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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.

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          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?

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            Brian Lee

            Chief of Product Management at Lifehack

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            Published on September 17, 2018

            How Being Smart With Your Money Leads to Financial Success

            How Being Smart With Your Money Leads to Financial Success

            Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

            With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

            So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

            1. Avoid being “penny wise but pound foolish”

            It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

            You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

            So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

            2. When you want something big, wait

            Impulsivity can get you in trouble in most aspects of life. Finances are no different.

            It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

            We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

            A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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            So, you get the itch.

            You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

            Here’s where you have to take a step back.

            Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

            Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

            It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

            The impulse faded. And you just saved yourself a ton of money.

            3. Live smaller than you can afford

            You finally get that big raise. And you want to celebrate – and why not?

            You’ve been looking forward to this forever. And after all, it was all due to your hard work.

            That’s fine, splurge a little. However, make it a one-time deal and be done.

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            Don’t get caught in the trap that just because you’re now making more money, you should spend more.

            Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

            The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

            But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

            4. Practice smart grocery shopping

            Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

            But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

            Create a grocery budget

            Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

            Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

            I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

            Make a list… and never deviate

            Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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            You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

            These impulse decisions will lead to overspending, which will derail your grocery budget.

            Eat before going grocery shopping

            It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

            If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

            After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

            Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

            However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

            This makes it much easier to stick to your grocery plan.

            5. Cancel your gym membership

            Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

            The average gym membership costs around $60 per month. That’s $720 a year.

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            Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

            I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

            Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

            Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

            For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

            Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

            There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

            It’s baby steps… And baby steps can start now!

            I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

            Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

            The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

            Featured photo credit: Unsplash via unsplash.com

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