Living below my means?

Question

Hello everyone. I will start off with some basics:
         
            I work full time in the tech industry and make a decent income. I own a condo in California that I rent out. On a monthly basis, my cash flow from this property appears negative. After tax adjustments, I am just about breaking even on that property. If you factor in rising equity, it is profitable (that is questionable right now, I know). It was my first purchase - I definitely made mistakes, but I have learned from them and am most likely holding that property - at least for now. The current market in California is not something I feel like wrestling with for a sale at this time.

My interest is to invest in multi-unit rental properties. My goal is to generate enough monthly cash flow to quit my full time job and pursue personal business interests and additional real estate investments. I am reading several books on the topic and boning up on my necessary mathematics. I am 28 years old and single with no plans for marriage or children.

I do not own the house I currently live in. It is a rental. My reasoning for this at the time was that I wanted a nice large house with a swimming pool, room for my dogs, etc, and was not sure if I would be moving out of state soon. I pay the rent and all bills on my own - rent is $2250 a month and bills probably get the total closer to the $3,000 range.

I have become accustomed to the large house and amenities. However, I can't help but think of the extra $1,000 or so a month I could save by moving into an apartment or a less expensive property. I could use that money in this down market to make some great investments on additional rental properties and have a much more comfortable life in the long run.

My question to you all is this - how do you motivate yourself to be more forward thinking? That, or do you have any suggestions on how I can continue to live the style I am used to while still capitalizing on the great real estate prices out there now? I am very wary of any type of zero-down loans, so my plan would be to save up the necessary down payment and make one or two purchases a year, depending on the logistics.

Mark N.A · Answer

Living below your means is like losing weight:  it's uncomfortable and takes work.  But it can certainly be done and once one sees results one gains more motivation.

In my youth I earned good money, had lots of strength and energy, and was half-way good-looking.  Life was great!

But, oh, how times have changed.

You have two incredible gifts at your disposal:  time;  and access to more resources and knowledge than any individual in all of history.

As my old high school coach used to say right before a game:  "Boys, the biscuits are on the table."

Mike Seluk · Answer

I don't know how to NOT do it, really.  I mean, I'd feel like I was going broke if at the end of the month the balance sheet came up negative - which would make perfect sense, I guess!   :lol:  And that would really freak me out, so to be totally honest, I think it's a bit of healthy paranoia to some degree.  You might just be the type who doesn't worry about it.  Or maybe you've always lived to a particular standard, and never considered what it would take to make a change.
            
            Whatever the case, it was a bit of an surprise when I realized just how much I was helping myself by living a simple life.  And what was satisfying was realizing that I don't even feel like I'm missing out on anything - I *do* have the means to do a whole lot more, but...well, I'm content.

Tony Frasher · Answer

I won't disagree with you on any of your points Jon, but to me, Dave Ramsey is more of a get out of debt guy, than a entrepreneurial type.  I would say if you're in this forum you're looking for ways to make more money.

People that can't control their spending are going to do that no matter what their income might be.  Kiyosaki talks about that.  Learning how to buy an asset to pay for your liabilities.  You just have to make sure you do it in the right order!

Marcial J.Paredes · Answer

Michael, I couldn't agree more.  Unfortunately most people seek their peers approval.. and society doesn't look to kindly upon the guy who lives below his means.  Most people want the attention and "so-called" respect that comes along with having nice things.  It makes them feel important.. and successful.

I couldn't agree more. I 've been guilty of thinking that way in the past.(keep in mind I was younger and bearly learning about 'reality'). Anyhow, I'm thankful for the mistakes I made in the past because if it wasn't for that, I wouldn't have made better choices later.

Jon Holdman · Answer

The trouble with making more income is that your wants can always exceed your income.  Trust me, I speak from personal experience.  If you can't control the spending, more income doesn't help a bit.

The New York Times ran a piece last week talking about how painful a $500K salary cap would be to the NY bankers.  For me, $500K sounds like a ton of money.  But it you've built a lifestyle based on a million or two, its a huge cut.  And, I have little doubt its easy to build a lifestyle that consumes a two million dollar base salary.

Tony Frasher · Answer

I would recommend reading "Total Money Makeover" as well, but I would also recommend reading "Rich Dad Poor Dad".

For getting out of debt and making you realize you don't need all the little stuff you think you need, Dave Ramsey is great.  For me though, I like my toys, and I would rather just figure out how to make more money to afford the things I want.  That's where "Rich Dad Poor Dad" comes in.  I'm sure there are some here that don't like Kiyosaki, but if you start to understand where you fit in the cashflow quadrant, you start to see what it will take to get where you want to go.

Michael Johnson · Answer

{"short term pain for LONG TERM GAIN",
"Do what others won't do to have what others won't have"}

I like this Idea! You lose nothing but gain in return if you take the plunge and do what others wont.. it's like digging treasure even if you're uncertain that there really is a treasure chest hidden.

David Nguyen · Answer

"short term pain for LONG TERM GAIN"

"Do what others won't do to have what others won't have"

Jimmy Rodriguez · Answer

Michael, I couldn't agree more.  Unfortunately most people seek their peers approval.. and society doesn't look to kindly upon the guy who lives below his means.  Most people want the attention and "so-called" respect that comes along with having nice things.  It makes them feel important.. and successful.

Jenny Chen · Answer

My mentor said something very interesting. He said that people would rather do what is comfortable than do what is good for them. I guess if your why is big enough, you'll move out of your comfort zone and do whatever it takes.