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in Budgeting Tips | Money Talk · September 1, 2020

Why Budgeting is A Powerful Tool Everyone Must Have

I’ve mentioned in my previous posts how I neglected my finances for a long time. The funny thing is I budgeted for years before I got serious about my financial situation. You would think I knew what I was doing, but I had no idea.

Back in 2015, I started my first professional job out of school and I got a pretty decent salary ($50k).  I was delighted. Growing up in Colombia, I never dreamt of making that kind of money. I told myself that it was time to get my life together, but I also wanted to live life like never before. That alone was a bit conflicting. 

The summer before I started that job I took 3 months off to focus on the CPA exam and racked up a lot of debt to support my expenses during that time. The thing is, I lived rent-free with my boyfriend at the time, and before quitting, I was making $20 per hour as a full-time property manager. I could have saved up to cover my expenses during my time off. I was irresponsibly spending money on massages, hair, nails, and eating out. 

In 2015, I had $60k in debt between the car loan, student loans, personal loans, and credit cards. I felt like I was drowning and needed out so I began budgeting. I used the Mint App to set up a budget and began tracking my expenses. I became more aware of my spending habits and made some significant changes. I also rented an apartment on my own, so budgeting became the tool I used to make sure all bills were paid. I began attacking the debt and it was great. I would make extra payments each month and slowly paid off some credit cards and personal loans. 

However, I did have a “Misc. Expenses” budget item where I would dump random expenses. I remember the budget was $300 and actual spending was  $500-$600 per month. I would still go on shopping sprees pretty often and eat out quite a lot. Ross was my biggest weakness. I would always spend a couple of hundred dollars buying random items, shoes, and clothes each visit. Buying a lot for cheap is my kind of thing, except it adds up real quick 😖. If I had just put that towards paying down student loans, I would be closer to paying them off. 

By the end of 2017, I paid off all personal debt, except for my student loans. I had moved in with Ryan which allowed me to decrease my household expenses by 1/2.  This accelerated my debt pay-down.  Once I paid off my car loan and eliminated card debt, I had an extra $300, and instead of paying off my student loans, what did I do?! I slowly started drifting back into the shopping sprees, massages, etc. 

It wasn’t until late 2018 that it finally hit me. As newlyweds, Ryan and I were talking about finances and I realized that he was already set with a good amount of investments. On the other hand, I was already 27 and had nothing to my name. Our wedding was financed with a credit card which added to my debt and I had also gotten a new student loan to start my MBA program. This got me really depressed. I was disappointed in myself for all of the bad choices I had made until that point. That’s when it all changed. I have since improved my financial picture and the way I think about finances. It took a while, but the important thing is that I did. 

What I did differently in 2018 vs 2015: 

  • Set specific goals 
  • Figured out why these goals were important and how they would get me closer to my ideal life
  • I envisioned (and wrote it down) a life where I had my finances in order and how great it would be
  • Created my net worth statement which detailed what I owned minus what I owed. (I was negative $58k and that was painful!) 
  • Made a flexible plan to build my wealth 
  • I continued to keep myself accountable and got an accountability buddy.

My main goal was to save money to buy an investment property. All I needed to do was reduce discretionary spending. Bye-bye to Misc. Expense Category! 

Before 2018, I was budgeting so I could pay my bills and pay down debt. I wasn’t thinking about the future Katherine. Truth be told, I didn’t even understand how retirement accounts worked or the importance of having one until I was offered the option at my job after college in 2015.

I lacked commitment to my financial well-being.  This is why after paying $40k in debt, I managed to get myself right back up real quick. 

Nowadays, when I budget, I am focusing on building a sustainable lifestyle that will allow me to live the best life while securing a better financial future. As you can already tell from my blog, I am obsessed with building my wealth through real estate investing.  

Budgeting is a means to an end and once I attached meaning to it, it became one of the most powerful tools in my personal finance journey. I keep it fun by challenging myself each month. For example, I aim to decrease target spending for one item (currently groceries) and start getting creative on how to do so without sacrificing my quality of life. I am definitely not eating ramen noodles every day. 

My financial buddy, Nicole, keeps me accountable when I begin to deviate. For example, earlier this year, she gave me a virtual slap and pep talk when I wanted to finance a new car that didn’t need. We meet every month and talk about our finances. However, we also talk about money all throughout the month. 

I honestly can’t recall the last time I went on a shopping spree. I have now replaced Ross and Victoria Secret with Home Depot and Harbor Freight. I invest more than I spend and it feels way more satisfying. I don’t have to deal with buyer’s remorse anymore.

At this time I only spend 40% of my income and while I am not sure how I will do it, my goal within the next year is to hit 30%.  Let’s see if I can make this happen!

Correction, I will make this happen and budgeting is the tool that will get me there! 

Currently, what I do with the money I don’t spend is pay down debt, save for an emergency fund, and invest. I know my strategy goes against common advice and the Dave Ramsey ideology, but I will talk about why I do things the way I do in a later blog post. 

What about you, do you budget? What is your experience with and overall thoughts on budgeting?

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This post may contain affiliate links. I may get commissions for purchases made through links in this blog.

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New Blog Post 🚨 In this week’s blog post I am New Blog Post 🚨 In this week’s blog post I am going over why we bought a short-term rental, our experience so far. Plus what we did prior, during and after purchasing our first short-term rental in March 2022, a Cabin in Blue Ridge, GA.

