It is not how much profit you make that’s important, but rather how much of it you are able to keep. That said, personal debt and financial obligations can take down even the most successful businesses.
Financial freedom is one of the biggest reasons people start investing in real estate. There is truly no limit on your earnings potential. It is not enough to bring money in, however. You need to control your spending and constantly watch your bottom line. Dealing with debt can drain your energy and impact how you deal with the people around you. If you came into the business saddled with debt, there are ways to deal with it. Here are five steps to secure your real estate company’s financial future:
1. Gauge your financial temperature: With everything going on in your business and personal life, it is easy to neglect your finances. Personal finance and debt is not an easy topic to fully understand. Sure, most people are aware of where they currently stand, but most aren’t sure how they got there. Get a copy of your credit report and write down all of the expenses you have made over the last 30 days. You can even go so far as to only use one credit card for the entire month to get a real bottom line expense number. Whatever method you use, you need to get an idea of what you are spending, where your money is going and how long you will make the payments for. Before you can take any action, you need to know your current financial situation.
2. Make an action plan: One of the reasons that delinquent homeowners fall into foreclosure is often because of a lack of action. Regardless of what your current debt situation is, it will never get better unless you do something about it. After you evaluate where your money is being spent every month, you need to make a plan. It is not enough to simply say what you are going to do. You should go so far as to write exact payment dates on a calendar. Even if you have a large amount of debt, you need to start somewhere. With a good action plan, you will start to see results. These results, no matter how small, will motivate you to continue with what you are doing. It most likely took you months, or even years, to accumulate any debt you have. It will take you much longer to get rid of it. Things will never get better unless you make a plan of attack and are willing to follow it.
3. Eliminate debt: In a perfect world, you would simply pay off all your outstanding debt with your next big closing. Unfortunately, with a household to take care of, this may not always be realistic. To get into real financial shape, you need to pay down and ultimately eliminate debt. Start by paying off the smallest accounts you have. In eliminating small accounts, it will have an immediate impact on your credit score and will help get the ball rolling. Next, commit to focusing on one card at a time. This doesn’t mean to totally neglect your other accounts, but make an extra payment or two on one account whenever you get extra money. A little here and there goes a long way to lowering your balance. Ideally, you should focus on the accounts that have the highest interest rates and work your way down. The most important thing is to be committed to doing this for as long as it takes. It won’t happen overnight, but you need to start somewhere.
4. Understand rates and terms: In order to truly create a strong financial picture, you need to understand where your money goes. It is not enough to simply look at a credit report: you need to break down and analyze monthly statements. Start by looking at the rates and balances owed. Next, take a look at how much longer you would need to make these payments for. Too many people don’t know where every dollar goes for their cable or phone bills every month. By really getting into all of your monthly statements, there may be ways to save hundreds of dollars. This all starts with understanding what is on every monthly statement you receive, regardless of how big or small.
5. Practice discipline: All of the knowledge and understanding of your financial picture won’t do you much good unless you are committed to changing. All it takes is one bad day or bad weekend to erase all of the good work. If you have a problem with expenses or spending, you need to be disciplined. You can want to change your current situation, but you need to put the effort into making it happen. There may be times when you feel that you deserve a treat for all your hard work. Instead of buying something or spending money, think about where you want to be twelve months from now. The money you spend on one nice dinner a month could be used to pay down an account. A healthier financial picture won’t happen on its own. You need to practice discipline.
A strong financial picture is more than about the money you bring in: you have to be able to save it too. If most of that money is being spent before you earn it, you will feel like you are constantly running uphill. With some understanding, education and discipline, even the most dire financial situation can be fixed over time.
