Thursday, August 16, 2007

The Online Millionaire Formula - and how it explains a "day job" as well.

There is a very simple formula for making yourself a millionaire:

niche x list x mailings = income

If you take out expenses, you are left with profit:

(niche x list x mailings) - expenses = profit

But how does this work.

Let's look first at how it doesn't -

A person has a job in a factory. He has one niche. He has one job and does one set of actions in that factory. Even if he has to do someone else's job, he is only paid for what he does personally.

So: 1 x 1 x 1 = 1.

This guy depends on the job (or his union) to wrangle pay increases for him. Otherwise, inflation keeps going (they're printing more money than they take out of circulation) and he makes "less" each year. More money laying around means people can charge more for stuff - supply and demand.

His supervisor is a bit better off, but not by much. Still has a single company (niche), a single job and a single set of duties - even if this is rearranging others to ensure the work gets done.

1 x 1 x 1 = 1.

So he gets a second job on the weekend: 2 x 1 x 1 = 2. He doesn't work as long or get paid as much on this "moonlight job" so the result is a little less than two.

As most people increase their budget to match their income, he's really not any better off. If he takes that extra income and pays down his debts, he's doing better, as his expenses get paid off and so his profits (available monies to save or invest) are better.

Now, that same person starts his own business instead of getting a second job.

Is it still 2 x 1 x 1? Maybe. If he runs it as a business and makes it bring in more income than it costs to operate, he will make more than 2. Reason being is that the government encourages taking tax deductions for that business (which is smart on their part). So his expenses go down and he makes more than he would with a second job (which takes more money out of his paycheck to pay more taxes).

Clearly, the government's policy is to encourage people to get out of earned-income jobs and start personal businesses.

In this last case, you keep building your business until it makes enough income to pay for your benefits and cover your take home pay (plus pay your Social Security - which doubles for the self-employed).

Once your business is going great guns, you quit your day job and have more profits. But wait, you still aren't going to be a millionaire. You're back to 1 x 1 x 1.

People like Robert Kiyosaki and Robert G. Allen have made their millions through mulitiple streams of income.

Kiyosaki and Allen both like real estate. If you took your profits and invested in one rental property, you are back to 2 X 1 X 1. Keep buying houses and you keep getting more income sources. If you keep investing in real estate or the stock market, or a joint ownership in another business, you will keep making more money - as long as each of these investment opportunities make a positive return (Allen says at least 10% per year).

Even saving 10% of your income from every paycheck would make you a millionaire by the time you retire, courtesy of the magic of compound interest.

Let's look at that second number.

In the information product line, you build mailing lists. As you find out more about these people, you can subdivide these mailing lists so you can send more accurate mailings to them.

If you only buy rental houses, you can say that you are in 2 niches (your job/business and your houses) and you have several houses in that second niche. So this could be 2 x 10 x 1 = 20. Again, this depends on your expenses versus your income to determine your profit. But it fits.

Now, lets move up to apartment complexes - that involves that third number. An apartment house has, say, 10 units. So you are 2 x 1 x 10 = 20. Apartment houses cost less to operate compared to rental (or should), so you are now making more than owning 10 hourses.

Buy another apartment and its 2 x 2 x 10 = 40.

Ok, having stocks runs the same. Its another niche. You buy various types of stocks and have various amounts of each. You fill in the numbers on this one - and you'll see that if you spread out your investments and always/only invest in growing companies (like Buffet), then you get exponentially more profitable.

Back to information products.

One niche, one list and a single mailing per week: 1 x 1 x 1= 1. Build your list and separate it into newbies, experienced, and top-end: 1 x 3 x 1= 3. Send three mailings per week: 1 x 3 x 3 = 9. Let's get your autoresponder working for you, and then get into another niche: 2 x 3 x 3 = 18. Keep this up until you get enough niches to keep you really busy: 10 x 3 x 3= 90.

Now instead of blowing all that profit on expensive cars and big-screen TVs, lets invest it in various other real estate, stocks/bonds, businesses: 20 x 20 x 30 = 1200.

See how this goes?

The more niches you enter into (and make darned sure they are all profitable), and the more of each/more customers you have in each niche, and the more you sell them your incredible product - the more you make.

You may say that this is simplified too much. But really, if you haven't grasped what I'm saying by now, either start over or turn the page. Life is actually quite simple, so is making yourself a millonaire.

Go ahead, stay in that one job for the rest of your life and spend every spare dime you can find on staying entertained and "happy". Retire to a fixed income which won't pay your bills and makes sure you stay at home instead of travelling the world or seeing your great-grandchildren graduate college. 1 x 1 x 1 = 1.

Or figure out how you can invest in yourself and low-maintenence income sources so you then get 20 x 20 x 30 = 1200. And have plenty of money to invest in your great-grandchildren's businesses (as long as they run them profitably). 40 x 40 x 40 = 64,000.

Millionaires are made by people who want to become a millionaire and then take the actions to do so.

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I'm figuring out how to become a millionaire from scratch.

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