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MILLIONAIRE MATH: Explained

24 May 2020

Millionaire Math: The way rich people think about making money!

Ever heard the term “Millionaire Math”? If you didn’t, this is your lucky day!

Most of you are looking to cross the first milestone in your financial journey, that of making your first million dollars, but every time we meet young and passionate investors, we realized they never actually look into the numbers related to their goals.

Everybody just wants to be rich, but nobody wants to get there $1 at a time.

And this is why it isn’t working that well for you!

In this one, we’re doing the hard work for you! Nobody is giving this much value as you’re about to receive in this article so pay attention and do yourself a favor and take notes.

We even made a video on Millionaire Math if you don’t feel like reading this long article:

Here are more than 15 examples of millionaire math!

1.

Earn it as salary

Believe it or not, most people will earn over 1 million dollars in their lifetime.

The average person can earn $50,000 per year for 20 years and that’s your million.
The thing is, most of them have to deal with the cost of being alive so they never notice the money.

There are many jobs that pay incredibly well.

If you earn 100,000 dollars per year… it’s enough to work for 10 years to hit the million dollar mark.

If you’re really good at what you do, earning at least 250,000 dollars per year isn’t out of reach, getting you to that 7 figure territory in only 4 years.

If you want to earn more, go where the money is!

Here are 5 jobs that can earn you over $250,000 a year.

1. Finance. – 100,000 dollars a year is a starting salary for the top people working in finance. Get a job with a hedge fund and do it right and the end of the year bonus could be over 1 million dollars.

2. Law – the more valuable the client, the bigger your retainer & paycheck.

3. Medicine – Plastic surgery has been booming for the past decade and with the push from social media, you can easily earn more than $250,000 a year.

4. Technology – internet security, important positions in tech companies, they all pay incredibly well.

5. Oil & Gas – Drilling is your go to segment here. Although the industry pays well, you need to be smart about your focus if you want to earn the big bucks.

High salaries are reserved for the people who are really good at what they’re doing. If this is your way to go, please remember:

People will pay you in direct proportion to the problems you are able to solve for them!

2.

Invest $100,000 in a S&P500 index fund for 25 Years

The average return of these index funds has been a little over 10% a year consistently.

Most Aluxers should be able to set aside $100,000, invest it in an index fund like Vanguard and pretend the money was never there.

If you do it when you’re fairly young, by the time your child grows up, you could make him a millionaire – or, you could simply take it out 25 years from now and travel the world as your retirement.
Here are the best 5 funds in our opinion right now, that almost everyone can access:

1. Fidelity ZERO Large Cap Index

2. Vanguard S&P 500 ETF

3. SPDR S&P 500 ETF Trust

4. iShares Core S&P 500 ETF

5. Schwab S&P 500 Index Fund

Just google them and go from there.

If this is the way you wanna go about it, please remember:

Time will pass either way, allow it to make you rich in the process!

3.

Sell 100,000 self-published books at $10 each

The average price for a self-published book is $9.99. Today, you can learn how to do it on the internet, it doesn’t cost you much and you get to keep most of the money.

If you go through a publishing company the math gets a lot more complicated. Here’s what the industry standard is for a brand new writer that gets picked up by a publishing house:

Advance: $10k
6–10% of the book sales—usually in two-tiers, a lower percentage up to 10k copies, 1–2% higher after that
20–30% of the ebook sales

Bring it all together and you’re keeping around 15% of the price the customer pays for the book.

To get to your million dollars this way, you will need to bring in over 6.5 million dollars in sales, at $15 a book, that means you should sell roughly 440,000 copies.

The mistake most amateur authors make is that they believe people will simply want to buy their books out of the kindness of their hearts. But people have no idea who you are.

Writing a book is the easy part! Getting hundreds of thousands of people to buy it is the real skill!

4.

Double a $1000 investment 11 times.

If you want to be rich, you need to learn the art of doubling money. This has very little to do with gambling or luck – since we know that was the first thing that came to your mind.. Stop thinking like that.

Instead, put aside $1000 and figure out how you can double the amount you have.

The 2 most common ways to do this are:

1. Flip goods – buy cheap, move the product, sell to for higher price (then repeat)

2. Buy tools – use tools to provide service – use the new money to buy more tools and repeat

If you really want to test if you’re actually an entrepreneur or just pretending to be one, test yourself by doubling money in different ways.

Everybody can make money if they have a lot of it, the challenge is to make money when you have very little of it.

5.

