Get Your Real Estate House In Order: DEBT

"There is a gigantic difference between earning a great deal of money and being rich." -Marlene Dietrich

It's an excellent time to examine where your money is going.

Are you frugal? Do you spend at will? No matter where you fall on the spectrum, there are a few ways to direct your cash flow so that you can benefit in years to come.

After all, it's never too late to begin money-friendly habits.

The first part of your foundation is actually the absence of two poisons: taxes and debt.

Both words might sound like nails on a chalkboard, so you should pay off both as soon as possible. We've talked (and do talk, and will talk) about taxes a good deal, and it's no secret that paying taxes is your duty as a citizen. In addition, we spent the last few weeks discussing ways you can pay and the penalties that come for those who don't.

Pay your taxes. Do it.

The first block: Eat an Elephant

The debt piece is obviously more nuanced from person-to-person. Undergrad, grad school, credit card, car, home, etc. The (odd yet accurate) analogy of eating an elephant comes to mind -- one bite at a time.

Debt is another item I'd love to chat about with you, as we can assess after-tax interest rates and how they might affect potential investments. If you've ever ridden yourself of debt before, you know the ensuing freedom. I want that feeling for the entirety of your financial picture.

The second block: Hold Wisely

Once the phrase "debt-free" is within reach of your vocabulary, the real fun begins. As an investor, you are comfortable with debt. Debt-Free, refers to consumer debt, not debt for investments. What's the real fun, you ask? It might sound nerdy, but saving and investing are two keys to financial wealth and freedom.

We've discussed ways to save and invest before, but again -- you are never too late for either.

Remember, the fall season offers a fresh start. Let's make it count!

The first question I'll ask is: Do you have an emergency fund established? This is key to your savings account. It should contain three to five months' worth of savings. Because life is full of unexpected costs—car accidents, medical bills, stolen items—it's important to play safe. After that is established, you can save for future costs like a new car, home, and so on.

Investing is another skill-set...

Being a lifelong learner is highly valued in real estate investing. Tax laws change regularly, and so must your investment strategies.

Associate with other real estate people and discuss what is working and what is not. We recommend local Real Estate Investor Associations (REIA, pronounced REE uh. Search the national site for local associations) and BiggerPockets (dot) com.

Real estate coaches come in ALL sizes and levels of sophistication. We hear a lot of horror stories.

The final block: Spend Generously

And I don't precisely mean spending everything you have. Clearly, I led with two things you should do first with your money: pay off taxes/debt and save/invest after you do. But this third step is inevitable -- we spend money (almost) every day in some form or fashion.

Where are your dollars going?

What is the ratio of money you spend on yourself vs. money donated to organizations or people you believe in? One of the most life-giving components to saving and earning money is so that you can help others in the process. What if someday you could invest in someone's start-up business so that they could pursue their dream? What if you could bless your children and help them with college tuition? There are plenty of ways to spend, but one of the best is on others.

But honestly, it is your money--your life, after all. How you spend is entirely up to you. And it's a good time when you can treat yourself occasionally. You are human, after all. Remember that when the steps above are done first, treating yourself to a new ____ will feel much more special.

This whole subject boils down to prioritization. Reversing this order of operations isn't illegal, but in the long run ... it might be detrimental.

BE THE ROAR not the echo! TM

Warmly, Janet Behm, The TAX WIZZARD