We live in a day and age where being health conscious is in. All you need to do is turn on your TV for twenty minutes and you will find a commercial about eating better or exercising more. As great as being physically healthy is as a real estate investor you also need to focus on your financial health. It is not enough to simply generate revenue. If your money is going out just as quickly as it comes in all your hard work is essentially for naught. Just like with physical exercise you don’t need to spend hours a day to get results. As long as you are consistent and make small strides every day you will slowly start to see an impact. This will spur you to do more and eventually help achieve peak financial health. Here are four quick exercises every investor can do to improve their financial health.
- Evaluate Expenses. Do you know where your money goes every month? As a real estate investor, you need to juggle your personal finances as well as your business expenses. There are times when you simply send a payment in without really knowing what it is for or what it entails. The first financial exercise you should do is an evaluation of your expenses. Start with an unofficial audit of your business. Not only should you list every dollar that goes out in a three-month span but you should take a minute to break down what you are getting from it. Is your lawn care professional providing the service that you expect? Are you getting everything you want from your property manager? If there is any doubt you should take some time to make sure you are comfortable with the expenses. It is important to also balance out your personal expenses as well. It is not uncommon to shave off literally hundreds of dollars of expenses every month by looking at your cable & phone bills, monthly memberships and everyday spending. The money going out has a direct impact on your monthly bottom line.
- Loan Balances. As you evaluate your expenses you should make specific note of your loan balances. These can be anything from mortgage repayments to credit cards. These expenses are often the ones that have the biggest impact on your monthly payments. If your loan balance has a fixed rate you should see if refinancing is something that makes sense. If you have an adjustable rate, such as a home equity line of credit, you can evaluate if converting to a fixed option is something that can save money long term. With any revolving credit such as credit cards there are a handful of ways to save money. The first is by looking at zero interest transfer options. If you have opened a credit card in the last few months you probably receive new credit cards in the mail daily. Instead of blindly throwing these away you should save the ones with zero interest. Paying on a zero interest or a low interest rate card can offer a significant monthly savings as well as expedite how quickly you can pay the card off. Don’t accept your monthly loan repayments without exploring all your options.
- Look At Your Credit Report. You should know your credit score and what is on your credit report at all times. Your credit score is the single most important factor in obtaining credit. Without a strong score you will be forced to accept a higher interest rate or may not get the approval you expect. Knowing what is on your credit report is easier than ever. There are literally dozens of places you can obtain a copy either for free or as coupled with another service. Not only will you know your score but you will get the jump on removing any erroneous items. These items can sink your credit score every month they are not removed. You never know when you will need credit to take care of an unexpected business expense. Without a strong credit score you will be forced to scramble and overpay to take care of these items.
- Budget Your Spending. It is truly a great feeling closing a big real estate deal. The check you receive at closing is your reward for dealing with all the ups and downs over the past several weeks. As trying as the transaction may have been it doesn’t mean you should spend money foolishly. If you aren’t careful with your spending you will be left to wonder where all your money went. As difficult as this may be you need to make a strict monthly spending budget. This takes some sacrifice and discipline but is best for your business until you really hit your stride. Even when you get to the point where you have multiple streams of income you still need to watch your spending. You should think about what you are getting from every expense you make. If you cannot validate the expense you should stop and reconsider. By having an allocation of money, you can spend every month it forces you to make good decisions. Most people don’t like following a budget but it can be the best thing you can do for your business.
The more you think about your finances the easier it is to adjust. With a little bit of financial exercise, you will be financially fit in no time.