Put $200,000 as down payment for a Million dollar property

What we’re about to tell you will shock most of the community, but you can go from 0 to 1 million dollars worth of real-estate property in 7 to 8 years and there are more than 1 way to do this. People are actually building wealth through real-estate all the time.

15,000 dollars as down payment and a steady job allows you to purchase a $100,000 property over 30 years.

This is why the most important thing you need to need to understand about money is CREDIT and your ability to leverage it to build wealth. If banks trust you to be able to pay back, they will give you money.

In most countries, a 20% down payment is acceptable by the bank. If you’re unable to pay back, they simply take the property away from you and resell it.

50,000 dollars -> gets you $250,000 worth of property

100,000 dollars -> gets you $500,000 worth of property

200,000 dollars -> gets you 1 million dollars worth of property.

We’re going to simplify the process as much as we can so pay attention. Here’s how millionaire math works when it comes to building wealth through real-estate:

You save $200,000 dollars and purchase a $1 million dollar apartment complex of 10 units.

You’re left to pay $800,000 over 30 years.

30 years times 12 months per year = 360 monthly payments in total.

Your mortgage is 800,000 / 360 = 2200 per month.

Each of the 10 units rents out at $1000 a month – meaning your investment is bringing in 10,000 dollars every month.

Your monthly costs are $2200 for the mortgage + let’s say 2800 dollars in maintenance, utilities and insurance – that’s $5000 worth of expenses in total.

After paying your expenses every month you’re left with an extra $5000 (rents: 10,000 – expenses $5,000). This is called cash flow. – if you wanted you could simply live off of this money on top of the property paying for itself.

You could use the 5000 dollars to pay the mortgage quicker – on top of the 2200 dollars you’re already paying, which would mean you would completely pay off the loan in 8 years and change.

& that my friend is how you turn $200,000 dollars to 1 million dollars in 8 years.

To keep this example simple, we rounded up the numbers and we brought together the interest the bank charges and the appreciation of the property which ball-park cancel each-other out.

If this got you a bit confused and excited at the same time, we recommend you pick up  The Book on Rental Property Investing by Brandon Turner. Out of everything out there it’s probably the best all-rounder on the topic + we’re fans of the bigger pockets podcast.

6.

Teach 10,000 people a $100 skill

People are willing to pay for your knowledge. We want to accelerate our growth and there’s no quicker way to get there than have someone who’s been doing it for years showing you the ropes.

This is why eLearning is picking up speed. People don’t want to waste time going through all the bullshit in order to get to the good stuff and they’re willing to pay for it.

Find a valuable enough problem that you can solve for people and they will gladly pay for the solution.

If you can’t deliver $100 worth of value, settle for less. You can see it on Udemy all the time.

For example, there are courses on Udemy like Microsoft Excel for Beginners which sell for only $10 to 20 dollars, BUT over 400,000 people purchased it. At $10 a pop, that’s 4 million dollars in revenue generated by a single teaching experience.

No matter what you do in business you need to understand this fundamental rule:

A transaction takes place when the value for the customer is higher than the asking price!

7.

6,500 People Pay $12.99 a month for a Year

This is the standard Netflix model. Subscriptions are a big part of the modern economy.

Your service should be valuable enough for people to buy-in and stick around.

In order to get to a million a year in revenue, you will need:

16,600 people to pay $5 ever month for a year. – this is what Apple arcade charges

8,300 people to pay $10 per month – this is what Spotify premium charges

Or

4600 people to pay 18 dollars a month – which is what we’re currently paying for YouTube Premium’s family plan.

The average american spends approximately 110 dollars per month on subscription services!

Subscription boxes were a fad a couple year ago, but as you can tell they’ve toned down quite a bit. Yes dollar shave club and blue apron are still around, but they’re no longer as aggressive as they used to be.

If you were to start fresh right now, a subscription service would work for:

1. Automation – people pay to automate things in their lives

2. Hassle free entertainment – do not disturb me while I’m being entertained

3. Part of a unique community that’s being gate-kept through a pay-wall.

Find your space, build trust and provide sufficient value for people to pay what you’re asking for and stick around.

8.

Sell $33,000,000 Worth of property as a Real-Estate Agent

The average real-estate broker get’s a 3% commission on each sale. In order to hit 1 million dollars from that commission alone you need to sell 33 million dollars worth of real-estate.

Although that might seem like a lot, depending on where you live in the world the time it takes to get there varies.

But real-estate agents actually have an unfair competitive advantage because they’re able to identify undervalued deals on their own.

