Where do we start?

Wealth is a mighty big topic to cover.  It also comes with different connotations for every person.  For the context of this blog we will view wealth as the accumulation of assets.  When I was younger the idea of wealth was a negative thing.  I viewed it as greed, a waste and only for elites.  The reality is that we all interact with money in some way by trading our time for it, and how we treat money defines our relationship with it.  

So, where do we start?  How about we take a big picture view of where we are at and where we want to go?  Trying to accomplish anything works out a bit better and is easier to manage if we break it down in to chunks.  Let’s take saving money for example.  We want to save money but we have no idea of how much we spend every month.  We probably know how much we make or at least we better!  What is not totally clear is just basic math: how much comes in and how much goes out?  Easy enough to grasp in the mind but when you put it down on paper you start to see a clearer image of just what is going on.  

By putting down expenses on paper (or better yet a spreadsheet) we can start to see where are money is actually going.  Twelve dollars a month for Netflix, not a big deal, but you start adding up other monthly expenses and then you realize you are spending $1,200 a year on “things” that are not really helping you.  Sure, they are nice to have, but the cost now takes away from the time you could have later.  Would you rather have Netflix and coffee now or not have to work ever again?  Okay, so cutting Netflix and coffee out of the picture is not all you have to do (nor is it something you should necessarily do) in order to retire early but they are just examples on how we need to start viewing our expenses.  It’s little actions that when taken will compound over years.

ACTION ITEM: First step, write down what it is that you want.  Save a hundred dollars a month, retire early, move out of your parents basement?  Start by writing it down.  It doesn’t have to be complicated or perfect.  Just start by writing it down.  This will help you bring in to focus exactly what you want.  You might write down – “I want to be rich” and that is fine to start with.  As you learn more come back to what you want and don’t be afraid to refine it.  After some time and learning you will come back with a clearer sense of what it is you want from what you have learned here – “I want to be financially independent with $40,000 of annual income derived from an investment portfolio that has a principal of $1,000,000.”  Being rich is vague, writing out specifics gives it more meaning.  For now, just putting down what you want is enough because we are not focusing on perfection – we will come back and revisit as we learn more.

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