There is a saying that “money makes money”.
There’s some truth in this. What it actually means is that people who are good with money know how to make it and recognise opportunities when they see them. They have the capital, and more importantly, they have the courage to take put their money to work.
Making money is a mindset, an attitude, a willingness to do what it takes.
That may mean forgoing lifestyle comfort in the short term to reap the rewards down the track. It’s more than hard work. I know plenty of people who work hard all their life to retire on the pension. It’s working smart, having your money work for you rather then you working for your money.
If you really want to gain financial independence, you need to make some really honest assessments about your lifestyle and expenditure. What are you prepared to go without? We have become so commercialised that what we think are basic necessities are actually luxury items.
Strip your spending back to bare bones, and look at ways to reduce those costs.
Some questions to ask yourself:
Do you need Pay TV?
Do you need Netflix?
Do you need your $40,000 to $80,000 vehicle?
Do you lease your car?
Do you even need a car?
Are you getting the best value from your Private Health cover?
Is it possible to reduce your insurances?
Is your mortgage crippling you?
Can you reduce your mortgage repayments?
Is the house you’re living bigger or more expensive than what you need?
How many credit cards do you have?
I think you get my point. There’s plenty of budget calculators online to help you work out where all of your money is going.
There will be no silver bullet, and you may have to make some very hard lifestyle choices. It could mean downsizing your home or selling cars. It could be as simple as packing your lunch and not buying three coffees a day, catching public transport, or finding free (or cheaper) forms of entertainment.
I have had potential clients come to me saying they want to purchase an investment property, but can’t seem to get a deposit together. These guys were single, earning over $300,000pa. You can’t help but shake your head in utter bewilderment. But it happens all the time. People will spend to their limit and usually the more people earn the less likely they are to budget, as there is always enough cash coming in to cover the splurges they have. People on lower incomes or tighter budgets tend to have a better understanding of where each dollar goes, but there will always be room for savings.
The idea of the budget is not to strip every dollar out of your income and put it towards property investing. It is so you can work out how much you want to put towards an investment property and make sure that you have a budget that is sustainable and will provide the cash that is required each week to meet your investment requirements. Once you know how much you have to spend we can find a property that fits the budget, rather then try to create a budget that fits the property.
It helps to equip yourself with understanding the investment property process. You might realise that you’re already in a position to buy an investment property. Do you have equity in your house or some money in the bank? It may be enough for a deposit for a property, albeit that property may not be in Mosman. However, it will be a stepping stone to buying a property in Mosman, if that’s what you want.
Being aware and benefiting from all the taxation and depreciation allowances that are available to you as a property owner will also help fund the investment. You can opt for a fully positive geared property or a negatively geared property that benefits from depreciation allowances which help off set the cost of holding the property.
Search for properties with multiple income streams to help spread the risk and increase the return. This doesn’t necessarily mean a block of flats, but it may be a dual occupancy, a house and granny flat, or multiple strata commercial properties.
There is more than one way to skin a cat, and sometimes it might mean having someone else look at your spending to see the savings solutions where you can’t or don’t want to.