Check it out at www.beyondjustnumbers.com or link in bio @beyondjustnumbers
I can’t stress this enough. Some investors are l I can’t stress this enough. Some investors are looking to make money from day one, but that’s not always the case. It wasn’t for us and I’ve talked to a lot of rookie investors who have told me “Thank God I have my personal finance situation together.” 

This is just my opinion. Do you agree? Let me know in the comments!

Want to join a free community of like-minded individuals? Join our REI Coffee Chat Community where we talk real estate investing, personal finance and financial freedom, and much more! Link in bio @beyondjustnumbers

Want to learn more about investing in real estate? Read my blog www.beyondjustnumbers.com

#realestateinvesting #realestateinvestor #creativefinancing #investmentproperty #buyrealestate #firemovement #debtfreejourney #financialindependenceretireearly #rentalproperty #investinginproperty #personalfinanceblog #wealthbuilding #planforretirement #investorlife #livefree #airbnb #moneyisfreedom #enjoythejourney #reicommunity #realestateinvestments #shortermrentals #cashflow #realestate
I used to think that investing in real estate was I used to think that investing in real estate was for the rich. I became in love with real estate while working for a real estate investment company that owned hundreds of units. This was back in 2011 and I was 20 years old at the time. I had less than 5 years permanently living the US, so I had no idea about anything. I grew up in Colombia and the only talk of money we ever had was the lack of it. 

The investors I worked for were a wealthy family, so naturally, I thought… Real Estate requires wealth. I don’t have wealth. Therefore, I cannot invest. 

I figured… well shit, I need become wealthy so I can invest in real estate. Eventually, after educating myself I realized how wrong I had it. You can build wealth BY INVESTING in real estate.

Took me a couple of years to figure it all out. Hence, why I didn’t start investing until 2019. I wish I had figured out earlier, but it is what it is. In just 3 years of investing in real estate, I was able to accumulate more wealth than I ever thought possible. 

Just to give you an idea…Did you know you could invest in real estate with as little at 3.5% of the purchase price? For a $150,000, that’s only $5,750. Buy a duplex that needs a little bit of work, fix it up, rent one side and live in the other. This will reduce your monthly expenses significantly, save the money and do it all over again.*

Of course it’s not that simple, but it’s also not that difficult. There are some particular steps and considerations which is  why I recommend doing further reading on the subject. 

Book Recommendation:
✅“The House Hacking Strategy” by Craig Curelop and ✅“Investing in Real Estate with No (and Low) Money Down” by Brandon Turner. 

#realestate #realestateinvesting
🚨 New Blog Post! Continuing the “Getting Star 🚨 New Blog Post! Continuing the “Getting Started in Real Estate Series” 

You’ve found a property either on your own or through a realtor, you’ve run your numbers, you’ve got a lender and now you are ready to make an offer. What’s next?

In this post I want to discuss a few items:

✅Key components of a real estate contract
✅How do you make a compelling offer to ensure you get the property you want
✅The main contract contingencies and how they work
✅Communicating with your realtor

I also provide real examples of what we have done personally. 

Check it out at www.beyondjustnumbers.com

Let me know what you think!
If I listed all of the hats, I’d never end 😂. If I listed all of the hats, I’d never end 😂. Anyone else? Show me the multiple hats you wear and tag me. Let’s have fun with some reels.

Trying to get good at the real game like @investinginyourwealth. How did I do?
The fact that you are not where you want to be doe The fact that you are not where you want to be doesn’t mean you won’t get there. Greatness takes time. Focus on what you control.

And remember, it’s okay to pivot.

#mindset #realestate #firemovement #realestateinvesting #realestateinvestor #rentalpropertyinvestor #rentalproperty #cashflow #motivation #financialfreedom #financialindependence #financialindependenceretireearly
We see a lot of advice around hiring a real estate We see a lot of advice around hiring a real estate friendly CPA. However, when you look up  CPAs that specialize in real estate, they can be pricey.  However, that doesn’t mean that other CPAs or tax professionals aren’t good. They might not be particularly aware of certain items, but they can research and collaborate with theirs peers. Perhaps it may require you to do a little of work to compensate. Things you can do:
✅ listen to The Real Estate CPA podcast or join the Facebook group
✅follow social media accounts of the pricey Real Estate CPA and take notes of what they are saying
✅attend free educational events 
✅read BiggerPocket book on Real Estate taxes 
✅if you know anyone working with a really good Real Estate CPA firm, ask them what they are doing

Then use that to go your CPA or tax professional and be like “Hey, is this something we can do for me?” They’ll probably say, “Let me look into it”. 

If they are good, they are going to research it and/or ask their CPA peer group. (CPAs and tax preparers also have Facebook groups where they collaborate with each other).

Here is a piece of advice, if they tell you “No, we can’t use this loophole or no, you don’t qualify to use this strategy” —> Ask WHY and “How can I qualify in the future?.” This way you confirm they did their homework and aren’t just being lazy. Don’t just take no for an answer. You can then get a second opinion by asking a question in a forum or to your peers.

So don’t panic if you don’t have a real estate CPA or tax professional. 

Next video I’ll be answering the question… “Can I skip the tax professional altogether and do my own taxes?”

#realestate
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