Take Your Own Baby Steps

December 29, 2015

I am a huge fan of the movie “What About Bob?” starring Bill Murray and Richard Dreyfus. Bill Murray’s character was so overwhelmed by life that he went to see a psychologist (Richard Dreyfus’ character) for help. The psychologist introduced him to the concept of “Baby Steps,” which suggests taking small steps to achieve your goal. In the movie, Bill Murray took baby steps, literally, but the steps were baby steps based on Bill Murray’s mental state, not someone else’s mental state.

I think one of the pitfalls of someone trying to get financially on track is looking at what someone else is doing instead of taking realistic steps based on their own situation. For example, I had a cousin who would get paid on Friday morning and be broke by Friday afternoon. After reading several wonderful financial experts’ blogs, she decided to apply their baby steps to her own life and drastically cut out everything and live frugally. But just like someone with a New Year’s resolution on January 1 to eat healthy and lose weight, she did well for a few weeks and was back to her old spending habits within a month.

I told her to take baby steps based on her situation instead. She took my guidance and did the following:

Month 1: She tracked all expenses using online apps like Mint.com. She was shocked at how much she spent on eating out and realized she was eating her down payment on a home.

Month 2: She used the tracked expenses to create a budget. When I reviewed her initial budget, I noticed that it only had bills, not the other things she spent money on like groceries, clothes and hair care. She was surprise when I also suggested adding categories like car maintenance. I told her that we all know that our cars will need some maintenance, but if you budget for it in advance, it will not become a future credit card expense. Since she just paid off her car, I encouraged her to continue to make her car payments to herself so she can outright buy her next car.

After creating the budget, we realized that she was spending more than what she made. The credit card falsely gave her a sense that she was living within her means. By this time, she had been tracking her expenses for two months so she started making minor cutbacks. She went to a lower cable package (I knew she was not going to give up the The Walking Dead so we compromised) and we created a budget category for eating out, which she used to eat a cheaper lunch as a treat with co-workers once a week. I told her the goal is consistency not perfection.

Month 3: By this time, she had been tracking her expenses for three months and using a written budget for two. She started thinking ahead and planned for a car tune-up and an upcoming vacation. She told me that she now actually has money left over by the time she is paid.

Sometimes the best way to attack financial goals is to take it in baby steps – the baby steps that are best for you. As we enter the new year, consider starting with one small thing you can do to improve your finances. It could be as small as bringing your lunch to work more often, cutting out one latte a week at Starbucks, or reducing your cable package. Small changes can make a big difference in your finances.