The secret formula to Wealth: An Analysis of The Millionaire Fastlane

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The secret formula to Wealth: An Analysis of The Millionaire Fastlane ​

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Introduction()​

Have you ever wondered what the secret formula to wealth is? What rule to follow to maximize your chances of getting rich? In the incredible and must-read book 'The Millionaire Fastlane ' by MJ DeMarco, we find not one, but three formulas, each leading us down a different path to wealth. This article will take you on an enlightening journey through these paths, dissecting each one through its unique 'Wealth Equation'.
These equations, exclusive to the Sidewalker, Slowliner, and Fastliner paths, encapsulate the core strategies and attitudes of wealth creation. As we delve into these formulas, we'll uncover the mindset, potential rewards, and challenges of each path.
So, are you ready to unlock the mathematics of wealth? Whether you're an aspiring entrepreneur, a seasoned investor, or simply intrigued by the mechanics of wealth, this exploration promises a wealth of insights. Let's take this journey together, and you just might discover the path to your financial nirvana!"

The path to failure: the sidewalk​

What are the caracteristic of a sidewalker ?​

A Sidewalker is characterized by living in the present with little to no financial planning. They may earn a substantial income, but their spending habits keep them on the verge of going broke. Their perception of debt is that credit allows them to fulfill their desires instantly. They see education as unnecessary once they've graduated, and they define wealth by the number of possessions they have. Sidewalkers are characterized by consumerism and instant gratification, focusing on the short term rather than the long term.

How do they try to be wealthier ?​

Sidewalkers live in the present with little to no financial planning. Their wealth equation is essentially Wealth = Income + Debt. This equation is problematic because it relies heavily on income, which is often fixed and limited, and it includes debt, which can accumulate quickly due to their spending habits. The lack of a financial plan and reliance on debt means that Sidewalkers often find themselves in a cycle of living paycheck to paycheck, never truly accumulating wealth.
When Sidewalkers try to improve their financial situation by changing their lifestyle and approach to wealth, they very often end up taking another path that offers an opposite perspective, The Slowline.

The path to life-long servitude: The Slowline​

What are the caracteristic of a slowliner ?​

Slowliners, on the other hand, sacrifice their present in the hope of a more comfortable future. They believe in getting rich old, which is problematic because wealth is better enjoyed young. Their plan is often not guaranteed and can fail due to factors such as job loss or market downturns. They view debt as evil, education as a means to higher pay, and time as abundant and exchangeable for money. Their primary source of income is their job, and they rely heavily on market investments and compound interest to accumulate wealth. However, these strategies have their limitations and dangers, such as dependence on job security, home equity, business stability, lifestyle, and the economy. Work, save and invest. Work, save and invest. Repeat for 40 years until retirement age ... 65, or, if I'm lucky and the markets return 12% annually, maybe 55! Here's the Slowliner's plan for accessing wealth. To better understand what a slowliner is, let's look at the fictional example of Mark and Bob.

How does a slowliner live ?​

Mark is a 23 year old software engineer who works for a technology company that pays him $75000 per year and wants to become wealthier. He decides that the way to increase his wealth is to earn a high salary and invest some of it so that his money will grow and make him richer. He begins to put a lot of effort into his job, hoping to get that 3% raise at the end of the year, and he makes every sacrifice necessary to r educe his expenses so that he can invest more money. he don't allow himself to buy thing that are outside his budget, he doesn't reward himself with product that he want, and he doesn't hesitate to deprive himself today so that he can buy and consume everything he wants in the future. he's been like this for 15 years, and now Mark is a 38-year-old software engineer. after working hard 8 hours a day for 15 years, he now has to work hard 10 hours a day, but at least he has a bigger salary. Even with this upgrade, Mark's life hasn't really changed; he drives an old car, wears the same clothes, and rarely gives gifts to his family. All these sacrifices so he could save more money to invest in the stock market. But one day he lost everything he had saved in a world economic crisis that caused the value of all the stocks he had bought over the years to plummet. Mark's friend BOB, who has followed the same path as him, has more chances>his stocks are still going up and he became a millionaire at the age of 68. Now he's trying to enjoy a Lamborghini, even though he's too old to drive it properly. This is how most of the slowliner end, but to understand how they get there, we need to analyze their wealth formula

How does slowliner try to become wealthier​

the slowliner wealth creatrion formula is "wealth = (income from work) + (market investments)" To increase their wealth they simply have to increase the amount of money their variable are making.

