5 Financial Tips To Help You Overcome Your Biggest Challenges
By Paul Esajian on January 20, 2017
It is not how much you make but rather how much you keep. Your bottom line is the most important aspect of your business. You may be closing deals but if you do not have anything to show for it you won’t feel satisfied. In most cases adjusting your bottom line is as easy as changing the way you look at your finances. There needs to be a different mentality that is associated with being in business for yourself. It is not a stretch to say that you need to watch every dollar that comes out in and out of your business. By changing the way you view money and changing a few bad habits you can quickly see an increase in your bottom line. Here are five important personal finance changes every struggling real estate investor should make.
- Cut Spending. It is amazing just how quickly expenses add up. Even if you are not spending money on exorbitant items your spending may still be out of control. A good exercise is to take a look at your credit card and bank statements for the previous sixty days. Highlight every expense you have made and isolate it on a separate spreadsheet. Go through all of these and see which items you can justify. What you will probably find is that a good amount of these are for excess items that you really didn’t need. Paying money for food and utilities is one thing but spending a few hundred dollars on a night out may not be the best use of your capital. By cutting your expenses by 20% you will immediately free up some capital. This can be used to pay down other debt or provide a nest egg for a rainy day. If your problem is spending this can be a difficult, but simple fix to make.
- Credit Card Usage. How reliant are you on credit cards every month? Do you do a bulk of your grocery shopping on your credit card? Do you tend to treat yourself to something nice every now and then? A more important question is how in control of your balances are you. Paying down high credit card balances is like running on a treadmill. The more you use your cards the faster you need to run just to keep up. Making the minimum monthly payment alone will not do much to reduce your balance. Just when you start making a dent in your balance you use the card and right back up the balance goes. If you have high balances and use your cards you need to take a stand and work on paying these off. A card with just a $1000 balance will cost you three times that in payments over the life of the card when you factor in the interest. Look at the cards with the highest rates and attack those first. This takes time and discipline but your balances won’t get under control unless you start somewhere.
- Establish A Rainy Day Fund. As a real estate investor it is critical that you have reserves you can lean on in times of struggle. Reserves allow you to make the right decisions for your business without compromising the long term growth. Building reserves is often easier said than done. A majority of Americans do not have more than a few hundred dollars in their savings account. Just like paying down your debt building reserves should something that you focus on over time. Take a percentage of every check you receive and allocate that towards savings without giving it a second thought. Regardless of what the amount is it is better than nothing. By doing this you will be surprised at what you can accumulate over the course of the year.
- Set A Budget. If you really want to curb your spending and monitor your finances you need to set up guidelines and parameters. The best way to do this is by establishing a firm spending budget. It is amazing at just how few people have spending budgets. Without a budget in place it is easy to spend whatever you like when you have access to money. Going over your budget just a little bit requires you to find money from other places. This could mean taking capital from your reserves or making expenses on your credit cards. Both scenarios open up a can of worms that you do not want to have to deal with. Setting a budget and eliminating spending is not always easy but if you look hard you can probably find at least a few areas you can trim.
- Track Your Progress. Changing your finances should not be a one month thing. If you make the commitment the change should be for the long term. At the end of every thirty day period you should take a look at how you did and assess where you can do better. Go through your statements and see exactly where your money went. Doing this every thirty days will give you some accountability for your spending and help understand the repercussions every expense has. As counterproductive as it may seem you can also give yourself a small reward for doing a good job. If you have eliminated Starbucks from your budget a $5 coffee can be a real treat. If you don’t stay on top of your progress changing your finances can be nothing more than a short term thing.
Making the commitment to change your finances is never easy. However nothing will change unless you take the first step. Use these five tips to help strengthen your financing picture.