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

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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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            Last Updated on July 20, 2021

            Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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            Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

            Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

            Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

            Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

            In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

            Break Free of Your Finances

            Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

            When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

            Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

            Though it seems hard to believe, it is really very simple to get financial freedom.

            To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

            While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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            Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

            1. Stop Unnecessary Spending

            We often spend money inwardly, instead of objectively.

            For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

            To stop this habitual spending, log down all your spending over the course of a month.

            Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

            This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

            2. Plan a Monthly Budget

            This is a great opportunity to get serious.

            Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

            Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

            3. Cut-up Credit Cards

            Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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            If not, you may want to consider ridding your life of the burden that credit cards bring.

            Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

            Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

            4. Increase Savings

            There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

            It’s good practice to save up to 15% of your income.

            Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

            Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

            5. Invest Wisely

            Consider investing in funds.

            Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

            To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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            Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

            6. Invest in Gold

            There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

            You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

            Another way to invest in gold is through ETFs (Exchange Traded Funds).

            These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

            With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

            7. Stash Emergency Funds

            Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

            If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

            Make it hard to get your cash.

            Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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            8. Find Fabulous Mentors

            Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

            If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

            There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

            9. Be Extra Patient

            Patience is the key of financial success.

            Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

            So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

            Financial Freedom for All

            Anyone can achieve financial freedom, regardless of their financial circumstance.

            Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

            Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

            Featured photo credit: rawpixel via unsplash.com

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            Reference

            [1] Hartford Gold Group: IRA Retirement Accounts

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