How Those Baby Steps Add Up

I was reading MDJ’s post the other day on baby steps and I came to realize how these little steps do add up.   The really interesting part of all these little steps is how you may not even notice them over a short period of time, it’s only in the long run do they appear.

Case in point, if you track your net worth you can actually see the progress over time.  For example, if you dig up my very first net worth post on this site in Nov. 2006 you would have seen I had an investment net worth of $21,000 and a mortgage of $150,000.  Not very impressive, but as of Aug 2009 those numbers are at $81,800 and $130,400.  So in total in the last 33 months I’ve saved, had investment growth and paid off debt to the tune of $80,400 or an average of $2436/month not including any increases in my house value. Wow, that’s fairly damn good considering that also includes the biggest drop in the stock market in my entire investing career. At that rate I should cross the $100,000 mark sometime in 2010.

Now had you told me that in advance I would save/invest/pay down debt to the tune of $100,000 in about 3.5 years back in 2006 I think I would have looked at you like your crazy.  I was trying my best, but to be honest in the start I did not feel like I was getting much of anywhere.  It was only keeping track of the small things and improving my savings rate a little here and there where I felt like I was doing much of anything.

Now my investments are to the point I feel like I’m seeing progress each month.  That whole compound interest effect has finally got big enough for me to notice, so progress now seems a bit more obvious now.  In fact, I’m really starting to understand a comment I’ve seen on various blogs and books “The first $100,000 is the hardest.”  Yes it is.  With little to no compound interest effect that climb up can feel like it goes on forever.  It’s only has you close in on that number does it feel like you are getting somewhere.

So regardless of how hard that first bit of your long term goal looks, keep going.  It’s a long haul up  to it, but trust me as you get closer it will feel easier.  You will start to feel more confident about your long term goals if you keep taking those baby steps.  Savings is like any other journey you only get there one step at a time.

8 thoughts on “How Those Baby Steps Add Up”

  1. Congrats!

    Compounding on top of regular savings fuelled in part by frugal living makes a real difference.

    Even without additional savings the starting capital makes a huge difference. Here is a simple 15 year comparison between 3% interest on $20,000 and $100,000. We get to spend the second column in retirement.

    $20,000 $100,000
    $20,600 $600 $103,000 $3,000
    $21,218 $618 $106,090 $3,090
    $21,855 $637 $109,273 $3,183
    $22,510 $656 $112,551 $3,278
    $23,185 $675 $115,927 $3,377
    $23,881 $696 $119,405 $3,478
    $24,597 $716 $122,987 $3,582
    $25,335 $738 $126,677 $3,690
    $26,095 $760 $130,477 $3,800
    $26,878 $783 $134,392 $3,914
    $27,685 $806 $138,423 $4,032
    $28,515 $831 $142,576 $4,153
    $29,371 $855 $146,853 $4,277
    $30,252 $881 $151,259 $4,406

  2. Good job on the net worth increase, that’s awesome. I wish people got awards for financially achievement, you’d win the one for outstanding performance!

    I’d enjoy seeing an full update/overview on your growing investment portfolio if you’re interested in sharing.

  3. CM,

    Good table to explain my concept. Thanks.


    Congrats to you as well. Your doing great!


    Investment portfolio is actually damn simple. Mostly index funds: bond, Canadian, US and International. Then a few select stocks: MBT, APF.UN, EIT.UN, CDL.B, REI.UN, BMO. My pension fund is also doing well, but it have dirt cheap fees so that helps (0.38%MER).


  4. Curious, do you include your mortgage pay down in your net worth calculation? Based on your original purchase price of course and ignoring any potential capital gains\losses.

  5. Adam,

    In the above numbers I did include the mortgage paydown, but not the house value increase. In my usual net worth update, which I do every two months, I do include any capital gain. Why? I started doing that way, so I keep it up now.


  6. Thanks Tim,

    Now here is my other question.

    So if we’re talking about the first 100K being the hardest, and how compounding interest really get’s fun above that level – are you talking 100K in the Stocks\Bonds\GIC’s and not counting your home? Since you’re not counting any capital gain\loss from your home – you’re leaving that out of the equation, yes?


  7. Adam,

    Correct I was referring to the first 100K of debt payment on the mortgage and investments. Since paying off your mortgage is compound interest in reverse the same effect applies. You could potentially just refer to the first 100K in portfolio alone, but that could be misleading depending if you leveraged a fair amount to get there.


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