Getting started financially

22 Replies

Hello everyone, I have a question for some professionals and financially savvy people. I want to get started in real estate and I know first I need to get my finances in order, and I have always been great financially. It seems with having a girlfriend that lives with me and a baby on the way that I cant seem to save any money. I dont make a ton of money but probably 45k a year in AL, I do have a 401k where I have 4k in. Would you cash that out in the future maybe when it grows to 10k or so, or just keep trying to save. Currently trying to find a better paying job. I also sell insurance on the side. I am a few thousand in debt (credit cards). Any advice would be great. Thanks!

@Nicholas Groover it's good you are thinking about ways to improve your situation. I suggest focusing on earning more somehow and tracking your expenses closely to see where you can reduce spending. You can get into REI eventually, but saving up some money first would be very helpful. I wouldn't mess with the 401K at that amount.

Agree with Cole. Don't touch the 401k and continue to contribute up to your company's match. You won't find a better REI than the free match. Payoff you credit card and don't carry Cc debt. Figure out how to max your earning and find a duplex to house hack to get started.

@Randy Bloch thanks! I actually bought my first house a few months ago, it was a foreclosure and I know I have a good amount of equity, just frustrating knowing I have money sitting there but can not put it to work! My gf doesnt like the idea of house hacking. I do love the idea!

Good, owning your home is a good start.  Payoff your cc and get a home equity loan on your personal residence.  Depending on how u are going to invest you are going to need higher income in order to qualify for mortgages.  You can try to use opm, but that takes a little more work. 

Also, I know GFs and Wife’s don’t like the househack idea and I don’t recommend forcing your family to live in shady neighborhood if that is only options for house hacks...but if can paint a picture to your GF on how this will launchpad for financial independence she might change her mind.  

If you can save enough for down payment for house hack, move in, rent your current SFH and after a year or two buy new SFH. suddenly, after 2-3 yr you have two rental and SFH under ownership. You are paying down principal, CF and tax benefits and appreciation all working in your favor. That would be a pretty good position to be at say 26-27. You play your cards right you could be on a path to financial independence at 35-40yo....I think you GF might sacrifice 2yr of house hack for future like that?

Who am i to know what your GF might think...I am single :) but very close to financial independence:)

I would add to make sure you are budgeting  and being intentional with your money. It probably is harder having a girlfriend vs a spouse if you have separate accounts. Hopefully your new house is reasonable in payments to your income. Keep paying off the consumer debt and increase your income. Once the baby comes you should get a bump in income from Uncle Sam due to your income. Use that money to save up for a down pmt on your first investment in a couple years. Patience and persistence will go a long way and you will be successful before you know it.

@Randy Bloch I have tried but not in that exact way. I will keep trying! She does like real estate but is not obsessed like me. Lol, but yes I'm currently have an opportunity to make another 10-15k a year working somewhere else. If that works out it would put me in a much better position. I appreciate your time and input! Congratulations on almost getting there! I can imagine you are excited.

@Nicholas Groover as others have said, build a budget and stick to it. The budget doesn’t have to be fancy with categories and a spreadsheet and stuff like that, make it simple. Personally, I’ve broken down my budget into weekly allocations. Every purchase i make, j add it to a list on my phone. No complexities or anything else, just a number with the name of the place i spent money.

The simple act of tracking the expenses and thinking about it changed the way i spend money, and i now save the majority of my disposable income.

Start there, use that to pay off your high interest debt, build up a reserve/emergency fund, and then start putting money towards the next deal. Or as others said, use an FHA loan to househack a duplex and rent out your current.

It all starts with being smart with the money you have coming in. Good luck!

@Nicholas Groover ,

What do your recurring expenses look like?  Could you eliminate TV/cable?  Could you reduce your cell phone bill by downgrading to a less expensive plan that still fits your needs?  Is there a cheaper Internet alternative?   Are there subscriptions you have that you barely use?

How often do you go out to eat?  This was a big one for me.  I cut this down a lot.  Used to go out several times per week, but when I decided to start losing weight and only allowing one “cheat meal” per week, this helped a lot.  