The first variable of their weatlh formula: Labor income or A job​

Job income is himself made of other variable, thus we can represent it in that way : Job income = hourly wage × hours worked ~ or ~ labor income = annual salary. So to increase their wealth, slowliners has to increase their labor income, but you didn't notice anything strange about that. All units are related to time, but time can't be controlled or leveraged. You can't ask people to work more than 24 hours a day, or 400 days a year, because that's impossible, which puts a first uncontrollable upper limit on your variable. The only thing a slowiner can do is to increase his hourly rate or his annual salary, but again, these are out of his control. The only thing you can do is work harder in the hope of getting a promotion or a raise, which takes a year. As you can see, in order to increase their wealth, Sidewalkers like Mark must trade their time for money in the hope that someone in the future will let them trade more time for more money, which refers to what the author of this book calls Uncontrolled Limited Leverage (ULL).
In summary, the time-based variables in the wealth formula make sidewalks like Mark rich when they are old and cannot be directly controlled. Can his second core variable be directly controlled and save his youth, it's time to find out.

The second variable: Market investment​

Market investments can provide a way to grow wealth over time, but they are subject to market risk and returns can be slow and unpredictable. They rely on the power of compounding, which requires three things: time, a favorable annual investment return, and an invested sum. Again, leverage is uncontrolled and limited. Can he ask for more hours a day to reduce the waiting NO, can he ask the market to stay consistent and favorable for the next 70, spoiler NO. As you can see, even the second component of his wealth formula can't be leveraged nor controlled by him. For example, in 2008-2009 the stock market lost nearly 60%. If Mark was a true slowliner who saved for 15 years and accumulated $100,000, it would be worth $40,000 today. It would take him 14 years at 8% annual returns to catch up! That's almost 30 YEARS! And that's not counting inflation, which makes his $100,000 worth more like $50,000!
It's all about hope and sacrifice. Mark and every slowliners are trapped in a system they can't control, and if they have a chance, they'll get rich in their twilight years. The slowline is based on the hope that you'll stay alive until the interest on your bond finally hits 1 million, the hope that you'll keep a job that pays well for the next 40 years, the hope that your investments will make 8% a year and that the stock market won't crash. Is it possible to stop hoping and make sure you get rich quick? While the Slowliner's Way offers a safe way to wealth, with many limitations, let me tell you that there is a third way, a way where getting rich quickly is possible, but getting rich easily doesn't exist. It's time to explore the Fastline path, which represents a more difficult, faster, and potentially more rewarding approach to wealth creation.

The truth path to wealth: The fastline​

Fastliners are entrepreneurs and innovators. They value time as their most important asset and believe in continuous learning. They create wealth through business systems and investments that impact lives on a large or large scale. They control their debt and use it to build and grow their systems. They see money as abundant and a reflection of how many lives they've touched. Their primary wealth accelerator is creating something from nothing or adding value to existing assets. They follow the Law of Effection- Impact millions to make millions.

What is the secret formula of getting rich​

The secret formula to be rich is what fastliners follow. Their wealth equation is wealth equation: Wealth = Net Income + Asset Value. They build their businesses or create assets that can generate income. The variables in this equation - net profit and asset value are the secret keys to becoming rich quick, understand them and you get the secret formula for getting rich.

