3 Simple Steps To Investment Success
In December of 1984, Kim, my best friend, Larry Clark, and I were skiing in Vancouver, British Columbia, on Whistler Mountain. The snow was very deep, the runs were long, and the ski was excellent, although very cold. At night, the three of us sat in a little cabin that was snuggled in between tall pines, barely visible because the snow was up to the roof.
Sitting around the fire every night, we would discuss our plans for the future. We had very high hopes, but very little resources. Kim and I were on our last few dollars, and Larry was in the process of building another business. Our discussions ran late into the night, every night. We discussed books we had recently read as well as the movies we had seen. We listened to educational tapes we had brought along and then discussed the lessons on those tapes in depth.
On New Year’s Day, we did what we do every year. We set our goals for the coming year. But this year, our goal-setting was different. Larry wanted to do more than just set goals for the coming year. He wanted us to set goals that changed our lives by changing our realities. He said, “Why don’t we write a plan on how we can all become financially free?”
I listened to his words and heard what he said. But I could not fit what he said into my reality. I had talked about it, dreamed about it, and knew that someday I would do it. But the idea of being financially free was always an idea in the future, not today, so the idea did not fit.
As I tuned back into Larry talking about freedom, I realized that he was not really talking about freedom. At that moment, I realized that taking on my self-doubt and my laziness was the most important thing I could do. If I did not take it on, my life would go backward.
“Okay, let’s do it,” I said. “Let’s set the goal to be financially free.”
That was New Year’s Day 1985. In 1994, Kim and I were free. Larry went on to build his company, which became one of Inc. magazine’s fastest-growing companies of the year in 1996. In 1998 at the age of 46, Larry sold his company, retired, and took a year off.
Whenever I tell this story, the question I am asked is, “How? How did you do it?”
Below are the three steps Kim and I took to becoming confident in our journey to becoming financially free:
1. Invest in Financial Education
I get it, putting your money out there can be a scary proposition. No one wants to take a gamble and then lose all that hard-earned cash you’ve built up over the years on bad investments.
So a great place to start investing is in your own financial education. What does this look like?
It starts with understanding that there are four distinct asset classes:
- Real estate
- Paper assets
Most people only think of paper assets when they think of investing, that is, stocks, bonds, and mutual funds. Unfortunately, this means giving your money over to a broker and hoping it is invested well, all while racking up fees, even when you’re experiencing losses.
But there is a whole world of investment options out there both within paper assets and elsewhere that you can and should explore.
Once you know that these four, very distinct, asset classes exist, you can begin to hone in on what you are most interested in and then dig deep into that area to learn as much as you can.
As the old saying goes, with knowledge comes power. Once you are armed with the knowledge you need to invest wisely, you’ll begin to build the confidence you need to get in the investing game. The good news is that investing in financial education has little risk and a huge upside. It costs a little bit of your time. Begin by reading books, attending seminars, and reading the daily financial news to connect the dots. It’s that easy to start.
2. Find a Mentor
Kim and I are huge proponents of not only building your financial education but also getting a mentor who can help guide you as you build your financial IQ. You need a community of people to help you achieve your financial dreams.
Join an investment club and start meeting with people who are like-minded when it comes to money and investing. You’ll be surprised at how much you start to pick up along the way.
And with the right mentor, you’ll have someone to bounce ideas off of and gain insights from when you don’t have enough knowledge on your own to make the call. It’s an investment in relationships that pays off big time over the years.
3. Get a Small Amount Of Skin In The Game
Kim’s first investment was modest by any measure—a small two-bedroom house in Portland, Oregon. At the time it seemed like a huge leap of faith for her, but in reality, the potential for loss was very small just a few thousand dollars.
What she learned from that investment, however, was worth infinitely more. And the confidence she gained allowed her to move on to a new, slightly larger investment down the road.
Today, she and I own thousands upon thousands of apartment units across the US, but she would never have gotten to this point if she didn’t take action and invest in that small single-family home in Portland many decades ago.
With the right investments in your financial education and by finding the right mentors, it becomes easy to take this step of putting your money where your mouth is. Then, slowly but surely, you’ll begin to gain the confidence you need to make bigger and bigger investments.
Start today, there’s no excuse. Don’t hide behind your lack of confidence to build the financial future you dream of today!
Editor, Rich Dad Poor Dad Daily