## The Wealth Algorithm (10) – Plan B

What if you couldn’t secure the necessary funds to start your project, to reach your dream? Would you give up? I don’t think so. Having had a powerful intention, which you believe in; giving up, giving in, failure, whatever, are not part of your vocabulary, even when you talk to yourself (by the way, random, obsessive self-talk is destructive!).

If that was the case, the first step would be to revise your plan, especially the due date. Then, assuming you have a monthly income, before paying the bills, or buying anything, put 10% of that income aside. Open an investment account for that purpose, and deposit 10% of your monthly income in it, before you spend a dime.

Once your savings in that account reach \$1000, start investing. Your target is to make 5% a month. Below is an example of how you would manage your investment account:

Month   10%Savings   5% Yield   Monthly Total

 1 200 0 200.00 2 200 0 400.00 3 200 0 600.00 4 200 0 800.00 5 200 0 1,000.00 6 200 50 1,250.00 7 200 62.5 1,512.50 8 200 75.63 1,788.13 9 200 89.41 2,077.53 10 200 103.88 2,381.41 11 200 119.07 2,700.48 12 200 135.02 3,035.50 13 200 151.78 3,387.28 14 200 169.36 3,756.64 15 200 187.83 4,144.47 16 200 207.22 4,551.70 17 200 227.58 4,979.28 18 200 248.96 5,428.25 19 200 271.41 5,899.66 20 200 294.98 6,394.64 21 200 319.73 6,914.37 22 200 345.72 7,460.09 23 200 373 8,033.10 24 200 401.65 8,634.75 25 200 431.74 9,266.49 26 200 463.32 9,929.81 27 200 496.49 10,626.30 28 200 531.32 11,357.62

Over a period of 28 months, and because of the power of compounding, your \$200 monthly savings, have turned into \$11,357.62!

Notice that you haven’t been withdrawing at all. Every month, you add the monthly savings (A), to the 5% yield on the previous month’s total (B), then to the previous month’s total (C). Or: A+B+C=D. The sum, (D), is reinvested again, and so on. Please spend some time studying the above table. As simple as it may look, it’s so powerful and effective.

Another observation is that the increase from one month to the next is exponential, not linear! Although your total is about 11K at the end of the 28th month, you don’t have to wait 2800 months to reach a million. You’re actually pretty close. You could find out by applying the above formula till the monthly total hits one million. If you did that, you would find out that you would need a total of 125 months. Or around 10 years.

The assumptions we made were conservative: A \$2,000 monthly income and only 5% return. If either of these (or both) went up a little, the total number of months would decrease dramatically, again, because of the magic of compounding.

Now you have a backup plan to revert back to in case your original plan could not be implemented. As a matter of fact, you could go for plan B, even if plan A did work! Think about that…

The only challenge with plan B is the 5% monthly return. You might ask: How am I going to maintain such yield every month? What kind of investment am I supposed to use? You could either revisit the methods provided in this blog, or do further research. You will find what you’re looking for.

All the best,

The Wealth Maker