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Learn how to take your dream of retiring early with FI from just a dream to a reality by applying these 3 simple steps. And the best part is, you can start them all today!
Newton’s first law of motion, often referred to as the law of inertia, states that,
“An object at rest stays at rest and an object in motion stays in motion with the same speed and in the same direction unless acted upon by an unbalanced force.”
“Excuse me?” you say, “I thought this was a blog about FI?” It absolutely is, but bear with me for just a minute while I unpack this law of inertia and how it relates to our wealth building journey.
First and foremost, we are the object at rest and trust me when I say we absolutely stay at rest unless acted on by an unbalanced force. Allow me to be the first example of this said “object at rest.” When I finished the first blog post, I immediately started the second blog post. If I recall correctly, I think I wrote a single sentence to kick things off. Why bother with a sentence? For me personally, getting started is always the hardest part. I knew that if I put at least one sentence down, I had already won the battle and would be far more likely to continue the next day and the day after that.
Now, fast forward to the completion of the second blog post, i
The point is, you just need to get started. There will always be reasons not to such as “now is not the right time.” You will tell yourself “I don’t have enough money to start.” Perhaps you don’t have a lot of money. You might be tempted to think, “there is no point to saving or investing because I don’t have that much to save or invest.”
But I have a HUGE secret for you….your wealth building journey has very little to do with the amount you start with and everything to do with when you start. So let’s talk about that.
How in the heck do you get started?
1. Track, Track, Track Your Spending
I want you to ask you a few questions, first:
- How much is your mortgage or rent payment?
- Do you know how much your monthly cell phone or internet bills are?
- What about your cable bill?
- How much do you spend on services such as Netflix or Spotify?
- And your monthly car insurance payment?
More than likely, these are all very easy questions for you to answer. You are probably feeling pretty good right
- How much do you spend on fast food in a month?
- What is your monthly bar tab?
- Do you know how much you spend on clothing?
- What does your monthly Starbucks balance look like?
- How much do you spend on groceries every month?
- What does an average month of driving equal in gas?
Alright, how are you feeling now?
My guess is you’re not as confident as you were in round one. Full disclosure here, most people can’t spout these off with any level of certainty or confidence. I know that Ms. TTF and I certainly could not. Truth be told, we are in the beginning stages of learning these numbers ourselves. If you could answer these without pause, what are you doing reading our blog? You should be starting your own 🙂
My point is this: If you don’t know these answers to the penny, how can you possibly say you can’t afford to start saving? The round two expenditures are
2. Find your Why-FI
We discussed this our first blog post, but it bears repeating. You have to find your “Why-FI.” Your Why-FI is your reason for even getting to FI.
You may feel tempted to skip this step, but I am telling you, it might be the most important step of all. We need something so important to us that it will push us through anything that stands in our way. Those setbacks may be low energy days or unexpected expenses. It has to be so every present in your life that you focus on it every single day. Some examples may be:
- You may want to retire early and spend more quality time with your loved ones (your parents, kids, friends);
- Maybe it is your dream to travel the world;
- Perhaps you have a passion project and you want to position yourself to make that your life’s work. To be clear, this is our passion project. We want to document our journey and it is our greatest hope to help many others along the way;
- You may want to ensure that you can both retire comfortably and PAY for your children’s education. Please, just as you would with the oxygen mask on a plane, take care of your retirement first and your children’s education second. I know we always want more for our children, but if you can’t help yourself, you will not be able to help them.
This list could go on and on and on, but the important thing is that it means something to you. Now take a moment to write down some of your own Why-FI goals. Put them in the comments, maybe you can help spur someone else’s creativity, too!
Now Use you Why-FI to Your Advantage
Once you have one (or 7) that mean something to you, I want you to do two things:
- Write down your Why-FI’s daily. Do this every morning when you wake up and every night before you go to bed. Keep this TOP OF MIND at all times.
- Have a note card with your Why-FI’s and carry it with you everywhere. Every time you contemplate making a purchase, pull out your Why-FI card and read it to yourself. Ask yourself if this purchase is worth delaying your Why-FI goal? This will be especially important with those Round Two expenses we discussed earlier. Is it worth it? Only you can decide, but this will help put each purchase into perspective.
3. Start Small and Pay Yourself First
In life, everything starts with “1.”
Our first step was just that, one step. We didn’t wake up one day and decide it was time to run around the house as fast as Usain Bolt. We didn’t transition from our “studies” in Kindergarten into a Masters program at Harvard. Unfortunately for our parents, they didn’t point to the toilet one time and we all lived happily ever after.
Why is it then, that we seem to think we need a $1,000,000 to start investing? Warren Buffet wasn’t born with a billion dollar bank account. He started as anybody else does, with a $1 and his Why-FI’s (though I am certain he never referred to them in this way); the rest is a very successful history.
I have said it time and time again,
Time is the name of the game and starting is a must.
So, how do you eat an elephant? Well, you don’t, but in the spirit of the saying, you have to start small.
The only way we humans can overcome barriers is to make them so small we can step over them. So what does that look like for our wealth building journey?
Ms. TTF’s first investment into her brokerage account was that of $10. She was so nervous, it brought a smile to my face. But she did it, and she hasn’t looked back. She set up her bi-weekly contributions, starting small at first, but now she has bought a used car and is already half-way to our first home’s down payment, all in a year and a half.
Start with what you can, even if that is 1% of your income. Even if that 1% totals $20 per month, that is 100% better than $0 per month. Once you have learned to live without $20 per month for say, 6 months, increase your savings to $40. And keep doing this until you can achieve a 15% savings rate.
Hide your Money
Where should this 1%-15% live? While this is a great question, an even more important question to answer is “how will that 1%-15% get from A (paycheck) to B (savings account, brokerage account, etc.)?”
Have you ever heard the saying, “If you build it, they will come?” This is a great quote from the very famous movie, Field of Dreams.
The wealth building version of this saying is, “If you see it, you will spend it.”
Do yourself a favor and pick up a fresh copy of your employer’s direct deposit form. Once you have done that, etch the authorization to put that 1%-15% into an account of your choosing (i.e. pay yourself first).
The most important part is that you place this into an account that you don’t use for regular spending nor do you look at on a regular basis. If you are looking for some help finding the right account for you, head over to MagnifyMoney.com which is a great place to find the most competitive interest rates around.
Get Technology to Help
Of course, you could always get started by using one, or both, of my favorite “set it and forget it” financial apps, Digit and/or Acorns. In our second blog post, we covered in detail, the benefits of Digit. While Acorns is a review for another day, it uses a round-up technology that you hardly even notice. Whichever of the options you choose, start today and I promise you that you will not regret it.
So what are you waiting for? Get to steppin’. Use these three steps as your unbalanced force to get the ball rolling.
- Start tracking those dollar, dollar bills y’all
- Write down and review daily your Why-FI’s, and
- Set up and automate your 1% (or more) savings rate.
Over and Out, FI community.