Being able to budget and save your money is the most important part in preparing to become a real estate investor. If you cannot manage your money it will be hard to even get started in real estate. If you do manage to buy a property with poor money management skills that property is set for failure.
Tracking, budgeting, and saving are the three steps we will go over.
Download this free google spreadsheet to help you track, budget, and save your come. Click here to make a copy!
First, you must know where you are spending your money. Use this form and go through your last two months of spending. If you are not sure about some expenses, it is okay to guess.
You can try and make accurate guesses or take it one step further and look back through your bank statements to see what you have spent money on.
Fill Out Section 1: Tracking on the download
Now that you have tracked where you spend your money, it is time to budget to save more money each month. The goal when first starting out on your journey is to live as minimally as possible to save as much money as you can for
In order to create a budget you can stick to. You must determine what is essential and what is not necessary. For example, if you can live with your parents for free or have a roommate and save a lot of money, that is a way better option than paying the total rent or mortgage by yourself. Always think of different ways you can save some extra money.
Fill Out Section 2: Budget on the download
Savings is the most essential aspect of money management. Everything we budget and track is to find out the maximum number we can save each month for future investments.
Off limits saving account tips:
Tip #1
Have two different savings accounts. Have one savings account tied with your checking account and credit card, and then have another savings account that does not have a checking account linked to it. The savings account that is linked to your checking account can be dipped into for emergencies or for other things like if you want to go on a vacation. The other savings account is off-limits and can only be used for Step 5: Creating Passive Income. Having a saving account not linked to a checking or credit card makes it easier to force yourself not to touch it, which is why I think this is a tip everyone should use.
Tip #2
After tracking your expenses and income and coming up with a budget, decide how much money you will put into each savings account. I suggest you take the extra money and put 75% into the off limits savings account and the other 25% into the general savings account. Pick a number and stick to that number. Try and put that amount into savings each month, no matter what.
Tip #3
You have come up with the budgets and the amount you want to save each month. If you get a bonus or your paycheck rises, then put the extra money into your off-limits savings account. If you have been doing fine without this money, then do not even allow yourself to see it. Put it directly into your savings, and you will be glad you did.
Fill Out Section 3: Savings on the download
- Total budget amount:
- Total income:
- Total savings (Subtract your total budget from your income):
- 75% of your total savings (goes into your off-limits savings account):
- 25% of your total savings (goes into your dip into savings account):
You should put #4 and #5 into your savings accounts each month. Right after you get your paycheck, move the money into the accounts, so you are not even tempted. If you have an emergency or one of your budgets goes over, you can use your “dip into” savings account to cover the difference. Take your “off-limits” savings account seriously and only use it to invest in real estate.
