I’m often asked by those new and even those (at times) who’ve been trudging along in the investing arena, how wealth is truly created with real estate. I have a basic saying -one that plays apart in my constant drive: “If you aren’t out earning it, your spending it”. The idea of working smartly and making solid investments is key to the foundation of my investment (and business) portfolio. The idea of investing whether it be with real estate, stocks, bonds, mortgages, and businesses, is two-fold: create income to live on and to compound your earnings to both improve that living lifestyle and financial independence.
I think there is a very basic premise that everyone needs to understand about being an investor.
Here’s what Webster’s Dictionary states the word “invest” means:
Main Entry: 2invest
Function: verb
Etymology: Italian investire to clothe, invest money, from Latin, to clothe
Date: 1613
transitive verb 1 : to commit (money) in order to earn a financial return
2 : to make use of for future benefits or advantages <invested her time wisely>
3 : to involve or engage especially emotionally <were deeply invested in their children’s lives>
For sake of our discussion note what it defines investing as in #1 . “To commit money in order to earn a financial return. (and here’s the biggie!) To make use of for FUTURE benefits or advantages”
Re-Read that last line!
We’ve all read about this stuff from all the famous speakers (such as Buffet, Kiyosaki, Orman, Ramsey, etc., ). It really is that simple. Are you a consumer or a saver? Do you live below your means? Do you even know or care? Are you willing to do what it takes to achieve more than what you have now? Yes, It really is that simple.
Are you willing to do what it takes?
I’m no different than anyone else. My goals, my dreams of financial independence is commonplace -Right? After school I wanted to get ahead, have my own business, and have the ability to retire early. I was in the corporate world and moving forward with both stock and real estate investing. There were days upon days throughout the years (Note: I said years) we’re I’d pull a full-time job to run out to a rental to work that night only to have to be at work first thing in the morning. Many weekends I’d be pulling out of the driveway at 6-7 in the morning (imaging my neighbors, friends, and co-workers still sleeping in or enjoying family) while I headed out to go work on my real estate investments and then coming home in the afternoon on Saturdays and Sundays. I used to say I’d push as hard as I could with both the corporate profession and the rentals -sooner or later one would determine the direction of my life.
Are you willing to live below your means?
My wife and I still live below our means. Ever read “The Millionaire Next Door” or better yet: “The Millionaire Mindset”. I have always had a goal of only living on a 1/3 of my income (whether that comes from a job, rentals, business, stocks/bonds, and/or any combination). While we must all treat ourselves at time and have vices (some big, some small), we must remember to constantly save for the unknowns and the ability to earn even more tomorrow. One of our goals is that we drive our cars for 10 years before replacing versus the constant churn of a costly new (or used for that matter) car. To this day, I still mow my own lawn.
The key: as your income increases DO NOT expand your lifestyle (living expenses) to match those income increases. I call it “slow the turn”. Reinvest the increases into investments that will turn around and pay you more. Work smartly. I know that may contradict the fact that I still mow my own lawn; however, I have a goal I want to achieve before outsourcing that labor of love. Through pain, I find change. Talk about motivation -huh? You see there are keys to working smartly. What is your time worth? And, it all depends on your assets? One has to work those assets and leverage them based on there merits (quality) -whether it’s money, skills and/or time.
It’s really that simple. Live below your means. Save your earnings and reinvest them in good assets that will begin to earn you even more. Reinvest. Rinse & Repeat. Let the magic of compounding work for you!
Now -What are you going to do about it?
By Tyler McCracken -a Charlotte, NC Real Estate Investor
