One of the greatest challenges in America today is financial mastery. The Social Security Administration says that only 2 out of every 100 people in the richest country in the world will ever have enough to retire when they reach 65 without needing to depend on relatives, charity or the government.
Our own personal freedom with our time is directly related to our financial freedom. We have found that there are a number of agents out there making in excess of $750,000 who are in worse debt and financial trouble than those who make $75,000. How does this happen? Good or bad money will only amplify your character and habits.
We need to start thinking differently than most if we would like to be the minority who make it to that top 2%. The principles below have been tested and will work for anyone, but are especially useful for those that have varying incomes like real estate salespeople. The principles are no respecter of age, race, color, creed or sex. Follow them and you will live in your wildest dreams - ignore them and your will live in your worst nightmares.
Here are some of the characteristics of the rich from researcher Thomas Stanley, PhD -
· They follow and maintain a long-term vision.
· They follow their plan no matter what - even in the face of financial challenges.
· They study wealth and wealthy people and do not rely solely on expert advice.
· They believe in deferred gratification.
Here's the step-by-step plan that I picked up over the years that allows you to grow wealth despite the irregularities of Real Estate income-
Step #1 -Set-up your accounts
Set-up the following accounts at your financial institution.
Professional Operating Account - Money to run your real estate business.
Personal Operating Account - Money to fund your life.
Income Tax Account - Money to pay taxes.
Charity Account - Give, give, give.
Security Account - No risk and low return investments.
Growth Account - Higher risk and higher return investments.
Fun Account - Second cars, vacations, special events, etc.
Step #2 -Divide Your Income
Transfer 25% (If working solo) - 50% (If working as a team) of your earned income to your professional operating account.
Total what is left and divide it as follows:
· Personal Operating Account - 45%
· Tax Account - 25%
· Charity Account - 10%
· Security Account - 10%
· Growth Account - 10%
· Fun Account - 0% (yes, it's 0% but don't worry we get to it later)
Step #3 -Redistribute Your Funds
Every quarter, take the profit from your growth account and any special moneys that may come in (gifts, inheritance, etc.) and divide it equally amongst your growth, security and fun accounts.
Step #4 -Plan Your Financial Future
Review a professional and personal profit and loss statement, and a personal net worth statement monthly.
Step #5 -Educate Yourself
Seek good, financial, insurance and tax advice - but make your own educated decisions.
· You must study investments yourself and only invest in what you know well.
· If you think education is expensive - try ignorance.
· Be patient, wealth is like a tree, it grows from a very small seed.
Carpe diem,
You can also click on one of the following links to have my daily blog with helpful life and business tidbits geared to real estate's elite delivered to your computer,
What some more help in the financial mastery arena? Here's a short list of a few books worth reading for wealth building:
How to Be Rich -- by J. Paul Getty; Paperback
The Richest Man in Babylon -- by George S. Clason; Paperback
The Millionaire Mind -- by Thomas, Ph.D. Stanley; Paperback
The Millionaire Next Door: The Surprising Secrets of America's Wealthy -- by Thomas J. Stanley, William D. Danko; Paperback
Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not! by Robert T. Kiyosaki, Sharon L. Lechter
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