but I will continue trying until I do. There is a few things I’ve learned on this path towards trying to be successful. I will share them here:

1) It isn’t about a creative idea; it’s about a creative way method of utilizing that idea.

Everyone tries to look for the next billion-dollar idea. They try and become the next Google or Facebook or Apple. But I can tell you that most successful business ideas were not original. They are replicating a previous business idea – and utilizing it in new ways. Google was not the first search engine but they did utilize a new method of ranking pages based on backlinks. Facebook became popular because of its organized, user friendly layout. It was not the first social network. Myspace and Friendster had all existed before Facebook. Even Apple did not design the first successful computer. Apple took the idea of GUI design from Xerox PARC. If we go all the way back to Ford motor company’s success, they did not invent the automobile, but utilized a new way of assembling them to reduce cost and offer them to the average American. Execution is key.

2) Passion is important.

Steve Jobs mentioned in his commencement address, and it’s quite true, that passion is the key to overcoming the barriers. If you were not passionate about your business, then there is no way you would be sane enough to dedicate your time and energy towards making it succeed. When you are passionate about your business, you will think of good ways to market it, to implement it, and to make it succeed. Drive is the most important part of character. GPA has nothing to do being successful. It’s all about character.

3) Network, connections and capital.

Where you are located is important. I mentioned before how Silicon Valley tends to contain the most number of high tech startups. It’s no wonder – the environment and the connections that are there all contribute to new ideas. The pool of talent that exists where you are allows you to build a better company. With the right people, and the right investors at your disposal, the success of your business becomes more likely. The reason is simple – money is an enabler – it allows you to do more with it, like hire the right people and promote in the right places. The right people in the right places enable you to gain more connections. The more connections, the more publicity and the more people that want to work with you. It’s a cycle that eventually leads to a talented business, but only combined with the other two points.

In short, opportunity begets more opportunity. If my life is short – I want to take some risks, and one risk is to be an successful entrepeneur – eventually.

How long does it take someone to be a millionaire?

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A millionaire is, by definition someone who has a net worth of $1,000,000 or more, not necessarily liquid assets. But I’m also interested in seeing how quickly the average man can become a millionaire if he’s really frugal.

So I made some sample data which obviously requires some estimates and assumptions.
Here are the assumptions:
-The man is a university graduate.
-The years start counting from when the man is 25. (so year 1 means the man is turning 26, has worked one year)
-The man gets $2000/paycheck, after taxes. I think this is fair considering I’m 23 and this is my paycheck. There are 26 paychecks in a year, totaling $52,000 in net income.
-The guy is very frugal. He spends only $150 a month on entertainment/clothes/gifts.
-Budget for food/groceries a month is $250, conservative yet doable.
-Interest and cellphone budget around $100.
-The guy doesn’t pay rent. He lives at home with his parents (so no other bills).
-He doesnt have a car, he takes public transportation which is about $100/month.
-He doesn’t have any investments, in fact he puts it all in an IRA.
-He doesnt plan to marry or have kids.

Here is the graph:

He becomes a millionaire at 48.

So, it takes him 23 years to save up a million dollars.

That’s a bit boring though, who wants to live like that? Here’s a more interesting graph with more assumptions:

They become millionaires at 36.

So, the average man is not that frugal, but still wants to save money. His expenses are much like the guy above, except he purchases a car, stocks and eventually a house and gets married. But here are some more assumptions:
-Spouse’s income is 93% of the male’s according to trends. She also owns a car but doesn’t purchase stocks.
-Average cost of US home is $176,000 and average age of homebuyer is 31. Property taxes are about 1.3% of the value.
-S&P average annual returns over 10 years – about 8%. Houses increase about 3.75% each year annually (these are all data from Google searches).
-They don’t have kids yet and graduated debt-free.

So, actually your combined net worth with your spouse could be $1 million when you’re as young as 36. That’s if you live modestly, because I’m not accounting for alot of other expenses (such as going back to school or home furnishing) that may occur, various tax credits or inflation, but it’s doable. And It’s way more efficient to marry and invest than to save by yourself.

Edit: Ok so maybe $2000/paycheck is a bit high. But working two jobs, it can definitely be done. And I didn’t say it was going to be easy . I have another graph here, so this time I’ll make the situation more plausible. The average starting salary in my field (IT) is about $55,000. So after Ontario taxes, that amounts to take home pay around $42,000. So after figuring that in the equation, let’s see how long it takes for the man+spouse to get combined net worth of 1 million+:

$1,000,000 net worth reached at 41

So after that income adjustment, you can see that it takes 16 years, so they will still be millionaires at age 41 if they live frugally. In short – save more, spend less. Some people think getting a million is really hard, but in actuality it just requires hard work, dedication and lots of saving.

Edit #2
At the time of writing the post, I was 21 and living in Canada. I’m now 23, living in California and indeed my paycheck is $2000, two times a month. So, completely doable in my field.

Edit #3:
I’m been on a Beatles spree lately. Here’s some reuploaded songs: