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Managing and understanding your personal cash flow is a foundation for investment success. The trick to achieving this is showing respect for your money.
Many people squander millions of dollars throughout their life time and are disappointed when they cannot determine where the money went. Even those on significant pay packets can find themselves living week-to-week, due to a lack of understanding of their cash flow. Respect for money comes from understanding where money is going and in turn, understanding where you are going.
The best way to understand where your money is going is to budget. Record every dollar that comes in and balance that with all outgoings. From there you can determine what there is left over for potential investment. The extra dollars found in the process could be pumped into investment for future passive returns.
Consider the impact of growth on money potential. Even if at the end of your working life you have a significant amount of money in the bank, consider how much you would have had if you had progressively invested it in properties over the years.
Set up a system and stick to it. Living even slightly tighter than you have in the past can provide new investment potential. Set up different bank accounts for different expenses and use that to split your income when you receive it, so you are always aware of where you money is at.
Always allocate money into savings before spending excess cash. This saving is not for splurges or luxuries, but for investment into assets to develop your portfolio.
Good money habits lead to good investment habits and all of that is driven through a respect for money.
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