How to invest, part 1: save money!
Probably the #1 question I get asked, whenever I talk about money, investing, passive income, or financial freedom, is this: “How do I get started?”
It really is not that difficult. In fact it is so simple, very few people actually do it.
The proverbial mountain
If you have the feeling of desire to be at the top of a mountain, there are many things you can do: dream about it, look at pictures of the mountain, read blogs about other peoples’ stories, read the spiritual history about that mountain’s significance, shop for equipment, learn the country’s culture, post on discussion forums about how awesome that mountain is, and watch movies that were shot atop the mountain’s peak.
But, if you want to get to the top, one of these days you have to go out there and start climbing.
Often when I speak with people about becoming wealthy, the response I get is, “Well, sure, wouldn’t everybody like that?” But the reason people don’t become wealthy is they don’t take that first step.
Several years ago, I met a girl who shared with our social circle at that moment, “My credit card limit just got raised by $500, so I’m deciding how I want to spend it.” Yes, she was previously maxed out, and she was about to become maxed out again. There was nothing that came to me to say at the time; but the mindset that generated that line, has stayed with me–perhaps because I used to think and act the same way.
In recognizing myself in this person, it gave me pause to consider and choose another direction. This was not my original turning point, when I decided to travel down the path of wealth accumulation, but it was a key reminder/reinforcer that solidified my commitment to staying on this path.
What to do
I have distilled the secrets to building wealth, down to three easy steps:
- First, put some cash in your hand. $25, $10, $1,000, whatever you can afford to lose.
- Then, put that cash into a no-fee bank account (and no-fee means no minimums, no account maintenance, and no direct deposit requirements!), that is dedicated exclusively for your investing and wealth-accumulation purposes.
- Treat this account as sacred; you are not to use it, rely on it, or pay bills with it. It is not a rainy day fund. Consider it already spent, the same as a restaurant bill once paid is already spent. You won’t go back to the restaurant manager and ask for a refund because you have fallen upon hard times…. don’t withdraw from this account!
Repeat steps 1-3, forever. You will own wealth. And it is good.
The question almost always comes up: “But what do I do with it?!” Patience, young jedi… we shall get to that, soon enough. But you have to get this concept of saving money, and incorporate it into your life, otherwise you shall never succeed at building long-term wealth.
Recognize the range of choices that are available to you, when it comes to your finances.
Plan in advance! When you get your tax refund, what will you do with it? When you find $20 in the street, what will you do with it? When you get a raise, or a higher-paying job, what will you do with it? If the answer to all of the above is d) put it into my investments, then you are on the right track.