Rental Property Investor · Charlotte, NC · Member since 2016 · 36 posts · 10 votes
Hey everyone,
I am graduating college in a week or so, and want to be prepared to budget effectively as I start getting real income for the first time. I'm curious as to how you manage your money, any apps you use for tracking spending etc, and any tips or tricks.
@Eric Fitzgerald congratulations on graduating! I have used mint.com for 10 years and really like it. You can track and itemize all your purchases, net worth, net income etc to help you identify how to optimize and set goals.
My biggest piece of advice is however poor you've been living in college... Roommates, cooking at home, driving a beater, keep doing that for as long as possible. At least until you get married.
@Eric Fitzgerald good old fashioned pen and paper on the first monday of every month. I'm cheap as hell, and put about 70% of my income aside as savings. I invest every dollar in my personal savings above 50k. Pick a reserve number. Meet it. Then go above it and invest aggressively when you pass that number. Set targets for everything too. Follow them, and monitor your results regularly.
Business finances are a bit of a different situation, of course.
I used Mint.Com for a couple years, but it's garbage. I found YNAB and never looked back.
Folks like Mint because it's free, but there are a couple reasons why it doesn't scale well. First, it's almost impossible to track your expenses, savings goals, etc. across accounts. It's hard to describe unless you've used both products, but YNAB is essentially what I was trying to emulate with Mint by setting up different bank accounts for different savings needs. YNAB let's you do all this no their front-end so you don't have to create multiple savings accounts on your back end.
It takes some learning but I tell people that the $55/year I spend on YNAB is literally the best money I spend all year. My wife and I don't fight about money, budgeting, and savings. It makes life easier and managing our finances far more efficient.
But really, if you start using YNAB now you will be far, far ahead of the pack. Make the process easy, painless, efficient, and (dare I say it?) fun, and it will be a process that's sustainable.
I stay away from net worth tracking apps. I'm not chasing a net worth figure but rather cash flow. If you are, maybe they're for you.
Use credit cards for everything but make sure you pay them off every month. Find a card that offers solid rewards. We like the Chase Sapphire Preferred card, but you might want to start with something that doesn't have an annual fee if you aren't spending a fair amount.
Open an excel sheet and put your income in one column and expense in another. I break up mine bi-weekly since that's how I get paid. Figure out how much money you can use to pay off bad debt faster.
Getting free of consumer debt and then staying out of it is the best thing you can do for yourself. When you're 25 you'll thank your 20 year old self for giving you freedom.
Exercise. Discipline in health leads to discipline in other areas. Savings/investing and fitness are both slow. The daily choices build the bigger picture. Both are tough, both involve internal struggle, and everyone assumes the results happen over night.
Read Dave Ramsey "Total Money Makeover"
Have roommates and live as cheaply as possible. You don't need granite counter tops, or a roof top pool.
If you get into a relationship keep your goals your main priority. This doesn't mean treat someone poorly, but state your intent up front and align yourself in relationships that support that goal. If it doesn't support the goal it's not you, it's not them. Neither is wrong it's just not a match.
As far as tracking, there are apps like Mint, Fudget, Wallaby. Find one that works for you to keep track of what youre spending every month - you'll cut way back on or prevent the spending creep as you become more conscious and aware of your spending.
Some will say use cash for everything. It CAN make you think about what you're spending money on because it's coming out of your pocket. The idea is you'll want to hold onto more so you'll spend less. Psychological trick. I agree with this if you need a crutch. But once you're in control, use a credit card with rewards, they will add up and you will build credit - which will be necessary in most cases if you're buying RE.
Live under your means. You don't need a new car, Kanye sneakers, or an expensive watch. Let the fools judge you. You have a plan to work and it will pay off.
Use credit cards for everything, pay them off 100% each month. Read a ton. Look into Index Funds, ETF's, Crypto, REITS, whole life insurance policies, and whatever else you can for what resonates with you as to where to put your money.
@Lindsay Brake Thank you! I've heard mint is a valuable tool, especially for staying organized financially. I definitely plan on keeping my expenses as low as I can compared to now.
I just ordered it! A few people have recommended it, so I will check it out. Thanks again
I do not like mint or having all of my accounts and logins associated with one organization/app Budgeting is easy if you make it easy. Two simple ways:
1) Toshl app - this is what I do now to track all spending and expenses
2) track by hand or spreadsheet - manually do it yourself. I think there is value to this approach because it’s hands on
You should open a high interest yield checking/savings account (aim to get 2-4%), set up dedicated checking account per property.
You should read the tony Robbins book “unshakeable”
Hey Jim, thanks for your advice. I've listened to all of the regular BiggerPockets Podcast, but not the Money one. I'll have to check it out, I'm sure they all have good content. I just ordered Set for Life, it looks like a good book for recent graduates.
As for the psychological impact, that's something I never thought about. Could be interesting how my upbringing can impact the way I think about money.
@Derrick E. Thanks Derrick. Definitely no new cars or fancy watches for me in the near future, hopefully that will put me in a good spot a few years from now.
@Steve Vaughan Thanks Steve. I'll check that app out, I haven't heard of it before. And yes, I plan on running my current car until the wheels fall off :)
@Steve Bracero Thanks Steve! I have a credit card now, but will look around for one with the best benefits. I currently have an older car and plan to use it until the end of its life for sure.
@Lindel Turner Thanks Lindel. I have been doing some research into IRA's and other options, but I am still pretty uninformed. (I think we should be taught this in school versus some of the more useless things, but that's a whole different conversation)
@Brian G. Thanks Brian! I've seen some of Dave Ramsey's YouTube videos, he seems like a great resource. I'll look into more details about that course. Thanks again.
@Frank Wong Thank you Frank. I already see some of my slightly older friends buying unnecessary luxuries that people my parents age have. Keeping expenses low is a big factor. I am looking to close on my first property this summer, and looking to grow from there!
@Taylor Chiu Thanks Taylor. I read the article, awesome read. As soon as you put away some money in savings, the effect of compounding interest and your money working for you creates that exponential effect of income. Also, decreasing your spending rate is much more powerful than increasing income, which is something that I didn't fundamentally understand until reading the article. (although increasing income helps, it's your rate of saving that income that really matters)
@Eric Fitzgerald Congratulations on starting young, some people don't come to this conclusion until they are up to their eyeballs in consumer debt.
I use YNAB (You Need a Budget) and it has worked really well but free options like Mint and Every Dollar will work fine to.
The main thing is get the right mindset about money, which it sounds like you are on the right track. I would suggest reading Dave Ramsey's book for the personal finance side and budgeting of things. I would also recommend reading Rich Dad Poor Dad, and Secrets Millionaire Mind from T Harv Eker for business sided mindset. I know what Dave teaches goes against what a lot of business and real estate teach but for personal finance I like him a lot, I don't necessarily agree with him 100% on leverage when it comes to starting a business or real estate though.
When you get credit card preapproval offers in the mail, they are very important so make sure you save them......then use them as toilet paper.
I absolutely hate, loath and despise consumer debt other than a house payment.
I don't consider Real Estate leverage or smart business leverage consumer debt although my end goal is paid for investments.
Income creep is real, be aware of it and prevent it from happening early in your journey.
Be frugal minded but allow some fun money for yourself. There is nothing wrong with spending more on personal things or luxuries eventually but it needs to fit your overall goals and income and needs to be well under standard for what your income is. You will burn out if you have 0 fun in life, not taking it to the extremes and not spending more than your income justifies is the key, that and budgeting for it properly.
Did I mention using credit card offers as toilet paper?
If you struggle to get in and stay in the habit of managing your finances then make a point to do a little every day for a month. Once you get set it really doesn't take much time but looking at the budget and thinking about it a little every day will help make it a stronger habit.
Learn how to mentally hype yourself up. When you get ready to do your finances reaffirm to your self that you enjoy the process, it is necessary and you love doing it because it will bring you one step closer to financial freedom and whatever your goals are. Don't let your self overlay bad or irritated thoughts with it if you don't enjoy the process. Don't go into it thinking I hate this, I don't want to do it etc. mental conditioning is very important for all aspects of life.
