zerotomillion

I am a software consultant by trade.  That basically means that I bill companies by the hour to create custom software for them.  About 90% of what I do is creating financial reports for the fortune 5000; Income Statements, Balance Sheets, Sales Projections, Budget to Expense reports, etc.  I have learned a few things from studying the financial reports of these very wealthy organizations.

For example I have learned the value of tracking ratio’s.  One ratio that I am becoming more and more concerned with is my Daily Revenue/Spending Ratio.

That basically means how much am I spending per day compared with how much am I earning per day.  But, before we get further into discussing the Daily Revenue/Spending Ratio, I want to talk about Daily Revenue.

Today my daily revenue is about $800.00 Dollars per day.  Two years ago it was $1,250.00 dollars per day.  The reason for this difference is the poor economy.  Billing rates for the work I provide have fallen due to the fact that there are many other consultants willing to take lower rates, because companies are not spending as much as they were two years ago, therefore, fewer consultants are needed.  Simply put, fewer jobs = lower billing rates.

Back to Daily Revenue…  My current daily revenue is $800 per day.  On the surface this is a very good number.  It is a good number because using my definition of a millionaire, I would be a millionaire at 10k per month, which is $328 dollars per day.

The first problem is that my Daily Revenue could disappear at anytime.  For example, there only about 5000 companies that use the software that I specialize in.  There are only so many companies at a time that have a need for my services and the competition is getting worse all of the time.

The second problem is that today I only earn revenue on the days I work, and I only work about 220 days per year.  If I were a real millionaire and I had 1 million dollars earning 10%, my interest would accumulate every day, not just 220 days per year.  My goal is to earn $328 Dollars per day without having to work.  Today, I don’t earn any money without working.

The point to all of this is to illustrate that there is a huge difference in the type or revenue that one can earn.  The kind of revenue I earn to day is good, don’t get me wrong, I am much better off than some, but it is still not the kind of revenue that comes from being independently wealthy.  That is exactly why I am doing my best to change the way I make decisions about my future time investments.

In the past I have picked a technology to specialize in that had good billing rates and I would go learn it.  I would then build a consulting practice centered around that technology niche.  I have now shifted to a new paradigm.  Now, I want to invest in buying or building products that will earn me at-least $33 dollars per day.  If I had 10 products all earning me $33 dollars per day, then I would be a millionaire, from a cash flow perspective.  My income would also be more diversified than it is today.

I am currently working on my first 5 products, all of them are software related and all can be downloaded for a small fee.  None of them are complete yet, but my first one is very close to being finished.  I will be launching it in February.  As these products are launched I will be writing more about my successes or failures.  In the mean time try to think of things that you could produce that would sell for $25 to $35 dollars.  Obviously, some of your ideas will probably be winners and some will be losers.  That really isn’t the point.  The point is if you can continually produce products that will be purchased at-least once per day for $25 – $35 dollars your Daily Non-Working Revenue will begin to go up.

Now lets return to the Daily Revenue/Daily Spending Ratio.  This basically means what is your daily revenue?  and what is your daily spending amount?  If I earn $800 per day and I spend $800 per day my ratio is not very good.    That means that it takes everything I earn to live my current lifestyle.  Let’s divert for minute, from having a goal of being a millionaire to having a goal of living our current life style without having to work.  Once we do that we can look at two things; our daily revenue and our daily spending requirements.

In my millionaire revenue model I have established that $328 dollars per day or 10,000 per month makes me a millionaire.  If I spend 10,000 per month right now and create the non-working revenue machine that takes me to 10,000 per month, not much is going to change.   I won’t have to work, but my life style probably wouldn’t change much.  My goal is to be free.  I want to be able to do what I want when I want, without having to work.  If I want to go explore Thailand for 3 months I want to be able to go, without having to worry about affording it.

In order to reach that goal, I have to not only work on my daily revenue, but I have to work on my daily expenses too.  So we should all have two goals.  Goal one should be to increase daily revenue (by the way you can begin doing that, by creating a simple monetized Blog).  Secondly, and even easier you can begin cutting your daily expenses.

There are two kinds of expenses, moving and non-moving.  Moving expenses are things like credit cards and entertainment, things you can cut back on, or even eliminate.  Non-moving expenses are things like car insurance and mortgage payments, your always going to have to have them.  In the next few weeks I will be writing about Non-moving versues moving expenses and how to decrease your daily spending amount.  Until then, make a list of your moving and non-moving expenses and jot down some quick ideas how to cut your daily spending amount.