Within ten years, Elon Musk could become the richest person in the world. This is due to a compensation plan which he has agreed with the electric car company, Tesla. Such an extraordinary achievement would not be be possible without two things: having a long term horizon when setting goals and thinking big. These factors will definitely help as part of an effective investment plan.
Under the compensation plan, Musk would be paid $55 Billion if he manages to raise Tesla’s market capitalisation to $650 Billion by 2028. As Tesla currently has a market cap of $59 Billion, the proposed sum would represent a roughly %1,000 increase in the company’s market cap. If successful, Musk, who is already worth over $20 Billion, would receive the largest ever pay packet in history. In the mean time however, Musk will not receive any compensation of any kind. With a projected stake of 28.3% in Tesla, Musk would easily go past Amazon’s Jeff Bezos as the world’s wealthiest person.
Big thinking moments
Musk’s biggest achievements include founding SpaceX, Tesla, SolarCity, brain electrode firm Neuralink, The Boring Company and X.Com which later became PayPal. SpaceX is taking the lead with groundbreaking developments in the new space age, for example, by being the first private company to launch rockets into orbit and landing orbital rockets on both land and sea platforms.
Also in development is the world’s most powerful spacecraft, the Falcon Heavy rocket, which aims to take humans to the moon or far out to Mars. The Falcon Heavy is due for an imminent demonstration flight on 6th February 2018.
Another interesting Musk goal was the building of the world’s largest lithium-ion battery in South Australia. The 129 MegaWatt battery was plugged into the grid well within the 100 day completion target. If this deadline had been missed, Musk stated that the battery would have to supply free the energy for free.
Application to personal finance
Despite all these achievements above being very different, they all have one common theme. At first sight the goals are easy to dismiss as impossible or very difficult to carry out. Instead, Musk has disproved the doubters over and over again through optimism, perseverance and big thinking.
What lessons can we learn from this. To me it means that it is imperative to set very ambitious goals in all aspects of life, particularly when handling finances. Of course the goals should be realistic to achieve and measurable with time. When assets are invested wisely, an initially big goal such as raising a huge sum or clearing large debts will become smaller at an increasing pace due to the impact of compound interest.
Time is on your side
Other factors which can come into play are an increase in income and optimising life to reduce costs. The critical thing is that once a wealth building target is set it becomes something to work towards, rather than aimlessly thinking wishfully of futile ways to get rich. Even for seasoned investors, it is difficult to comprehend how powerful time can be. When investing, time in the market is more important that timing the market.
With 70% of workers in the UK “chronically broke” according to this report, now is the time to start rethinking your finances so that you don not get caught out on the wrong side when the tide goes out. A good starter goal is to aim for a net worth (assets minus liabilities) of six figures. This can take several years to achieve but once you get there, bigger milestones like half a million seem very achievable. After that who knows what else can be done. If you maintain a consistently high savings rate, within a few years you would be way ahead of the average person on the street.
The power of setting big goals
I maintain a set of long term personal goals, covering several years. Some of them such as gaining financial independence in a few years are shown here. When goals are set, they become a target that can be aimed for with a wide arsenal of tools.
A good example is if you realise that your 9 to 5 income will not be sufficient to take you where you want to be, you can employ side hustles or business ideas to accelerate your progress. With all the free resources available in the world today for learning and bettering ourselves, there is no excuse for not trying.
Financial independence is not all or nothing, so one should not give up on the journey. It is like a spectrum; covering different proportions will allow you to do different things. For instance, when 50% financially independent you might feel more confident to take a more lucrative contract job as opposed to a less paid permanent role. You could also decide to go part time doing a more enjoyable occupation.
Big or small, the key to achieving any goal, from maintaining your car to getting out of debt, is taking action. Small steps will soon become big ones as the compound effect comes into play.