Since this topic is critical for real estate investors, I wanted to dig \u00a0a little deeper and help those who do not have a personal financial statement get started.<\/p>\n
Know the Numbers<\/h2>\n
The single biggest mistake I see when coaching new real estate investors is that they don’t know\/understand the numbers. \u00a0If you don’t know the numbers, you are almost guaranteed to fail with real estate investing because the devil is in the details.<\/p>\n
Before we even get to the point where we are evaluating real estate, we should all start to evaluate ourselves and our personal financial situation. \u00a0Many people look to real estate as a way to generate extra income and build wealth.<\/p>\n
Just like those “You Are Here” maps in the mall, you need to understand where you are now before you can figure out your next step.<\/p>\n
For some, it may be getting started in real estate investing. \u00a0For others, it may be spending some time paying off debt<\/a> or getting your personal finances in order.<\/p>\n I’ve previously described the Cashflow 101 board game and how it helped me define my investing strategy<\/a>. \u00a0In addition to helping define your investing strategy, it can also help understand your personal financial situation.<\/p>\n You see, each person in the game starts out by drawing a profession card. \u00a0This card defines your profession, as well as your income, expenses, assets and liabilities.<\/p>\n The “Business Manager” Profession Card<\/strong><\/em><\/p>\n The first step in the game is to copy the information from your profession card onto your personal financial statement sheet. \u00a0This is pretty easy as they personal financial sheet is structured the same way as the profession card.<\/p>\n The Business Manager Personal Financial Statement<\/strong><\/em><\/p>\n From there, you play with game and work to build your passive income.<\/p>\n One alternative way to play the game is to create your own profession card with your information. \u00a0I absolutely love this approach for a few reasons:<\/p>\n I have done this with a few students, and the results are incredible<\/strong>. \u00a0In one example, the person did not realize that their monthly cashflow was actually negative! \u00a0And they wondered why they could not get ahead.<\/p>\n On another occasion, the couples realized that they had more credit card debt than they realized as each person kept their own checking account and credit cards. \u00a0Regardless, it allowed people to create their first personal financial statement<\/a> without having to know a lot about personal finance.<\/p>\n I really love actionable content. \u00a0Instead of just reading a blog and thinking “that’s great” and moving on, I want you to try out this activity. \u00a0Take the blank profession card below, print it out and fill it in with your own information. \u00a0It might take you a little bit of time, but I guarantee you it will be worth it when you finish.<\/p>\n A Blank Profession Card to Get You Started<\/strong><\/em><\/p>\n Now that you are done, copy the numbers over to a blank personal financial statement<\/a>\u00a0from the game, then review it. \u00a0Is it what you expected? \u00a0Are there any abnormalities in the numbers that really surprised you (such as the guy who had a negative monthly cashflow)? \u00a0This card may be tough to look at, but please realize that you just took a critical first step.<\/p>\n You took a look at your personal financial life and just pasted a giant “You Are Here” star on your own financial map! \u00a0You now know where you are and can map out where you want to go.<\/p>\n If you have the Cashflow 101 game, I’d recommend playing a round of it with your personal profession card. \u00a0If you don’t own it, you should be able to find a local meetup to play with like minded people. \u00a0It is amazing to see the game using your own numbers. \u00a0If you have a lot of debt, the game may be a little more difficult.<\/p>\n This will allow you to understand how things might play out in real life and you may have to adjust your strategy. \u00a0Maybe you spend some time paying off debt before you jump into real estate. \u00a0Or maybe the numbers are better than you thought and now is the right time.<\/p>\n It all comes down to numbers, and one of the most important pieces of paper that you have is your personal financial statement. \u00a0In Rich Dad Poor Dad<\/a>, Robert Kiyosaki likens it to your “adult report card.” \u00a0I really liked this analogy as it puts your financial situation in perspective.<\/p>\n Treat it like a report card and give yourself one every 4 months. \u00a0By doing this, you will be able to see how your financial situation is changing over time and some trends. \u00a0This will help you pivot and adjust as needed and help guide you to your goals.<\/p>\n This is just a starting point. \u00a0Like Ben mentioned, I would also recommend creating your own personal financial statement in a spreadsheet. \u00a0Don’t ask someone else for theirs, spend some time and create your own. \u00a0However long this takes, it will be worth it. \u00a0If you are not familiar with using a spreadsheet, this activity will give you some of the basics.<\/p>\nUsing Cashflow 101 To Get Started<\/h2>\n
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Try It Yourself<\/h2>\n
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<\/p>\nConclusion<\/h2>\n