Advertising
Advertising

You Only Have $5. What is the Best Way to Invest and Grow your Money?

You Only Have $5. What is the Best Way to Invest and Grow your Money?

The following answer by Visakan Veerasamy found in Quora teaches you how you can grow your money when you only have $5.

I remember reading Tina Sellig’s (executive director of the Stanford Technology Ventures Program) book- What I wish I knew when I was 20. (I don’t know Tina, though I wish I did, and I love her book.)

She gave her students the exact same problem. Here are her words, with my emphasis. If you don’t have time to read the whole thing, just skim and read the words in bold.

“What would you do to earn money if all you had was five dollars and two hours? This is the assignment I gave students in one of my classes at Stanford University, as part of the Stanford Technology Ventures Program…

Each of fourteen teams received an envelope with five dollars of “seed funding” and was told they could spend as much time as they wanted planning. However, once they cracked open the envelope, they had two hours to generate as much money as possible. I gave them from Wednesday afternoon until Sunday evening to complete the assignment.

Then, on Sunday evening, each team had to send me one slide describing what they had done, and on Monday afternoon each team had three minutes to present their project to the class. They were encouraged to be entrepreneurial by identifying opportunities, challenging assumptions, leveraging the limited resources they had, and by being creative.

las vegas

    What would you do if you were given this challenge? When I ask this question to most groups, someone usually shouts out, “Go to Las Vegas,” or “Buy a lottery ticket.” This gets a big laugh.. These folks would take a significant risk in return for a small chance at earning a big reward.

    lemonadestand

      The next most common suggestion is to set up a car wash or lemonade stand, using the five dollars to purchase the starting materials. This is a fine option for those interested in earning a few extra dollars of spending money in two hours.

      But most of my students eventually found a way to move far beyond the standard responses. They took seriously the challenge to question traditional assumptions—exposing a wealth of possibilities—in order to create as much value as possible.

      How did they do this? Here’s a clue: the teams that made the most money didn’t use the five dollars at all. They realized that focusing on the money actually framed the problem way too tightly. They understood that five dollars is essentially nothing and decided to reinterpret the problem more broadly: What can we do to make money if we start with absolutely nothing? 

      They ramped up their observation skills, tapped into their talents, and unlocked their creativity to identify problems in their midst—problems they experienced or noticed others experiencing—problems they might have seen before but had never thought to solve. These problems were nagging but not necessarily at the forefront of anyone’s mind. By unearthing these problems and then working to solve them, the winning teams brought in over $600, and the average return on the five dollar investment was 4,000 percent! If you take into account that many of the teams didn’t use the funds at all, then their financial returns were infinite.

      queuing up

        So what did they do? All of the teams were remarkably inventive. One group identified a problem common in a lot of college towns—the frustratingly long lines at popular restaurants on Saturday night. The team decided to help those people who didn’t want to wait in line. They paired off and booked reservations at several restaurants. As the times for their reservations approached, they sold each reservation for up to twenty dollars to customers who were happy to avoid a long wait. 

        As the evening wore on, they made several interesting observations. First, they realized that the female students were better at selling the reservations than the male students, probably because customers were more comfortable being approached by the young women. They adjusted their plan so that the male students ran around town making reservations at different restaurants while the female students sold those places in line. They also learned that the entire operation worked best at restaurants that use vibrating pagers to alert customers when their table is ready. Physically swapping pagers made customers feel as though they were receiving something tangible for their money. They were more comfortable handing over their money and pager in exchange for the new pager. This had an additional bonus—teams could then sell the newly acquired pager as the later reservation time grew nearer.

        fixing a bike

          Another team took an even simpler approach. They set up a stand in front of the student union where they offered to measure bicycle tire pressure for free. If the tires needed filling, they added air for one dollar. At first they thought they were taking advantage of their fellow students, who could easily go to a nearby gas station to have their tires filled. But after their first few customers, the students realized that the bicyclists were incredibly grateful. Even though the cyclists could get their tires filled for free nearby, and the task was easy for the students to perform, they soon realized that they were providing a convenient and valuable service. In fact, halfway through the two hour period, the team stopped asking for a specific payment and requested donations instead. Their income soared. They made much more when their customers were reciprocating for a free service than when asked to pay a fixed price.

