I had it clear in my mind at the age of 16: I wanted to become a millionaire by my 30th birthday. Why? I couldn’t tell you. I just had this unexplainable desire to be rich, and I didn’t know what I even wanted to buy with that money. It just seemed to be the ultimate representation of success to me. I poured through investment books, stock charts, and money making programs on the internet. I knew everything about everything that had to do with money, but didn’t make any money (for quite a while).
One day, someone asked me a defining question in my life: “You want to make one million dollars. Why that amount?” I was dumbfounded and didn’t have a response. He continued: “Saying you want $1,000,000 is like saying to your mom, I love you 104,529—it’s completely arbitrary.” He was right. It doesn’t make sense to strive to accumulate a certain amount of money. What happens when you get there? What are you going to do after that lump sum starts getting depleted? It made me question the entire premise of the financial industry, which promotes accumulation of money through good investments until retirement. It just didn’t make sense to me that I needed to let time pass while I wait for delayed gratification. I needed to look at money a different way.
After putting my nose in more books and listening to trustworthy financial experts in seminars, it finally hit me: I needed to consider cash flow rather than the amount I had tied in my bank account. Instead of declaring how much money I wanted to have so that I could label myself as having a certain stature in society, I decided to focus on what things I wanted and how much they would cost, then figure out how I could afford them by increasing my cash flow. Almost anything, no matter how expensive, can be financed, and if you can generate more money than the associated liability, you have positive cash flow. You don’t need to worry about accumulating enough money to buy things in lump sum. Remember, when it comes down to it, you want money not because of money itself, but rather, what money can buy and the time to enjoy those things (which money can buy as well).
Letting your money sit somewhere isn’t productive for you, nor is it productive for society. Any time you earn money, it’s because of some value you contributed. Any time you buy something, the product you purchase is a reflection of value generated by a producer. The circulation of money through the world produces more and more value. If you trap your money somewhere instead of reinvesting it into cash-producing assets, you stop this train of value creation and limit yourself from earning more and more money to pay for the things that are important to you. How much you should accumulate is an arbitrary question. How much you should produce through investing in cash producing assets to pay for what you desire is a definite question.
At SmashingEntrepreneur.com, I work with passionate entrepreneurs to quickly take ideas to market and quickly generate passive positive monthly cash flow to pay for a lifestyle of their design.
One million is definately an arbitrary number, but some people are motivated by the psychological “win” of having that 7-figure goal. That’s why going from $990 in savings to $1,000 in savings — or conversely, going from $1,000 in debt to $990 in debt — can seem like such a huge victory. And I’m a huge proponent of whatever psychological “win” we can give ourselves!
I’m also all about cash flow … but why not have both goals?
A million dollars just sounds cool. Saying you want $700,000 doesn’t have the same effect. But having cash flow and no debt are definitely better goals.
haha, you’re right it does sound cool. I wonder if our kid’s kids will be thinking that a billion instead of a million dollars is the new “cool” when they become our age. (well maybe it’ll take 3-4 generations if the markets keep tanking) …Now I’m have Bruno Mars “Billionaire” song stuck in my head.
The reason we pick a million dollars is because it defines the word millionaire. We all want to be millionaires,thinking just being a millionaire is the goal! My goal was financial independence by the time I was 40. I beat my goal by nearly 2 years. Setting the right goal is more important than anything else.
Congrats on beating your financial independence goal by 2 years, that’s fabulous!!
It is funny how 1 million is a common dream for a lot of people. Getting to a comfortable cash flow like you said, plus paying off debt, and securing an emergency fund is a much better goal. Finding ways to diversify income streams is freeing too.