Another fun thing to do with credit car applications is shred them and shoot it out of a confetti canon.
A lot of good apps help you see where your money went, but you probably need to focus on not spending compared to looking at your app at the end of the month to realize you wasted a ton of money, but it’s still good to document your expenses by category with one of these free apps.
First, I would put every dime I have to my savings account to create an emergency fund, for me that’s $10,000, do not touch this money unless it’s an emergency! No, a car or buying an investment property is not an emergency.
Secondly, fund a traditional or Roth ira or both depending on your income tax plan(traditional is tax deductible, so that might help you avoid owing the IRS but the Roth grows tax free) I put roughly 25% of my net income to my Traditional IRA and Roth IRA collectively after they are fully funded for the year I buy vanguard index funds with the rest. I like Robinhood and the Stash app for these types of investments.
I try to live off of only 25% of my net income, this may not be possible for you depending on the cost of living where you live. I have made the choice to live in a low cost home in a part of the country where the cost of living is very cheap, but that’s not for everyone.
I try to save another 25% of my net income for real estate investing, I use 100% of the profit from that to fund more real estate investments.
The last 25% is for trying to have a decent quality of life. Spend it on what makes you happy. For me I try to go on a couple vacations every year(without breaking the bank). Whatever money is left over from this I hold onto for bigger purchases like maybe a car upgrade in a few years or you could use half of this to become more aggressive on your debt payments.
It’s important to fund your savings account and investments first. If you don’t you will find yourself spending that money and you will not stay disciplined with your investing. If you get married continue this strategy with one income while using 75-100% of the second income to pay off debt and invest. The most common two things to destroy a budget is a car loan and groceries/eating out. Most households easily spend well over a thousand dollars monthly on these two things. Pay cash for a used car, and keep the groceries around $25-35/week per person. It’s not too difficult to do if you get smart about what you buy and how you eat. Grow a small garden or hit up a farmers market and buy your protein right, Drink water, etc.
It doesn’t take much knowledge or education to do any of this it’s all very simple and common sense but most people have lost the ability to be disciplined and hold themselves accountable. The urge to impress others is way too strong for most people. And the more money you make the harder It becomes to stay disciplined.
Sorry for writing a book but I’m passionate about being frugal!
I hooked up all bank accounts, retirement accounts and credit card to Personal Capital. This aggregates everything into one centralized location and has fantastic visualizations that help track income, expenses, monthly cash flows and net worth. Once you've saved a little cash and start investing via a 401K plan through your W2 job or your personally opened IRA plan, there are some really great tools/visuals for retirement planning and asset allocation. If you go the rental property route, I have been using Stessa and it's been simple, easy to use and very helpful thus far in managing my property cash flow.
Lastly, it takes a ton of discipline for this, but I use my credit card for every expense possible during the month and then pay the full balance every statement. Get a good reward card (Chase Sapphire, CapOne Venture, airline one, etc) and the points accrue quite rapidly. My wife and I have taken numerous free trips as a result.
@Eric Fitzgerald if you're interested in achieving early financial freedom, read Set For Life by Scott Trench and The Simple Path To Wealth by JL Collins... immediately! Then consider an anti-budget, a term that I believe Paula Pant of the Afford Anything blog and podcast coined. Decide on your savings rate (try for 50%+ if you can!), set that aside first, and then don't worry too much about how you spend the rest... as long as you aren't taking on bad debt. Good kuch!
Would agree with two of the major themes posted thus far.
1. Spend what you are spending right now in college for as long as you possibly can.
I graduated 3 years ago, and lived with 4 roommates to cut costs and save money despite having a pretty solid paying W2 job
Don't let income creep happen and stay off the consumerism treadmill - you don't need that new iPhone.
2. Do budgets by hand for as long as you can (but also use mint/whichever tool you prefer)
I find it satisfying to do this on Sundays. Grab a bottle of wine (2 buck chuck that you split with your roommates) and write it out. Easiest way to find some cost savings.
Pro Tip - Do this with your roommates and turn it into a competition.
Overarching very simple piece of advise. Read Rich Dad, Poor Dad and understand what an asset is compared to a liability. Once you do, build assets, reduce liabilities.