You’re not going to get to the million dollars by collecting commissions alone, so you become an investor as well.

The position you find yourself in allows you to purchase deals for 80% of what they’re actually worth to a normal buyer. If you’re smart and have put some money aside, you can take advantage of this gap in the market and accelerate your growth.

Once you’re able to purchase a property for 20% OFF, the fact that you don’t have to pay 3% to an agent, because you’re an agent yourself, things start to turn in your favor. This is why every real estate agent should use millionaire math in their investment strategy.

If you’re a real-estate agent and you’re not investing in real estate there’s something wrong with you and your understanding of the marketplace!

9.

500 Million views on Youtube

This is a ball-park figure. You could get there with 100 million views, or you could barely come close even with 1 billion views if the content isn’t right for advertisers.

On average, if you could get your channel to 500 million views you’ve probably earned over 1 million dollars from ad revenue.

This doesn’t mean you can’t make even more money and get to the 7 figure amount quicker. Many youtubers accelerate their financial journey by selling merch, accepting sponsors or even developing their own products.

How much advertisers are willing to pay for a sponsorship or an ad in your videos depends on 2 things:

1. The number of people you can reach – in this case views

2. The quality of the audience – or better said, their ability to purchase what you’re selling as an advertiser

Multiply these numbers – one with the other and you get a rough score of how valuable you are to the marketplace. By the way.. This applies to almost every other content space as well, not just youtube.

The highest paying industries are:
1. Medical & Health Loss
2. Law
3. Financial

The lowest paying niches are:
1. Personal vlogs
2. Gaming & Kids
3. Music

This is why Doctor Mike is making more money than Tekashi69.

10.

Crypto with the right Multiplier

Here’s the thing about speculative crypto trading: If you’re going to speculate and gamble, might as well go for a 10,000x return, right?

If you like the technology behind a crypto project, back it up, but do it early.

People always buy in when it’s expensive!

Here’s the difference. Back in 2013, in the span of a month, bitcoin jumped in value from $150 in Mid October to $1000 by the end of November.

You might be thinking… even if I got in at $1000 per bitcoin I would’ve still made a killing, since right now it’s trading just under $10,000 a coin. But let’s look at the math.

If you purchased bitcoin at $1000 and held onto it until today, you would’ve 10X’d your money. – 9-ish times to keep up with the latest numbers.. But who’s keeping track…

But if you purchased only a month earlier at $150 per coin… you would’ve multiplied your money 66.6 times. I know.. The devil number… boohoo [ghost noises]…

This is the type of difference a single month can make when it comes to investing, especially in new age technologies & how the millionaire math applies to our situation.

But you’re probably thinking that you don’t really understand the technology and this has kept you away from it & we’ve always said you should Only invest in the things you understand!

For the past couple of months more and more of our non-tech friends have reached out asking for guidance when it comes to not only understanding the blockchain space, but actual step by step guides to buying and storing crypto… so many did to the point where we started forwarding conversations we’ve had just to not have to go through every single detail over and over again.

But this sparked an idea.. If so many of our investor friends are looking for help, why not bring it all together and create the ultimate alux guide to getting started with bitcoin.. We bet the community would find something like that valuable, or so we think…

That’s why we set up: alux.com/bitcoin – If you would be interested in such a course, leave your email. If enough of you are interested in learning how to buy, securely store and get started using this technology, maybe we’ll build it for you guys.

11.

Get 200,000,000 streams on Apple Music

In order to do the millionaire math when it comes to streaming, you need the numbers. For those of you who would be interested to know:

– Spotify pays $0,0032 per stream

– Apple Music got the average rate of $0,0056

– Google Play Music landed a $0,0055 payout rate

– Deezer is slightly lower at $0.00436

Your best shot is getting those Apple music numbers up, because apparently they pay the most.

But don’t look down on Spotify since they have the most paying subscribers as follows:

– Spotify: 271m users & 124m subscribers

– Apple Music: 60m subscribers

– Youtube music: 20m subscribers and -you will not believe this-

– Amazon Music: 55m customers

It might not sound like a lot of money per stream, but think of how many times you play a song on repeat if it hits the right vibes for you… & everybody does that. You’re not gonna watch an alux video 100 times in a row… but we know people that once they get hooked on a song, they listen to it until they can’t listen to it no-more.

In this case, the millionaire math applies to how many people you have access to your stuff and how frequently you can get them to replay it.

12.

