Always Start Small
Rich dad always said, “Start small, and dream big.”
As a young man playing Monopoly®, rich dad saw his dreams on the game board—the plan for his life and his plan out of poverty. He started with little green houses on the Monopoly board and dreamed of his big hotel on Waikiki Beach. It took him about 20 years, but his dream did come true.
That’s the irony of the advice to start small when it comes to investing: when you’re first starting out, nothing feels small, even when it is.
We have all heard the saying: “Rome was not built in a day.” The saying I use, whenever I find myself feeling overwhelmed by how much I have to learn, is, “How do you eat an elephant?” The answer is, “One bite at a time.” And that is how I recommend you proceed if you find yourself feeling overwhelmed by how much you may have to learn in order to make the journey from the E and S side to the B and I side of the CASHFLOW® Quadrant.
Please be kind to yourself and realize that the transition is more than just a mental one. It involves emotional learning. After you take baby steps for six months to a year, you’re ready to move from walking and then to running. You’ve got to walk before you can run. This is the path I recommend. If you don’t like this path, then you can do what millions of other people do who want to get rich quickly in a fast and easy way, which is to buy a lottery ticket.
It might be your lucky day.
Kim and I have a written goal to attend at least two seminars a year on subjects about the B and I quadrants. We go on vacations with people who are experts on subjects found in the B and I quadrants. We learn a lot while playing, resting, and dining out. We achieve more with a lot less stress. Those are ways of underachieving and yet still moving toward big, bold dreams.
The key to making any investment is setting a big goal and approaching it systematically, taking baby steps first and then gradually increasing the size of your investments as your learning and experience increase. You will want to push yourself beyond your comfort zone—but gradually. That is how Kim and I did it. There is nothing wrong with having smaller goals that lead up to the ultimate goal of financial freedom. The same thing applies if you want to get into good physical shape. I work out with a tough trainer who pushes me to achieve smaller goals on a daily or weekly basis. They increase in intensity as my abilities improve and together they lead up to achieving my big goal.
So dream big daring dreams, and then underachieve a little bit each day. I recommend setting attainable daily goals that, when achieved, provide positive reinforcement to help you stay on the path to the big goal of moving from the left side of the CASHFLOW Quadrant to the right side.
The Value of Experience
I recommend people start in the B quadrant before proceeding to the I quadrant. Regardless of whether the investment is in real estate, a business, stocks, or bonds, there is an underlying comprehensive business sense that is essential to being a sound investor. Some people have this comprehensive sense, but many do not, primarily because school trains us to be highly specialized, not comprehensively trained.
For those thinking about moving to the B or I quadrants, I recommend starting small and taking your time. Do bigger deals as your confidence and experience grow. Remember, the only difference between an $80,000 deal and an $800,000 deal is a zero. The process of going through a small deal is much the same as going through a much larger, multimillion-dollar public offering. It is only a matter of more people, more zeros, and more fun.
In theory, the numbers and transactions on the right side of the CASHFLOW® Quadrant are simple, regardless of whether we’re talking about stocks, bonds, real estate, or businesses. To be financially well off simply means being able to think differently, to think from different quadrants and to have the courage to do things differently. To me, one of the hardest things a person who is new to this way of thinking has to go through is the countless number of people who will tell you: “You can’t do that.”
If you can overcome that kind of limited thinking and seek out people who say to you, “Yes, I know how to do that. I’d be happy to teach you,” your life will be much easier.
Once you gain experience and a good reputation, it takes less and less money to create bigger and bigger investments. Many times it takes no money to make a lot of money.
Experience is valuable.
If you know how to make money with money, people and money will flock to you.
Start Small in Real Estate
As I’ve said, the goal is to invest from the right side of the CASHFLOW Quadrant. In real estate, this means viewing real estate as a passive activity. If you buy properties to fix up yourself and then sell, or properties that you plan to manage yourself, you’ll be operating from the left side’s E and S quadrants. This can be a good way to get started in real estate. The goal, though, is to invest as a business owner and investor—from the B and I quadrants. This means you’ll have systems and a team to perform the work of renovation, upkeep, and management.
Master a formula, and then learn another formula. A basic formula in real estate is to start small, for example, with one single-family residence. You want to start small so the cost of any lessons you learn along the way will be small, not large. After you’ve mastered the formula of buying and either selling or renting single-family residences, you may decide that you want to graduate to another type of real estate such as commercial or industrial. But start small and start simple to keep the risk small and get the best results!
Thanks to my rich dad, my mentor, and my coach, once I got serious, I achieved my dream of financial freedom after 10 years of perseverance. It wasn’t easy. I made many mistakes. I was scolded more often than I was praised. I lost money and made money. I met many good people, a few great people, and some very, very bad people. From each person, I gained wisdom not taught in school or learned from books. My journey was not so much about the money, but who I became in the process. I became a rich person who does not let money, or the lack of it, dictate the boundaries of my life.
If you find an investment you want to invest in, put a little money down. It is amazing how quickly your intelligence grows when you have money on the line. Don’t bet the ranch, your mortgage payment, or your retirement. Simply put a little money down, pay attention, and learn.
Start small, and take your time. Experience is more important than money.
Editor, Rich Dad Poor Dad Daily