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Who Wants to Be a Millionaire for Life?
You can spend your $1 million on 'things,' or you can use it to secure your financial future.
Congratulations! Your generous, loving aunt entered your name in a national raffle, and you won. You just received a phone call telling you you've won the $1 million grand prize. It's time to celebrate.
You need to know, however, that your prize has a few strings attached. Before your prize is delivered, there are two tasks your aunt requires of you:
Task No. 1: You must send your aunt, in writing, the answer to this question: How are you going to spend your prize money?
So before reading further, take a moment and imagine how you would spend your $1 million grand prize. Would you buy a new house? A new car? Take a vacation? Would you pay off your credit card debt? Or donate to your favorite charity? Maybe you'd start that new business you've dreamed of. You have five minutes to make your list. Ready ... go.
Michael, the Millionaire-for-a-Moment
Michael Grimm actually did win the $1 million top prize on the popular TV program America's Got Talent. Here's what he said he would do with his winnings:
"I'm not going to be a millionaire for long! A lot of the money is going to go to the community and charities, and my grandparents and family that need this. You know, I don't need that much."
That's certainly a nice sentiment. He goes on to say that he is going to custom-build a house for his grandparents. You cannot say Michael is not charitable or kind. That he is. On the other hand, I wouldn't say he has much financial savvy.
Which leads to your aunt's second task.
Task No. 2: Answer the same question ... with one condition: How are you going to spend your prize money ... so that your financial future is secured?
Would that change the list of things on which you'll spend your prize money? A more important question is: Do you know what you can spend your money on to secure your financial future?
There are, of course, no guarantees of ironclad financial security. Yet there are definitely ways you could spend your money that would increase your odds of success for a healthy financial future. So please take a few moments and create your list now. (Otherwise, you'll never see your $1 million prize.)
It's All in the Spend
Here is a key to financial success: It's not how much you make that makes you financially fit; it's how you spend the money you make.
With every dollar that comes into your household, you have a choice -- to spend it on things that make you poor or to spend it on things that make you rich. You can use your money or you can use up your money. Using your money means spending it in ways that bring more money to you. Using up your money is simply spending it on "things," and before you know it, the money is gone.
Granted, we all have necessities in life that cost money: housing, food, transportation and clothes, to name just a few. My guess is that if you were to make a list of all the things you spend your money on every month, you'd be amazed at how much money is simply being used up, spent on things that do nothing to build your financial future.
So ... back to your aunt and her requirements on the windfall. Let's say you get the $1 million -- with the caveat that the only things you can spend it on are things that will generate money for you every month or every year. If that is the rule, then what would you spend it on? And if you don't know ... what can you do to prepare yourself to make those important decisions?
From Nice Guy to Nice Rich Guy
Let's look at Michael Grimm's answer again. He is basically going to give his money away to family and charities. While his intentions are admirable, what if Michael understood how to use his $1 million to make money? Then he could be giving his money to his family and charities for the rest of his life. You know as well as I do that as soon as he gives that money away, it's not only gone from his wallet, but (if his recipients don't know how to use the money) they, too, will use it up quickly.
For example, if Michael invested his $1 million in rental properties, stocks that pay dividends, vending machines and/or startup businesses -- and if those investments gave him a 10 percent return annually on his money -- then every year his $1 million would generate $100,000. Over the course of 10 years, this plan would return him $1 million, PLUS he would still have his original asset of $1 million. I realize this is a very simplified explanation, but you get the point. If Michael adopted this strategy, then he would go from being broke after giving away all his winnings to remaining a millionaire -- and a lifelong gift-giver.
Your Spend List
So what's on your $1 million list? How do you want to spend your money so that it will generate a lifetime of income for you and your family?
Imagine your $1 million of rental properties generating a 15 percent return, throwing off $150,000 per year. Can you live on that?
Let's look at a more realistic scenario. Today, instead of $1 million, you have $1,000 and you want to invest in your very first property. Let's say someone you trust (and who has successfully purchased five or 10 properties that create cash flow) has a property that requires a $10,000 down payment. You invest your $1,000 with her and receive 10 percent ownership in the property. If that property generates a return of 15 percent, then you make $150 per year. There's your start.
There are hundreds of ways to spend your money. You simply have to find the vehicle that most interests you, and then use your money wisely.
My message is this: Given $1 million that you could only spend on things that made you money instead of cost you money, what choices would you make? Once you've determined that, why not make those choices in real life? And why not do it now?
No one is going to do it for you. If you're counting on your savings (now paying less than 1 percent), your 401(k) (which, in many cases, lost 30 percent to 50 percent), or Social Security (which is anything but secure), then there's a good chance you'll be working for the rest of your life. With every dollar you own, you have a choice -- spend it on your future financial security, or spend it to secure a lifetime of hard work. The choice is yours.
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