Crossing the “Someday River”
Unless you Googled “Never Gonna Let You Down by Rick Astley” and by some miraculous phenomenon were led to this site, you are probably here due to your interest in how to use real estate as an investment vehicle. That means you’ve taken the first step, THINKING about what real estate might do for you and your future goals, whatever they might be. This is where most people stop. For the majority of THINKERS, investing in real estate gets tossed into the SOMEDAY pile of your brain at this point. Also located in the SOMEDAY pile is the assumed fact (whether true or false) that you WILL have a higher income in the future and THEN you can think about accomplishing other items in the same pile (perhaps new car, boat, remodeled kitchen, etc. are also lying in the SOMEDAY pile).
The fact is, however, that with an increased salary usually comes increased personal expenditures; that boat and marble counter top kitchen often get retrieved from the SOMEDAY pile first, many times based on speculation (via credit cards and loans) before the earnings even increase. So now you are back at square one; you now must make even more income SOMEDAY before you might ever think about real estate again. So, how does one ever cross the bridge over the SOMEDAY River and never look back?
I was once told by a coworker, “Remember, in two days, tomorrow will be yesterday.” I prefer to stretch it out a bit and say, “Remember, in two years, next year will be last year.” How many times have you thought, “Man, if I had started doing such and such two years ago, I would have accomplished such and such by now! Why didn’t I do that? Those years just flew by!” The point is, it is always easy to find an excuse about why NOW isn’t the right time to invest.
Since there are an infinite number of concoctions as to why NOW isn’t right, you will have plenty of excuses to carry you through your entire life, always giving you reasons to not take ACTION. The sad part is that when you look back in time, the things that you didn’t do will stand out but the excuses of that prior time will most likely seem like minor points. In the end, you have to have enough willpower to take ACTION in the NOW, knowing that the actions you take TODAY will make you proud in the FUTURE. This is how you will make it across the bridge of SOMEDAY River. Let’s talk about some hypothetical examples that most of us can relate with.
Say you are faced with the need for a different car. There’s that shiny new one you drive past everyday going to work. You stop by the dealer and he approves you for that shiny brand new car for payments of only $500 a month. Over the period of your five year car loan you will pay $30,000 for that new vehicle.
On the other hand, you could buy that nice used car with low mileage from your neighbor for only $8,000. But you say, “Since it’s used there will be higher maintenance costs.” OK, let’s say you spend $2,000 on maintenance for the used car during five years in addition to routine maintenance that you would also spend on the new car. So, over a five year period you will have saved $20,000 JUST by getting a used car vs. a new one. That’s a 10% down payment on a $200,000 property!
How about personal habits that might be changed? I won’t direct this at smokers and cigarette spending, as that’s been done plenty, but how about using coffee drinkers as an example? Do you find yourself buying coffee shop drinks every day? Let’s say you buy a $2.00 straight black coffee every morning (double that price if you like the fad drinks). That means you spend approximately $60.00 per month on coffee. If you would make your coffee at home instead you might spend a total of $15.00 per month, and that’s buying the same brand of coffee beans that were being used in the $2.00 drinks in the store. That means there’s $45.00 a month, or $540.00 a year, that you can save by making your coffee at home with no sacrifice in the quality of coffee.
Now try to cut out the daily bag of chips or candy bar that goes against your healthy diet anyway, now there’s another $500 or so per year that can be saved. Now eat out one less time per week, there’s another bundle of money saved. Before long you have money to invest in real estate, simply by replacing or cutting out daily spending habits.
It doesn’t matter how much money you are currently making. As the examples above show, A LOT of money can be saved simply by making a few small lifestyle changes. YOU have the power of deciding how your SOMEDAY will be. YOU have the power to take ACTION today that will lead you across the SOMEDAY River! Do you want to be proud in a few years time (or less, if you are diligent) that you saved enough to buy an investment property that is putting you on the road to financial freedom? Or would you rather be proud that you showed up to work every day in a brand new car, drinking coffee in a fancy cup, your stomach full of restaurant cuisine instead of the home-cooked meal, no more near financial independence than you were a few years back? I know which one I would rather choose!
For detailed accounts of how wealthy people handle their personal finances, you can read the book The Millionaire Next Door by Thomas J. Stanley and William D. Danko.
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