Most of us never learned in school that how we feel about money is one of the most important things that affects our personal and family happiness and well-being. Our schools don't teach you how important your credit score, personal financial statements, and ability to set financial goals are, but these things are crucial to your financial "shape" and success.
Work on building or improving your credit score by keeping accounts open and making payments on time. Even if your credit is bad, you can start investing in real estate right away. But if you have good credit, you can take advantage of some of the most creative and profitable financing options for real estate investors, so you should start working on your credit score.
Second, know how important it is to make your own financial statements. Your financial statements will help you make a plan that will get you to a place where you are truly financially free.
Some of you will probably cringe at the thought of having to look closely at your finances. Think about it this way: How will you ever know where you want to go and how to get there if you don't know where you are? After all, the key to becoming financially independent isn't making millions of dollars; it's managing your own money. How many former professional athletes and rock stars who made millions of dollars are now broke and living on skid row? How many multimillionaires have to work long, hard hours to pay their bills and then retire when they are too old and tired to live the life they always wanted? Too many. They were never taught how to take charge of their money, which is a shame. Now is the time to start doing that.
The first thing you need to do to live the life you've always wanted is figure out how much passive income you need to become wealthy.
Next, assess your debt repayment expenses. There are both good and bad costs of paying off debt, and it's important to know the difference. Positive debt is when you use someone else's money to buy something that will make you money (leveraging). When you invest in real estate, you will take on a lot of good debt. (For instance, you might get a loan from the bank to buy a new rental property that brings in more money than it costs. Even though it is someone else's money, like that of the banks, it still brings in money.) When you pay down your debt, you have a positive cash flow that puts money in your pocket. A negative debt expense is a negative cash flow because it costs you money.
Do everything you can to get out of debt. Look at your estimated debt costs and figure out how you can lower or get rid of the negative debt repayment costs. When you cut back on other budgeted expenses, you can often use the difference between what you were charged and what you had planned to pay on your negative debt.
Last, look at all the other categories of expenses and make any necessary changes.
SUCCESS STORY
Since Emily's credit was bad, she never thought she could start investing in real estate. One day, she found out that her friend Debbie, who had bad credit, was making a lot of money by investing in real estate. Emily asked her how she could invest in real estate when she had bad credit. Debbie told her that she had learned how to buy properties even though she had bad credit. She told Emily that when she first started investing, she used seller financing and both traditional and nontraditional loans with high interest rates to pay for them. At first, her investments broke even because the interest rates were higher than usual. She used the tricks for investing, though, and in a year she was able to get her credit back on track. She then refinanced all of her properties at lower rates, which made them start to bring in $1,900 per month.