Look for ways to cut expenses while still optimizing for happiness.  I wouldn’t touch the 401(k) and as others have said, keep contributing up to the match.  

Pay off those credit cards as quickly as possible. This is a very dangerous game. If you're confident you can pay it off completely during the promotional period, consider shopping around for a 0% APR balance transfer card. Promotional periods are usually between 6-18 months. Sometimes there's a one-time, upfront 2-3% balance transfer fee. Depending on the other terms (like getting 0% APR for 18 months), it could be worth it but try to find one with no transfer fee. Check out credit unions as well, not just big banks.

Look at tapping the equity in your home, just be really careful here and don’t bite off more than you can chew.  

Hope this helps.  Best of luck. 

Originally posted by @Nicholas Groover :

@Patrick Menefee Awesome, thanks for the advice! I'm going to try and start tracking my spending with mint.

I'm not terribly familiar with Mint, but they track it for you right? Pulling it from your accounts that you link?

It's a good way to do it, I use Personal Capital for mine, but I've found that going a step further and going through the activity of logging it myself manually has made all the difference. I'd recommend it for at least a month, see how it goes. When you set a budget for yourself weekly and record every transaction, you start to be much more conscious of the things you spend money on.

Good luck! 

Originally posted by @Nicholas Groover :

@Patrick Menefee Awesome, thanks for the advice! I'm going to try and start tracking my spending with mint.

 This was great advice and using Mint is also very wise.  I can honestly say that using Mint has changed my path towards financial independence as it helps me monitor both my expenses and net worth.  It helps me make conscious decisions about my spending.

Originally posted by @Nicholas Groover :

@Randy Bloch I have tried but not in that exact way. I will keep trying! She does like real estate but is not obsessed like me. Lol, but yes I'm currently have an opportunity to make another 10-15k a year working somewhere else. If that works out it would put me in a much better position. I appreciate your time and input! Congratulations on almost getting there! I can imagine you are excited.

Try helping her see what is in it for her...the better life it will lead to for your family. Maybe the SFH u move to after you house hack has something she wants...bigger yard, better location or better schools. If u explain that whatever that is will be difficult to obtain on current path and lay out an alternative path that gets u to that, she might start to see the world a bit differently.

Best of luck!

@Nicholas Groover Hey Nicholas, not sure if anyone else has mentioned this but instead of selling insurance for your side hustle, get your real estate license and start selling real estate!

What is the best way for you to learn about real estate and perhaps some earning some commission? Now, I've got to tell you selling real estate isn't easy and not for everyone, but I think it might be a good option for someone starting out as you can also find opportunities in which you may not need a ton of money down (if any) and you can buy those properties as you start meeting people in your market. 

For what is worth, you are in the right place! Good luck. 👍

@Nicholas Groover

Hard bitter pill first.

Track what you currently spend. Write it down. See where you are bleeding in your budget. Don’t blame wife/child. They are a gift and should be treated as such.

Now with family on board, work to cut expenses. Also work at growing your income. Find real estate chores you can do for others would have dual purpose. But even deliver pizza will add to budget.

Create a nest egg. A reserve for when real estate problems happen.

Now work your butt off to find or create a deal. A deal so good, a lender or a partnership will fund the deal. And do the work till the property is stabilized and cash flowing. Repeat...

I did this. Never making 50k w2 money a year. It took 9 years to get 10 doors. It has ups and downs. Some days will suck. Please do it faster and more profitable than I did. Good luck.

@Nicholas Groover

Im late to this ,

But I have an idea for you to consider.

Look at other sources of passive income that don't require big money.

Do a commercial, collect royalties.

Create a YouTube channel.

Sell a subscription to content you create.

Invest in a REIT, collect dividends

Reseller on Amazon..

Side hustle.

Gigs

Repair/repurpose/resell anything that you can

I tried a million ways to bring in streams of income, or one time boosts when I was younger.

Most were small, but combined they helped...

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