Building A Sure Financial Foundation

DISCLAIMER: I AM NOT A FINANCIAL ADVISOR.

     These are the steps I personally made over the past 2 years. In saying that, I speak out of personal experience only. I was $20,000 in debt, a vehicle repossession on my record, and multiple charged off accounts to what was left of my credit. It seems to me that there are so many people out there like I was just wandering aimlessly with no hope of taking control of their finances and life. My heart goes out to those in despair. If you are one of them I hope this helps you. YOU HAVE THE POWER TO CHANGE YOUR LIFE!

Step 1. Increase your income to 200% of your yearly expenses. If you can live off of 30,000 find a job making 60,000. This is not an easy step but it is an imperative step. Find this job as if your life depended on it because it does.

Step 2. Reduce your living expenses down to BARE MINIMUM. Cut the cable, use a prepaid cell phone, stop eating out and spending frivolously. Replace TV time and going out at night with people and books much smarter than you. Remember that you are the average of the 5 people you surround yourself with. If you can survive at $30,000 a year think creatively how to make it on $25,000. Turn it into a game.

Step 3. Create an additional stream of income. use your knowledge or talents to bring in a few extra bucks and night or on the weekends. Hustle so hard that people around you take notice. Make them talk about you!

Step 4. Use this year pay down your debt. Start with your delinquent credit accounts. Call and see what kind of settlements you can get. Ask for a payment plan of several installments. Meanwhile make minimum payments on all debts that are in good standing. Clear up that credit!!!! It will take a year or two to repair itself.

Step 5. Time to focus on your debt in good standing. Get a list of all the accounts. Take the account with the smallest balance and while making minimum payments on the rest of the accounts allocate every penny you have into paying off that one small account. Every time you pay off an account you free up more money to use for the next account. Kill these suckers off one by one. It will snowball quickly. Meet with your banks financial adviser every 6 months to check on how your credit is fairing.

Step 6. Investments are secondary to your personal well being and security. I would strongly recommend building up an emergency cash reserve. My criteria is 6 months expenses. If you could survive off of $25,000 a year, then you need $12,500 in reserves. The goal is to not to use this unless in catastrophic emergencies. Because of this I recommend parking 75% or it in a vehicle that earns more interest than the 0.01% your savings is making. Keep the remaining 25% liquid for emergency access. Speak with your financial adviser for his professional advice.

Step 7. Get yourself a secured credit card. This will help repair your credit faster.

Step 8. By this time a year or 2 have passed. Your debt is gone. Your credit is well on the mend. You have cash reserves as a hedge of personal protection and you have been reading biggerpockest.com, finance books, business books, personal development books and real estate books. At this point YOU ARE THE GURU!!! Now we want to consider investing. Lets be real for a second though.... you need one of two things to begin investing. Experience and/or money. Wholesaling requires a marketing budget(preferably one that allows you to hit the market 5-7 times). First time flippers will probably need some skin in the game. Even hard money lenders want to see a certain percentage of your own money in the deal. You may get by with doing some seller financing for a buy and hold but what happens when your water heater breaks or better yet the tenants that you inherited pick up and leave in the middle of the night after punching holes in your drywall and putting the toilet on the roof. Sure insurance will cover but they wont cover the month or two of debt service you need to pay to your lender. You know what this means. Time to start your investment reserve account. How much do you need in this account? I cant answer that for you. You will need to decide on whether you will be a passive or active investor. You will need to evaluate and determine the niche and market you want to be in. Then you will need to find experienced local investors and PROVIDE THEM VALUE. They can give you insight into how much you should have stashed away.

     Lets talk about partnering for a moment. Partnering with other local investors will provide you with several things. Partnering could reduce the amount of initial capital you need. Partnering will increase the likelihood of a profitable deal. Your partner will not risk his money in a bad deal. If your money is in the same vehicle as his then your money will probably be more secure. Better to have half of good deal than 100% of a bad one. You will also glean the experience needed to attract private money investors… the key to scalability and higher profit.

     You may be telling yourself (or screaming at me) that this process will take far to long. 2 years is a long period. You are correct. Let me ask you this question. Would you frame a house an hour after you poured the foundation? Of course not. The walls would fall and turn into a heap of rubble. The foundation needs time to cure. Time to harden. In the same way, your financial foundation needs to be solid before the building of your investments.

     Now is the time to take action. Not tomorrow. Not next Friday when your paycheck arrives. Now! Time waits for no man. I know you have it in you to take full control of your life. Be great. Anything short of excellence is unacceptable. Best of luck to you on your journey.