With so much talk about becoming a millionaire and becoming financially free it can all seem a bit daunting. After all, only 2% of Americans are millionaires and if you’re a just starting out in life (myself included) it doesn’t exactly seem realistic to come up with a million dollars or become free by next Tuesday. Instead of focusing on these largest goals possible and the end product of years and years of labor, consider chunking it down into baby steps.
If you’ve ever seen the movie “What about Bob” you’ll recall the famous book “Baby Steps.” “Baby Steps” is simply the name of the book, but Bob (played by Bill Murray) takes it literally and does everything in baby steps which allows him to face the challenges of his life that had previously shut him into his apartment.
For finances many people see hedge funds and complex investing in the news and bankers making bonuses bigger than their lifetime earnings, but I would recommend they take a look at the whole process in the form of baby steps. You don’t need to know any complex investing techniques, but you do need to start from where you’re standing now. It was Warren Buffett who said all you really need to know in business is addition and subtraction, so don’t make it more complicated than it is.
Instead of saying “I’ll never become a millionaire” say “I’ll save $5,000 this next year, or even smaller just say I’ll save about $400 a month, or perhaps $10 a day. Saving $10 a day will get you to your million dollar goal, but it sure seems a lot easier than looking at that final figure.
If you’re starting from scratch and dont’ have a clue about personal finance your steps might be something like this:
- Open your first bank account
- Open a checking account
- Set up direct deposit
- Set up a 401k with your employer
- Open a Roth IRA
- Learn how to analyze businesses
- Pursue your own business
The same goes for real estate. Most real estate developers and investors aren’t born with ability to analyze deals, so start small and learn along the way. Most real estate developers start with a process that looks a bit like this:
- Purchase a home
- Purchase smaller residential real estate properties
- Advance into multi family property
- Do a 1031 Exchange into a commercial property
- Use equity and current holdings to finance riskier developments and new construction.
If you started at the end you wouldn’t have the necessary knowledge learned from the steps you took beforehand. The baby steps along the way are necessary to teach you lessons that build off of each other.
So next time you read an article about becoming a millionaire or achieving any large goal, break it into baby steps so that it becomes much more achievable and realistic in your mind. This will make any goal seem possible and if you’re Bob, you’ll be able to even leave your apartment!
What are some of the things you take baby steps on?
Are you motivated more by looking at the big goal or taking small steps of action?
Image from Radhika_bhagwat