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 Career Goals (With Examples) How to Answer Behavioral Based Interview Questions Smartly 7 Best Project Management Apps to Boost Productivity 100 Incredible Life Hacks That Make Life So Much Easier 10 Best New Products That People Don’t Know About

            Trending in Money

            1 9 Millionaire Success Habits That Will Inspire Your Life 2 How to Set Financial Goals and Actually Meet Them 3 How to Develop a Millionaire Mindset in 6 Simple Steps 4 How to Eat Healthy on a Budget (The Definitive Guide) 5 Top 5 Spending Tracker Apps to Manage Your Budget Smart in 2020

            Read Next

            Advertising
            Advertising
            Advertising

            Last Updated on April 28, 2020

            9 Millionaire Success Habits That Will Inspire Your Life

            9 Millionaire Success Habits That Will Inspire Your Life

            As technology evolves and information becomes more accessible, it has also become more challenging to define success. A lot of people are trapped in the rat race while trying to discover the actual formula for success.

            You could become overwhelmed with what tools, techniques or philosophies to imbibe while trying to get tips over the internet. At every click and turn, there are ‘how-tos and quick-fix’ on how to become successful overnight. You will find several courses, articles, videos and books on how to achieve financial success.

            But what if I tell you it doesn’t have to be complicated as people made it out to be? What if you could achieve success by merely following these 9 millionaire success habits?

            1. Read for Personal Development

            A daily habit I have discovered millionaires share in common is reading. For instance, if you are an entrepreneur, you need to read to become an efficient leader and a productive business owner. Reading helps you to grow and learn without going to a business school.

            A research conducted by Thomas Crowley indicates about 85% of self-made millionaires read at least two or more books each month. [1] Warren Buffett is one of these examples. He spends 80% of his day reading. In the early days of his investment career, he would read 600 to 1000 pages in a single day.

            While millionaires sometimes read for pleasure, they also learn to improve themselves. They read topics on leadership, how-tos, self-help, biographies, lifehacks and also follow current events.

            Here’re some recommendations for you: 25 Best Self Improvement Books to Read No Matter How Old You Are

            2. Establish Multiple Sources of Income

            Another success habit I noticed about successful people is that they don’t depend on a single income source. Every millionaire possesses multiple sources of income. This helps them to manage economic challenges and also make more money.

            They are passive income addicts. They earn interests from loans, rental income from real estate, royalties from intellectual properties, dividends from investments. They also launch a side business or run a website or sell information products.

            How income is made either passively or actively is what separates the successful from the wannabes. They are always learning ways to build multiple streams of income.

            Advertising

            3. Live on a Stipulated Monthly Budget

            An average millionaire does not believe in luck and jackpot. They take the time to understand cash flow-income and expenses. Based on this, they establish a monthly budget and religiously stick to it.

            The essence of the budget is to minimize unnecessary expenses. This will help you gain complete control of your financial life. Budgeting helps you to avoid overspending to achieve your financial goals. Here’re some tips to help you stuck to your budget: 32 Hacks for Sticking to Your Budget

            4. Manage and Maximize Money

            The most significant education for a millionaire is financial intelligence. Nobody attains financial freedom without gaining financial intelligence. This is the more reason millionaire, regardless of their income, keep their knowledge about tax strategies updated.

            They always seek to reduce their tax bills. One approach they employ is by living or incorporating their business in states with no income tax.

            Do you know that about 60 companies paid $0 legally in the 2018 tax year? Some of these companies that ‘avoided'(note: not evaded) federal income tax include Chevron, Amazon, Halliburton, General Motors, Delta. Their US income was totaled at $79 billion with an effective tax rate of -5%.

            What’s the deal? They got a tax refund.

            How do they accomplish these?

            An ITEP report indicated that they have the culture of throwing huge sums at tax experts who assist them in discovering creative, as well as convoluted means of paying little tax as much as possible.[2]

            5. Avoid Debt

            Another habit that separates the millionaires from the rest of the world is how they manage debt.

            They don’t live an extravagant lifestyle; instead, they only buy what they need and can pay for. They do not book hotels and flights by using their credit cards to pay for them.

            Advertising

            They are conscious of the interest rates even when they use credits cards or take loans. If possible, they try to pay with cash because of its zero percent interest rate.

            6. Set Daily Goals

            It does not matter if they are setting up a business, a career, or financial projections; they have the success habit of setting short term goals. They plan daily and weekly goals to generate momentum in achieving their long-term goals.

