When I first started out in this business about 10 years ago, I had almost no money. I was desperate for deals and would do almost anything to get a deal. I would run all over the place, I would let seller’s “beat me down” on price and I didn’t have the confidence to stand up to people and get the money I deserved.
Now things are a lot different. I don’t let anyone “beat me down,” I have confidence to get what I deserve, and I will easily walk away from a deal if a seller or anyone else causes me any headaches and becomes a pain in the butt.
How did I get to this point?
Well, obviously, when we start out in this business we don’t know much so it’s natural not to have a ton of confidence. However, over time we gain experience and (hopefully) become successful and make a good amount of money.
What we do with this money determines your level of confidence and your ability to deal with people on your own terms. In other words, you need to have four buckets that you put your money into to ensure that you’re living life the way you want to.
The first bucket is used to pay your bills and your monthly expenses. This includes rent, gas, food, and everything else. There’s no reason that you can’t live on $3,500 a month. If you can’t, you have a spending problem and you need to get rid of cable TV and all those other monthly subscriptions that you don’t need.
The second bucket is for emergency money. I’m conservative, so I like to have a years worth of expenses saved in case an emergency happens. If you can’t afford a year, try and get 3 to 6 months of emergency money saved up. This is a very important bucket to have, because with this money saved, it allows you to do deals on your own terms. If you don’t have any money in the bank you’re operating off of fear and you’ll likely let people walk all over you.
The third bucket is for your retirement.
I’m no financial expert, but this means long term investing in the stock market, bonds, gold and of course real estate. I’d put 10% of my monthly income in this bucket if I were you.
The fourth and final bucket is the most important and the bucket that investors have the hardest trouble utilizing. In short, the fourth bucket is where you re-invest your money into marketing. For instance, if you close a $20,000 wholesale deal, at the very minimum you should invest $2,000 of that money back into marketing, and you can do what you want with the other $18,000.
One of the secrets of my success and of all businesses in general, is that you are always re-investing in your business. If you don’t take a portion of every deals profits and plow it back into the business you will not grow and you’ll eventually go broke.
I can’t emphasize this enough and it drives me nuts when I hear investors being cheap about marketing. In fact, I recently invested $1,300 in a direct mail campaign and a friend of mine couldn’t believe I was “wasting” money like that. I tried to explain to this friend that the $1,300 investment would probably lead to a $10,000-$30,000 deal. And I don’t know about you, but if I could give someone $1,300 and they would give me $10,000 in return, I would do that all day long.
So, if you don’t have your four buckets yet, get working on them because it will make the real estate investing business, and also life, a lot more enjoyable.The Four Money Buckets That Will Lead You to The Good Life by Jason Hanson