FIVE THINGS YOU MAY NOT KNOW ABOUT REAL ESTATE INVESTING, PART 4 – “A Personal Budget is Critical to Your Business Success!”
In this series of blog posts, I’ve been pointing out some of the “insider secrets” to successful real estate investing, that don’t necessarily make it into most seminar presentations or infomercial scripts. It’s the real “gut-honest” truth about what it takes to be profitable on a consistent basis. In part 1, I addressed the fact that everything doesn’t go right all the time, while in part 2 we discussed the reality that it’s just not as easy as they say in the infomercials. In part 3, we talked about how it actually takes some money (even if just a little) to make money, while in this post I want to examine the importance of a personal budget in the success of your business.
You may think that a business budget is critical to your success in business, and yes, it will eventually become necessary. However, most people never get to the point of considering a business budget, because they’ve never even taken the time to establish a personal budget. And unfortunately, that one ill-fated decision oftentimes leaves them unable to take advantage of the very real opportunity that is available to them in the world of creative real estate investing.
One of the first things I encourage new real estate investors to do is to establish a marketing plan to generate new leads. Obviously, the more money you can throw at this new marketing plan, the greater the chance it has at generating the leads necessary to quickly take you from a start-up IDEA to a profitable BUSINESS. However, most people feel like they can’t “afford” the extra money that it takes to truly get things off the ground, and so they just throw their “leftover” money at this new business, instead of establishing a budget and being INTENTIONAL about their marketing.
As Dave Ramsey (the king of personal finance) always says, the key to an effective budget is giving EVERY dollar a name, and deciding ON PURPOSE where you money will go. Otherwise, money will consistently “leak” out of your budget on frivolous and unimportant things, and there will never be anything leftover for the important stuff…like generating leads for your new entrepreneurial endeavor. Very few people intentionally CHOOSE to spend $800 on eating out, and only $20 on marketing their new business. However, that’s typically what happens when we don’t pay attention.
So, here’s your homework assignment…and a call to action of sorts. Sit down with your significant other (or your dog if you’re single), and write at the top of a piece of paper how much money you bring home (net income). Deduct out the essentials (shelter, clothing, etc.) and then decide how much you will spend on any discretionary items, like entertainment, dining out, etc. Lastly (and most importantly) make an intentional decision regarding how much you will INVEST into your new business…and then STICK TO IT! If you decide on $100, then spend $100 every single month on some form of marketing (direct mail such as letters or postcards, bandit signs, etc.)
When you give every dollar a purpose, and assign all of your income to a category, it helps you see things in much better perspective. When you go over budget on dining out, you have to make a decision as to whether it will come out of your clothing budget –OR- your “building-a-business-for-the-future-so-I’m-not-stuck-in-the-rat-race-my-whole-life budget”. When you consider your spending decisions through that prism, suddenly that extra dessert or appetizer just doesn’t seem all that necessary.