The first variable of the fastline formula: net income​

Contrary to the slowline formula for a fastliner the first variable isn't a job but a business. We already cover why having a job in your wealth formula can't make you rich until your twilight, The only true source of income to be rich Is a business. Like the slow line formula, the variables of the fast line formula are made up of other variables, so we can break down net profit this way: NET PROFIT = Units Sold (Scale or the number of people impacted) × Unit Profit (Scale or the value you added to their lives) Together they form a law that MJ DeMarco describe as the law of effection, which states that to gain million, you need to impact million. Let us take the example of a company that sells pens to its customers. If you sell 15,000,000 pens at 75 cents, you'll have 15,000,000 * $0.75 and your net profit is the rest of money after deducing cost and taxes form your income. You have a large scale (15,000,000), but your magnitude is tiny ($0.75), which means that you have an impact on the lives of millions of people, but you add very little value to them. The opposite can be a real estate company that sells 300 apartments for $3750, they have impacted a small number of families, but by providing a home they add great value to their lives, which justifies the price. In all these examples lies the true essence of Fastliner Wealth, a law that can work for anyone anywhere, the Law of Effection which is again To make a million you need to impact millions or add great value to thousands of people's lives and if you can add great value (Magnitude) to a large number of people's lives (Scale) you will not discuss in terms of millions but billions of dollars. As you can see with these formula, your wealth is virtually unlimited. As long as there are people to satisfy, you can make money; as long as you can improve their lives, you can make money and increase your net profit. Virtually, there is no real limit to the amount of money a Fastliner can make, although in reality it's a little more complicated.
The second thing you need to understand about net profit is that it's not only mathematically unlimited, it's also completely controllable.
Take the same example of the pen and the real estate company. If they want to have more profit, for example, they can start selling pens in a new country to increase their scale, or they can create a fountain pen that will cost more and therefore have a higher magnitude. The same goes for real estate companies, they can increase their scale by finding more customers or by increasing their magnitude by selling expensive houses, or even do both. As you can see, to become wealthier, the slowliner has to ask his boss to increase his salary, while the fastliner has to increase his scale and/or his Magnitude. Yes, one is the most difficult but is controllable while the other is easy but requires the willingness of someone else. The math doesn't lie: fastliners get rich while slowliners get old. If net profit is already an unlimited and controllable way to make money, what does an asset add to the formula? It's time to find out.

The second variable: Asset value​

Asset value is the value of any property you own that has a market value. As the second variable in the Fastline Wealth Formula, they're also unlimited and controllable. Fastliners view assets differently than Slowliners. While Slowliners buy and sell depreciating assets that decline over time, Fastliners buy and sell appreciating assets: businesses, brands, cash flows, notes, intellectual property, licenses, inventions, patents, and real estate. An example of an asset
An example of a successful use of an asset by a Fastliner, who we will call Anthony, might be a website that he created and monetized through advertising and affiliate marketing. Now if he wants to be wealthier, instead of making sacrifices and hoping that the market doesn't crash and that he will earn correctly for the next 40 years as a slowliner will do, he will start developing his website to increase its value. The fastliner had control over the content, design and marketing of the website and had the potential for unlimited growth as long as there is a demand for the information or products offered on the website. His website became a successful appreciating asset and now generated consistent and high revenues, and increased its market value. After several years, his website now worth millions, making Anthony retire rich well before the slower investment reaches $200,000.

Conclusion​

To conclude, the article examines three different financial paths: Sidewalker, Slowliner, and Fastliner, each with its unique approach to wealth creation. Sidewalkers live in the present, often spending beyond their means. Their wealth equation is "Wealth = Income + Debt," which often leads them into a cycle of living paycheck to paycheck due to their spending habits and lack of financial planning. Slowliners, on the other hand, sacrifice their present for a future of financial comfort. They follow the formula "wealth = (income from work) + (market investments)". However, their wealth accumulation is often slow and subject to various risks such as job loss or market downturns. Fastliners are entrepreneurs, and innovators that follow the law of effection-affecting millions to make millions. Their wealth equation is 'wealth = net profit + asset value'. They create wealth through business systems and investments that impact lives on a large scale. However, the Fastliner path is not without its challenges. It requires continuous learning, innovation, and the ability to create something from nothing or add value to existing assets. Despite these challenges, the Fastliner path offers a more controllable and scalable approach to wealth creation, making it a potentially rewarding journey for those who dare to take it.

 

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