Personal Budget – Not
I find too many folks who use a personal budget to a create an ideal financial scenario never linked to the truth. Whether it comes to income or expenses, people spend too much time fudging the numbers.
What is a personal income statement?
An income statement is a financial statement that measures your financial performance over a given period (i.e., Month or Year).
Your financial results assessed by providing a summary of how you incur your income/revenues and expenses through both operating and non-operating activities.
As we go on this investment real estate journey together, I will challenge you to look at everything you do financially.
The moment you consider purchasing or buying a piece of investment real estate you go from a typical real estate life (Home Owner) to being an entrepreneur and or a small business owner.
Making a small change to how you set up your income statement and net worth (or personal balance sheet) will help your mindset in the future.
Keys to a New Investment Way of Life
Everyone you come in contact with when you start to think or purchase investment real estate will assess who you are different. In this situation, I am talking about lenders will no longer look at you on a one-off basis; buying a home for your personal use, and life is one thing. Purchasing investment real estate for you to generate revenue and house others is an entirely different story.
KISS Method – Keep It Simple Solution
Where I find people get bogged down is trying to come up with a better mousetrap and never get beyond just doing. I am providing a “Simple Solution” to personal income and expense spreadsheet. I am adding one line to your income and expense sheet titled investment real estate; don’t get caught up in the fact you don’t have any investment real estate. Get used to the fact that we are showing investment real estate on your income and expense spreadsheet.
If you are an Excel software expert great; just don’t complicate my message and create analysis paralysis or critical eye analysis and take your eye off the goal.
Before we start thinking about a personal budget, I challenge each of you to download the individual income and expense spreadsheet I have provided you. You will find this on our website entitled; “The Investment Real Estate Way©” Starter Kit. https://www.vaulttoinvestmentrealestatesuccess.com
The Investment Real Estate Way© Starter Kit Components:
Income and Expense Statement
Net Worth Statement
Vault to Investment Real Estate Success Checklist
Many sites try and upsell or have you pay for a template they created. I have created a model in Excel, and you can download; make modifications to ( I didn’t lock any cells) to fit into your life; you should only have to make a few additions or deletions, and away you go.
Once you have your income/expense statement done; please fill out complete for the next three months; right down to the penny. Do not prepare a budget; real-life income and expense statement is your reality check and shows your real income and expenditures; it will take you three months to see the truth, the whole truth and nothing but the truth. Time goes by fast as you are preparing for your investment real estate life; start your income and expenses spreadsheet; now.
What kind of result should you be looking for when analyzing your income and expense spreadsheet; total income minus total expenses gives you a positive net income; in other words, you should have money in the bank at the end of each month.
When you visit the bank to borrow funds for investment real estate; the bank will not care if you have a personal budget; they want to see your actual numbers and one month’s record of your income and expense statement is not enough evidence for the bank.
One of my mentors Peter Kinch has a saying; “Always remember you are playing in the bank’s sandbox and you have to play by their rules.”
Most of us have to use the bank and their money to get our investment real estate business started. Understand the bank’s rules and know what they are going to ask. How do you think the bank or your lender is going to feel if they don’t have to chase you for the information. You should have had prepared in advance of your appointment with them.
Most banks or lenders don’t have the time to educate you; show them you are an expert and professional when it comes to your finances.
Having a well-documented history of your income and expense personal statement is part one. We will talk about part two; your net worth statement; in the next blog on Building a Strong Financial Foundation.
Hatching A Small Investment From Your Income and Expense Statement
I want you to focus on the funds leftover at the end of the month; if you start here, you don’t need a plan. Once you have tracked three months of your income and expense statements, you will see money left over at the end of the month, or you will find yourself in negative territory with no money in the bank.
We will cover in an upcoming blog; how to make your positive cash flow grow into a downpayment on an investment real estate property.
We will also discuss how to put your Humpty Dumpty finances back together again.
This is your income story and this is your expense story; how it ends is up to you.
The challenge is not for you to spend your precious time on planning; the goal is to get you into an automated plan to build a robust financial foundation; unlocking sustainable wealth and a living legacy.
Are you ready to take control?