Yahoo Finance I Decided To Become a Millionaire: Here’s the First Step I Took
For those who have made the ambitious decision to become a millionaire, the first step is often the most crucial one that sets the entire wealth-building journey in motion. For Brie Schmidt, managing broker at Second City Real Estate, getting an ultra-clear understanding of her finances was priority number one.
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Tracking Every Dollar
“The first step to becoming a millionaire is understanding finances,” Schmidt said. “Apps like PocketGuard and Honeydue or services like Quicken allow you to link bank accounts and credit cards to track and manage your finances.”
Schmidt knew that before she could funnel money into investments and accelerate her net worth, she needed total visibility into where every dollar was currently going each month.
“It is important to understand where your money is going every month and where you can cut spending to save money for investing,” she explained.
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Identifying Wasteful Spending
Once Schmidt and her husband began closely monitoring their finances through budgeting apps, areas of wasteful spending quickly revealed themselves.
“When we started using budgeting apps, we discovered my husband was spending $800 a month on eating out for lunch at work,” Schmidt said. “He was only spending a few bucks here and there every day so he didn’t think much of it, but when we looked at the monthly total, we saw it was a large chunk of money that could have been saved had he packed his lunch.”
By slashing that single line item from $800 down to $300 per month, the couple instantly found an extra $500 in monthly savings to redirect toward investments and wealth-building goals.
“By doing that across the board with all our spending, we were able to find $1,500 a month in savings,” Schmidt added.
Understanding Money’s True Costs
With budgets trimmed and cash flow getting diverted to savings each month, Schmidt turned her focus to calculating the true costs and returns on how that money sat versus where it was invested.
“Once we had a monthly budget and money set aside for saving, we needed to understand how money worked and what it cost,” she said. “If our money was in a high-yield savings account at 4.25% interest rate but we had an outstanding car loan at 7% interest rate, the money sitting in savings was actually costing us since we were paying more for the money we had borrowed.”
Understanding that dynamic debt costs and investment returns drove Schmidt’s next priority: rapidly paying off debt with higher interest rates than they could earn on safe investments.
“Paying off the car became a priority so we allocated $500 of the $1,500 savings to pay the loan faster,” Schmidt shared. “Within a year we had over $10,000 in savings and paid the car off, and now had $2,000 a month in savings.”
From there, Schmidt could choose investment opportunities with theoretical returns that outpaced her 4.25% high-yield savings rate while eliminating future expensive debt costs.
The first step Brie Schmidt took on her millionaire journey may seem simple, but it formed the critical foundation for everything that followed — gaining total control over finances through diligent tracking, cutting wasteful spending to the bone, strategically paying down debt and understanding investing priorities.
By first establishing a rock-solid financial base through budgeting and conscious planning, Schmidt unlocked the ability to consistently save, invest and build wealth with laser-focused intention moving forward.
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This article originally appeared on GOBankingRates.com: I Decided To Become a Millionaire: Here’s the First Step I Took