Own 10% of company valued at $10 million

Although the hype around start-ups has toned down a bit more recently, the serious entrepreneurs are still pushing hard to grow their new businesses.

If you are one of 3 founders, by the time the company proves the business model and raises enough money to be valued at over 10 million dollars, you should have at least 10% of the shares left for yourself. This is why millionaire math is important when it comes to determining your future worth.

Some of you might not like the sound of that and almost all of you will remain poor. Your big fish in a non existing pond mentality is hurting your chances of building wealth.

10% of a big pie is a lot more than 100% of nothing.

You have to learn to use % work for you. Sometimes an equity payment or a royalty for that matter, will be worth more in the long run, than taking a lump sum of money and walking out the door feeling victorious.

Our all time favorite example is: Ronald Wayne. The 3rd co-founder of Apple who sold his 10% share in the company for only $800. Just to put things into perspective… if he owned 10% of Apple today, Ronald would be the richest man in the world at: 138 Billion dollars.

He now lives in a trailer park and lies to people that it doesn’t bother him.

But this isn’t the only time he screwed up. Believe it or not, he did it twice!

He used to have the original 1976 contract from when the company was started; a couple of years later he sold it for $500 because he needed some quick cash. Some time goes by and the contract is put up for sale at auction and sells for 1.59 million dollars. Ronald can’t seem to catch a break.

13.

Sell 20,000 Products with a $50 margin

By this point in the video, we realize that there are a million ways to use math to make yourself a millionaire, so we wanted to bundle everything product related into this one so that we don’t end up with a 3 hour long video.

The millionaire math here is pretty simple:

Sell 1 million products with a $1 profit margin.
Sell 100,000 products with a $10 profit margin
Sell 1000 products with a $1000 profit margin
Sell 100 products with a $10,000 profit margin
You get the jist of it.

The most profitable industries are:

1. Pharma & Supplements

2. Beauty products

3. Drinks & Liquor

This is of course without mentioning Digital Products which basically once finalized have little to no running costs.

It takes the same type of effort to sell $20,000 worth of product as it takes to sell $1 Million worth, you’re just not focused!

14.

Divorce someone who’s worth at least $3 million

You might be wondering why 3 million and not 2, considering it’s usually a 50-50 split. This is because you don’t actually know how millionaire math works.

Basically, the lawyers, the executors and everyone else involved will eat away at whatever money you think is left. If it gets messy, you can expect up to a 3rd of the money to be lost in the process.

The biggest winners in a divorce are the lawyers!

Without a prenuptial agreement, a divorce can get incredibly messy and expensive. Involving the state in your finances shows a lot of trust in what is a statistical improbability.

If you’re soon to be married, the most valuable thing you can do is keep a history of the wealth you have accumulated before getting married. We know this doesn’t sound sexy, but it will save you a lot of money, stress and sleepless nights.

Money trouble is one of the No. 1 causes of divorce – followed by adultery which results in money trouble eventually.

15.

$1 Million in 1 Deal

A single deal can be worth a lot of money if you position yourself correctly. But this doesn’t happen overnight. In almost every case where big money is thrown around, the deal is the result of years of effort & positioning.

The most common ways people get million dollar plus deals are:

– Artist or Athletes signing with a new label or team

– Writer sells book rights to be turned into tv series or movie

– A bigger company acquires your company

– Your invention & patent gets licenced or acquired by a bigger fish that needs it

– A developer needs a piece of land you own

– You blow up on the internet overnight and things happen from there..

Of course there are more instances of potential million dollar deals, but in almost all of these cases, it took years of preparation, work, effort to find yourself in a position where this kind of money makes sense.

Here’s an example that happened earlier this week. Spotify, the streaming company, has signed a licensing deal for 3 years only to move the Joe Rogan Experience podcast, including the 11 years of content, to Spotify exclusively. Joe Rogan, was paid between 125 to 150 million dollars up-front for this deal and there’s a good chance there are some more money on the table if his audience follows him to the platform.

If you think 125 million sounds crazy, you’re still not fluent in millionaire math.

Here’s why the math makes sense: Last year, Joe Rogan made at least 30 million dollars from his podcast alone. If the trend continued, in the next 3 years we would’ve made 100 million on his own. So Spotify comes in and removes the risk from this equation.

You might be wondering, just how much money will Spotify make from this exclusivity deal. Upon announcing the contract, Spotify share prices jumped by 8.4. Spotify’s market cap jumped by over 1 billion dollars. Spotify turned 100 million into 1 billion with a pen!

And that’s how Millionaire math works!