{"id":141523,"date":"2022-01-31T04:00:00","date_gmt":"2022-01-31T11:00:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=141523"},"modified":"2023-03-22T03:57:50","modified_gmt":"2023-03-22T09:57:50","slug":"4-simple-steps-for-less-money-stress-in-real-estate-investing","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/4-simple-steps-for-less-money-stress-in-real-estate-investing","title":{"rendered":"4 Simple Steps for Less Money Stress in Real Estate Investing"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC3549641698\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p class=\"has-normal-font-size wp-block-paragraph\">There is a rosy glow about real estate investing\u2014a land of opportunity, eye-popping numbers, and the lure of a tangible asset that can be painted a calming shade of blue. And a lot of these upsides are brilliantly true! But there is one soft underbelly that gets lost in the optimism\u2014and that\u2019s the added stress of being a landlord.<\/p>\n\n\n\n<p class=\"has-normal-font-size wp-block-paragraph\">Leaky pipes that need fixing, the mortgage that needs to be paid between renters. It\u2019s a lot of numbers and cash flow logistics to be jumbling around in your head\u2014and it can be stressful!<\/p>\n\n\n\n<p class=\"has-normal-font-size wp-block-paragraph\">Well, that\u2019s kind of our thing: keeping finances neatly organized. Stay for the geekery. We know a thing or two about how to gain total control of your money, and how to be totally in control of your cash flow for real estate investing.&nbsp;<\/p>\n\n\n\n<p class=\"has-normal-font-size wp-block-paragraph\">There are four simple rules, and they\u2019re called the YNAB method. That\u2019s <a href=\"https:\/\/www.youneedabudget.com?utm_medium=referral_sponsored&amp;utm_source=biggerpockets&amp;utm_content=bigger-pockets-blog-swap\" target=\"_blank\" rel=\"noopener\">You Need a Budget<\/a> if you\u2019ve got time to stop and smell the roses. Our secret sauce is this proven four-step method that puts you firmly in the driver&#8217;s seat for managing your cash flow no matter what tool you use.<\/p>\n\n\n\n<p class=\"has-normal-font-size wp-block-paragraph\">At their heart, this method isn\u2019t really about money management. It\u2019s about creating a system to organize your finances, so you can spend less time stressed about money and more time living the life you want.&nbsp;<\/p>\n\n\n\n<p class=\"has-normal-font-size wp-block-paragraph\">What you\u2019ll learn:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How to use the four-rule method for less money stress<\/li>\n\n\n\n<li>How to know when you\u2019re financially ready to buy your first property<\/li>\n\n\n\n<li>Things to budget for as a landlord<\/li>\n\n\n\n<li>How to remove surprises from your expenses<\/li>\n\n\n\n<li>How to organize, track, and gain total control of your cash flow<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Without further ado, let\u2019s meet the YNAB Method:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Rule #1: Give every dollar a job<\/li>\n\n\n\n<li>Rule #2: Embrace your true expenses<\/li>\n\n\n\n<li>Rule #3: Roll with the punches<\/li>\n\n\n\n<li>Rule #4: Age your money<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">Rule #1: Give every dollar a job<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Think of each dollar in your possession like a devoted employee. Each dollar you have right now needs a specific job. Maybe some dollars are meant to pay for mortgages, while others are set aside for utilities. Maybe some dollars are saving up for your next (or first!) rental. You want the unemployment rate for your dollars to be 0%, so each one is given a job. You get to choose. You\u2019re the boss.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/izT8J8FA7CgD4bG5R1gQ4FqhquAlKG0rfPkhtPwuyiTvxuaHkGSDYCLpPnRxK41txShu02qEKvW_7LsLM_Geb0QmSyhONbnzo1YeF3RU0B3BgN2uLXIFVpDs8Kmqes4fOGySt7kT\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">Rule #2: Give every dollar a job until all your money is assigned to a category.<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Rule #2: Embrace your true expenses<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">No more getting walloped by a roof repair, surprised by a water bill, or left out in the cold for the inevitable renter turnover. With rule #2, you plan for non-monthly expenses within your budget. You save for things like maintenance and repair each month, turning your monthly expenses into neat-and-tidy monthly costs.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/Bri9E8BPurTTCzhrzw1yz1RHqoEaq131m5X6_neJT64o50_0ITSzBmMHPt8oAtCsl7iGrrWNKg5GmDkFRqsQ29tHVVozmKPiAFBDIQ90yduxM6pSqDOL2wfFBG4bKV0rl2P2fND_\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">Save for non-monthly expenses like repairs and renter turnover in your budget.<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Rule #3: Roll with the punches<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Rigid budgets break. They break on paper, they break your heart, they break your budgeting willpower. So with Rule three, we future-proof the ol\u2019 budget.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You might spend more than planned on a repair\u2014and that\u2019s totally ok. Just move money from another category that\u2019s less important (like the emergency fund you set aside for such a time as this!).&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh6.googleusercontent.com\/mqBxlcZXItqOEbys862bX5jaSMhMAWFqVds1NoCxH3hake67S4tc7otDLfYnUclE0BKdrSXdXUoOVYT7_1OZX_vQzYiYb5Bl52mQHpLH7MVbz6XxdkPiVq3uWevadAjjc1_82prL\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">When you overspend in a category, just pull from another category that has money available.<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Rule #4: Age your money<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Think of it like this: with Rule Four, money comes in and stays in your account for a little while. You use last month\u2019s rental income to pay this month\u2019s mortgages. You\u2019re using \u201cold\u201d money instead of \u201cnew\u201d money. As time goes on and you follow rules one through three, rule four is really just a byproduct\u2014your pile of money and assets will grow larger.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Side effects of following rule #4: balances growing plump, and extra cash left over to continue growing your real estate collection.