Million Dollar Challenge Day 1
Today I start the challenge. Take $125 and turn it in to $250 within 12 months.
To be completely honest, I don’t think it’s going to take 12 months to double that money.
So here are some new conditions for the challenge:
1) If I manage to double the starting money for the year before the end of the 12 month period, the new 12 month period starts the next day.
If I start Year 1 on January 1, 2021 with $125, I have until December 31, 2021 to turn that in to $250. Year 2 then starts on January 1, 2022 with $250 and one year to double that and so on. What the new rule means is that if I start Year 1 on January 1, 2021 with $125, and I can turn that in to $250 by, for example, June 30, 2021. I now start Year 2 with $250 on July 1, 2021 and have until June 20, 2022 to turn that into $500. In this way, I hope to take a few years off the end of the challenge and maybe get to $1,000,000 in 10 years or less.
2) None of the challenge money can be spent on anything other than the challenge.
This is going to be the hardest part of the challenge. What this means is that I can’t use the profits to pay bills or buy food or anything else other than buying things to resell for the challenge. The initial investment is going to be $125. If I lose it all in Year 10 on something dumb, my actual loss is still going to be only $125, because that was my initial investment. It doesn’t matter how much I make with that over the coming years, the only loss I can possibly take is the initial investment of $125.
3) This doesn’t include taxes.
This is tough. Taxes on profits are going to eat in to the possible returns. We’re going to have to tackle this one a bit differently. If you are in the 25% tax bracket, you would need to do additional sales during the year to cover the taxes for those profits. Using some easy numbers, this means that if you made $1000 profit on your sales for the year, you would owe $250 in taxes. That means that your returns for the year have not actually doubled, but only increased 75%. To actually get the $1000 return for the year, you would need to make about $1340 to cover the taxes and still have a $1000 return for the year. So, my new goals for each year are going to be slightly different to cover the taxes I’ll need to pay on the profits. See chart #3.
To be fair, and to play it safe, I’m going to start a savings account that holds the extra money for taxes. At the end of Year 1 (whenever that may actually occur) I’ll put $37.50 into the tax savings account. That’s the difference between the $125 I need to double my money, and the $162.50 I’ll need to cover the taxes on the profit. At the end of Year 2, I’ll add $75 to the tax savings account. Then, every April 15 I’ll remove the amount in the tax savings account to pay for the taxes I’ll owe on the profit. I’m not going to worry about any interest on the savings account. Current rates of return for savings accounts make this not even worth tracking.
This is where the difference between the original challenge of making 100% return on investments is radically different than trying to double your money through selling things. Investments don’t realize any return (or any tax liability) until you liquidate those assets. In other words, the investors wouldn’t be paying taxes until after they’ve already reached the million dollar mark, whereas we will be paying taxes every year. We’ll have to work harder on the front end.
But don’t fret too hard — we’re going to find some tax loopholes along the way that will lessen the tax burden — if not reduce it to nothing!
4) The investment account to track is going to be in cryptocurrency.
The other part of this challenge is to track a volatile investment and see how it keeps up with our sales strategy. I’m choosing cryptocurrency. Volatile? Check. Possible huge returns? Check. Possible loss of everything? Check.
I’ve already put some money in Bitcoin. It’s only $50 so far, but I’ll be putting more in this month to get it up to $125 for the starting money amount. By the way, I actually bought the Bitcoin yesterday. Today’s value stands at $59.48. Did I say it was volatile?
I’ll be starting the challenge with $125 in cash.
I’m using today, December 16, 2020 to start the challenge, giving myself one year to turn that $125 into $287.50.
Do this with me!