          For this team, as well as for the team making restaurant reservations, experimenting along the way paid off. The iterative process, where small changes are made in response to customer feedback, allowed them to optimize their strategy on the fly.

          Advertising

          lecture theatre

            Each of these projects brought in a few hundred dollars, and their fellow classmates were duly impressed. However, the team that generated the greatest profit looked at the resources at their disposal through completely different lenses, and made $650. These students determined that the most valuable asset they had was neither the five dollars nor the two hours. Instead, their insight was that their most precious resource was their three-minute presentation time on Monday. They decided to sell it to a company that wanted to recruit the students in the class. The team created a three-minute “commercial” for that company and showed it to the students during the time they would have presented what they had done the prior week. This was brilliant. They recognized that they had a fabulously valuable asset—that others didn’t even notice—just waiting to be mined.

            Tina was trying to teach her students something. And she gave them a powerful gift she helped them see for themselves that they were boxing themselves in with limitations.

            Yes, a lawyer could make money just working a couple of hours. Yes, it takes time and physical effort to make money. But what are the assumptions you’re making in your daily life? What are you not looking at? What have you taken for granted?

            Anybody can ask you those questions, but not everybody can set you up and put you in a place that makes you most receptive to appreciating the full power of those questions.

            If you can tell me that you go about your life questioning every assumption and leveraging every hidden advantage, sure. But are you? What would it take to get you to start doing that?

            Advertising

            More by this author

            Brian Lee

            Chief of Product Management at Lifehack

            How to Set Ambitious and Achievable Career Goals (With Examples) Best Chrome Extensions to Get Things Done Faster 24 Best Habit Tracking Apps (2018 Updated) How to Make Money Fast: 10 Easy Ways to Make Money in the next Hour This is How The Use of Emojis Can Shape Our Impressions

            Trending in Money

            1Top 10 Recommendations on Money Management Apps 2How Much Should I Spend on Rent? Find Your Answer Here 3How Much Money Do I Need to Retire? Find Your Answer Here 4The Ultimate Guide to Make Saving Money Fast and Easy 56 Easy Ways to Treat Yourself

            Read Next

            Advertising
            Advertising

            Published on July 4, 2018

            Top 10 Recommendations on Money Management Apps

            Top 10 Recommendations on Money Management Apps

            Don’t want to overspend your budget, swipe your credit card too many times, and feel like a financial mess? Instead of beating yourself up for the bad financial decisions you’ve ever made, create a new plan!

            The solution is simple, save more and spend less. But, we all know it’s easier said than done.

            One problem is finding quality apps that save you time and money, and aren’t just hype.

            Luckily, there’re many great money management apps available at your fingertips. Here are 10 reliable money management apps that can help you save money, and crush debt.

            1. Personal Capital

              When was the last time you’ve tracked your net worth? Probably months ago or maybe never. Personal Capital allows you to easily track your net worth and plan for retirement.

              Here are some of its main features:

              • Sync many investment accounts, and expenses (mortgage, credit cards, etc.) in one place
              • Discover hidden fees and how much they’re affecting your retirement plan
              • Wealth management for investors requiring a long-term strategy

              With Personal you’re free to track your expenses and net worth.

              Available for: iOS and Android

              2. Mint

                If your smartphone could only install a few apps, Mint would be one of them. Why? Because Mint tracks all your balances and bills in one place.

                Here are some of its main features:

                Advertising

                • Effortlessly track all your bills and balances in one dashboard
                • Categorized expenses to understand where you spend your money
                • Uncover hidden fees, and determine your investment style with sophisticated retirement tools.

                Feel at ease with managing your money by a reputable company that isn’t going anywhere.

                Available for: iOS and Android

                3. YNAB

                  Everyone needs a budget, there’s no way around it. YNAB (You Need A Budget) is an easy to use app that will change the way you think about money. Their motto is to “give every dollar a job”, and you’ll quickly discover why.

                  Here are some of its main features:

                  • Easily sync all bank accounts in one place
                  • Visually see your debt paying progress with eye-catching charts and notifications
                  • Customized categories setting saving goals

                  The best part about YNAB is the community that comes along with it. You can hop on the YNAB forum to receive support, listen to the YNAB Podcast or stay tuned for their weekly videos.