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/5UxXDvVkjV--uwn5D5hBz5cL8UhElDGn3Wt4W16Fwb-ZIjkLo2-JX-IQ06pkXWilv0BJxWMjnFG2VN0GhdGDYwt-I3Woqp4Ql26lhkMTKOb51xs2rugIiNY-TWyES0Ec9hsGVrnt\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">Follow rule #4 to build your pile of cash so you can jump when the next opportunity strikes.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Let\u2019s see the four rules put into practice with two scenarios: the new investor, and the seasoned investor. We\u2019ll show you examples within YNAB, but you can implement the method in a spreadsheet or any other zero-based budgeting system.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Budgeting for the new real estate investor<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">You\u2019re itching to buy your first rental property but it\u2019s hard to know when to pull the trigger. Instead of trying to time the rollercoaster market, you call the shots by knowing when YOU are financially ready. After you\u2019ve used the four rules in your own life, you can map out the specific costs it will take to enter the market and start saving. Plus, you\u2019ll know exactly when you\u2019ve hit the target to start shopping for property that fits neatly within your budget.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/FcYEOGAQgWZq86yKmJrEU6P5P-22OupCBddknHBWUYKR9V6ooejaTElvGtwqUURnOqjuOKAHlmCWb3zEF_lQeqJkwlZB1xCr1LCToLPD5hDocib6fOy_LkHGu_5jRdl1Aj2o8IYa\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">Focus on using the four rules in your own personal budget, and include a category to save for your first rental property. Once it reaches your target balance, you\u2019re ready!<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Set aside money for your own personal expenses, and then set a target for the down payment needed on your first rental property. Don\u2019t forget to set it high enough to cover closing costs and repairs needed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Budgeting for the seasoned investor<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">You\u2019ve got your portfolio amassed, now you just want to optimize your organization system. Your budget could include all the expenses of each property, split out by address.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/IVubbwDpp8ppXDEWnsE-h1DpAeRjNLZp-_0QCG9gWITkYEupqFcypUaXl51ESoyqD8ccpRHC8foRJQ5LxMnqgu-l0HRQj3ueUNdtwbVkEZB006kax3gxQJYTHnAdcfoKsq0nJ465\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">Track both your cash flow and your list of mortgage debt to market value in one place.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Don\u2019t forget to save for those larger, less frequent expenses in your budget as well. Consider including a Master Funds category group to cover expenses between leases, an emergency fund, and a fund for capital improvements.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can easily save for your next property as well in this Master Funds category group.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/6KMGveq2d9IRm-Cm9FwwSsEamIeVh0G5eUMsoT9FQ_e5HKMHvqw2XS2g6k9qdBoC-OaeTyZmm38WbYjr--3a2Mf4NCBDYes-NBpp1M6EWcr56PrhIZCysN-C2UqbitgIa6ZJ2AF-\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">Save for larger, less-frequent expenses within your budget.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Keep an account register of your rent payments and outgoing expenses for easy reference.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"529\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/01\/BP-YNAB-1024x529.png\" alt=\"\" class=\"wp-image-141524\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/01\/BP-YNAB-1024x529.png 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/01\/BP-YNAB-300x155.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/01\/BP-YNAB-768x397.png 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/01\/BP-YNAB.png 1282w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">See a running list of money coming in and out, and easily reference when rent money is due.<\/figcaption><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\">As you follow the four rules, watch your net worth climb every higher as your asset-to-debt ratio increases.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/RIHvWlC8CqN49Zf_0vVEfxppIpsuFN3MseL-ltNTNN-bUC3dNK4N3Iz99ndHAF1dU5lUmdR7WM7Te0U8cj_4ZDZnEKJ9UIjCOt8KukjG580cqULizXeNhczFlqt-WrIlGY3TqfWx\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">A real net worth chart shown in YNAB reports.<\/figcaption><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\">As you track your spending and categorize your dollars, you\u2019ll also be able to easily see an at-a-glance income statement by month and over time.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/3ZcnLUVYVcUKp0IrI10NLqlacCfzfRhN8FTw_Itp5-Zjm8w4E3M6-M_SullOi_H6VaY2EYm9dMywV0loh6BmWLCEUi41MVfRd0jvqQmIZ9Yw1PZDBp86MoXWOGdGJc6BJ-r-Cw2h\" alt=\"\" title=\"\"><figcaption class=\"wp-element-caption\">Track your net income each month (shown here in YNAB reports) at a glance,<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">No matter what app or spreadsheet you use, follow the method to lower your stress, grow your wealth, and enjoy your ever-larger pockets.&nbsp;<\/p>\n\n\n","protected":false},"excerpt":{"rendered":"<p>Whether you\u2019re a first-time investor or you have a portfolio of properties, there are four simple steps you can take to have total control over your cash flow. <\/p>\n","protected":false},"author":613600,"featured_media":141526,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7119,5182],"tags":[548,2453,7305,59,2408],"class_list":["post-141523","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-biggerpockets-daily","category-personal-finance","tag-finance","tag-finance-real-estate","tag-investor-basics","tag-real-estate-investing","tag-real-estate-investing-finance"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/141523","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613600"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=141523"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/141523\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/141526"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=141523"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=141523"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=141523"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}