To build wealth effectively, you need to be able to budget your finances.
Welcome to the second part of our “Building Wealth Through Real Estate” series. Last week, we talked about your mindset and how it influences your money-related decisions and behaviors. Today we’ll be expanding on this idea by taking a look at budgeting.
Your budget is part of how you build wealth; however, it also tends to be the hardest part to manage. Looking at the numbers and determining what you truly need to do is difficult, as your budget shows the behaviors and habits of a past version of yourself. As you look at your budget and see where you spent your money, try to keep that in mind—don’t judge yourself for who you were in the past.
When you’re budgeting, there are a few things you want to look for:
1. Income: You need to determine the amount of money you have coming in. You might think your commission is what you earn, but you need to take out business expenses and taxes to find out what you truly made. Make sure to add additional streams of income as well.
2. Money going out: You need to look at both personal and business expenses. It’s called a profit and loss statement, and it looks at the commissions you have coming in, the expenses you have going out, the cost of sales, the cost of taxes, and anything else that affects how much you earn. You also go through your household budget and look at bills, food, gas, groceries, entertainment, and any other personal expenses. Going through your bank statements can help you see how things truly add up.
3. Debt: Add up student loans, house loans, car loans, credit cards, and any other debt that you pay each month. With this information, you can tally up where you are, how much you owe, and how you should pay things off.
Looking at these can help you determine how much you actually earn and spend. With this information, you can fine-tune your budget and create a plan for building your wealth. If you’d like more information about building your business as an agent, feel free to reach out to me. I look forward to hearing from you soon.