            Ensure you prioritize when setting daily goals. This will help you to achieve the most important to-dos on your list.

            Setting priorities will help you to focus on highly rewarding activities. If you desire financial freedom, it is wise to pursue activities that earn you thousands of dollars rather than hundreds of dollars.

            7. Don’t Act Rich

            The goal is not to act rich but to be productive. Interestingly, Thomas Stanley buttressed in his book that for the most prestige brands of cars, about 86% percent are toys of the non-millionaires. While most believe that people with huge fortunes tend to drive exotic cars, in reality the largest consumers of pricey cars are aspiring millionaires.[3]

            According to findings by Experian Automotive Researchers, 61% of individuals who earn $250,000 or more rarely buy luxury brands. Instead, they buy Hondas, Toyotas, and Fords like the rest of the world. The reason is they are not ready to spend money on premium cars that tend to drop in value in a couple of years as it would cost money. Millionaires invest in assets that appreciate.[4]

            8. Own or Buy Businesses

            In Robert Kiyosaki’s cashflow quadrant, he divided how you earn income into four quadrants. The E and the S quadrants take the left position while the B and the I are on the right side. According to Robert, it is possible to be on all quadrants, but the millionaires are not.[5]

            • E stands for employee – they work for others
            • S stands for self-employed – they work for themselves
            • B stands for a Business owner- employees work for them (500 or more employees)
            • I stand for Investors – Money work for them like Warren Buffet.

            Your goal is to move from the left quadrant to the right quadrants where you own big businesses or make money work for you.

            It is possible to become financially successful by pursuing what you love. For instance, if you love writing, aspire to be the best seller. Wealth and passion work together.

            Check out How to Start a Small Business with Little to No Money for tips.

            Advertising

            9. Avoid Get-Rich-Quick Scheme

            A millionaire holds patience as an essential virtue. It takes patience to become successful, not only in finance but in every aspect of life. While it is possible to become financially successful at an early age, most millionaires hit it at age 50. They live a moderate life, invest in their future and retire rich.

            Bonus: How to Develop the Millionaire Success Habits?

            Having learned these habits, the next question is,

            How can I develop the Millionaire Success habits?

            Here are six values you will need to develop:

            Establish Your Life Vision

            You need to be clear about what you want in life to set yourself for a life of success. Your vision has to go beyond becoming a millionaire to understanding why you want to become one. Any great entrepreneur you will ever find has a clear vision and an established mission.

            Understanding why you are doing what you do will drive you to become the kind of successful person you want to be.

            Make Your Passion a Profession

            When your passion becomes your profession, work becomes pleasurable. Loving what you do enables money to flow to you and through you.

            So what’s going to be? Wake up every morning by speaking positive words into your work, love what you do, and focus on the work that brings you joy.

            Take a look at this article and learn how to make it happen: 5 Steps To Turn Your Passion Into A Career

            Focus on Solution

            Focusing on the solution means establishing the problem that you or your business address. This will help you focus on the solutions when others are faced with challenges.

            Advertising

            A millionaire has a mindset that is fixed on the solution. He or she knows there’s a way out, and that every problem is an opportunity in disguise.

            Improve your problem solving skills with these tips: 6 Effective Ways to Enhance Your Problem Solving Skills

            Develop Your Leadership Skills

            Leadership skills are an asset that is indispensable if you want to develop a millionaire success habit. The more you hone your leadership skills, the more you will attract leaders who share your values.

            Be Growth-Focused

            Millionaire entrepreneurs prioritize self-improvement. Here’s how to achieve it:

            • Get a coach. Coaching will impact your life, and you will achieve peak performance in life and business when you have a life coach.
            • Be coachable. It is not enough to have a coach; you must be coachable. Sometimes, you need feedback and counsel to reposition your life and business. A coach has the wisdom and experience to counsel you from a higher perspective. The more you receive feedback and work on yourself, the more you become better at what you do and who you are.

            Flip Your Thought Pattern From Acting To Being

            It is not enough to have a millionaire success habit, you must also become a person of positive influence. This is how you can become significant. Bill Gates is not only rich; he is changing lives in Africa and different parts of the world.

            If you want to become successful, you must first be and think like a successful person. This is how resources you need can flow into your life.

            Here’s a final thought from me:

            It is not enough to do something to have something; success is about being someone who possesses what is needed to take positive and inspired actions.

            More Success Habits

            Featured photo credit: Austin Distel via unsplash.com

            Reference

            Read Next