                  Available for: iOS and Android

                  4. Wealthfront

                    Albert Einstein once said “compound interest is the eight wonder in the world”, and for a very good reason. The problem is, most people are scared or unwilling to learn the basics of investing. This is why Wealthfront is the perfect solution for the hands-off investors.

                    Here are some of its main features:

                    • Variety of investment account options including IRA, Roth IRA, and more
                    • Your portfolio composed of 7 different asset classes
                    • Automatically rebalanced portfolio
                    • Daily tax loss harvesting

                    Wealthfront is perfect for people requiring investment guidance, or prefer a hands-off solution.

                    Available for: iOS and Android

                    Advertising

                    5. Clarity Money

                      If you’re staying on top of your budget but want to take your finances to the next level, Clarity Money can help you. Clarity Money helps you stay under budget and build a personalized savings plan.

                      Here are some of its main features:

                      • Easily cancel subscriptions with one click
                      • Synchronize bank accounts fast
                      • Transfer money effortlessly between different accounts

                      Clarity Money isn’t an app that does it all. But, it does make transferring money and canceling subscriptions fast and efficient.

                      Available for: iOS and Android

                      6. Acorns

                        What if there was a way to quickly gain confidence in investing your money, without too much risk? There is, and Acorns is your solution. With Acorns’s technology, you’re able to make investments as small as $5.

                        Here are some of its main features:

                        • Automatic contribution option
                        • Customized portfolio tailored to your needs
                        • Low management fees ranging from $1-$2 per month

                        Stop wasting dollars on expensive coffee. Instead, invest them towards a brighter financial future.

                        Available for: iOS and Android

                        7. Albert

                          Do you budget by only subtracting your expenses from your income? If so, how would you discover any overpayments or extra money you could save? This is where Albert shines, and it does it all free.

                          Advertising

                          Here are some of its main features:

                          • Receive notifications for overpayments, hidden fees, and low balances
                          • An Automatic budget that’s built around your spending and income
                          • Easily track debt and set new financial goals

                          While Albert does offer a paid option, most of its core features are FREE. So, what better option to save?

                          Available for: iOS

                          8. Prism

                            Have you recently forgot to pay a bill because life got in the way? Prism automatically tracks your bills and syncs your bank accounts in one place.

                            Here are some of its main features:

                            • View all your account balances in one glance
                            • Bill due dates are automatically pulled and tracked
                            • Receive early reminders for upcoming bills

                            If your budget is on “fleek” but can’t seem to stay on top of your bills, Prism is your go-to app.

                            Available for: iOS, Android, Windows, Amazon

                            9. Mvelopes

                              Remember hearing about people using envelopes to budget their money? Well, Mvelopes is the new envelope system for this generation. Easily create monthly budgets and track your saving goals.

                              Here are some of its main features:

                              • Connect unlimited bank accounts
                              • Real-time budgeting with auto transaction syncing
                              • Low monthly $4 fee or $40 annual

                              Mvelopes can help you crush debt, save more, and help you stop overspending. With its low monthly fee, it’s worth a try.

                              Advertising

                              Available for: iOS and Android

                              10. Wallaby

                                Most people don’t have time to track their credit card’s changing rewards and interest rates. Because of this, you need help reaping the most of your credit card’s rewards. Wallaby is the app that will help you do just that.

                                Here are some of its main features:

                                • Automatic recommendations for the best credit card to use for each transaction
                                • A friendly user interface, displaying credit cards with their corresponding images
                                • Free to use

                                If you’re using the same credit card to make your purchases, you may be leaving money on the table. Give Wallaby a try if you’re ready to maximize your credit card’s rewards.

                                Available for: iOS and Android

                                Take control of your finances and experience financial freedom

                                Picture yourself staying on budget and saving more money than you’d ever imagined.

                                It took hard work and dedication but you’d finally learned how to manage your money. You have to start taking control of your spending and saving habits.

                                You now have a list of reliable apps that can help you build better money habits, what are you waiting for?

                                Featured photo credit: Pexels via pexels.com

                                Read Next