Today on our Real Estate Graduate Call we discussed the importance of learning to be more informed about how to take steps to work on our own Financial Plan of Independence. We discussed that all Real Estate Investors can take steps to be better with their own plan so that they have the means and better credit to invest more in Real Estate.
We discussed the importance of having a spreadsheet or some other form to track the income and expenses.
We at Prosper have a spreadsheet that focuses on this very area. All students can call into the Coaching Support Line and ask for a copy of this customized Excel spreadsheet to be sent to them.
The first part of filling in the spreadsheet relates to documenting all income and expenses from day to day. The spreadsheet will in turn create an ongoing total of how much has been spent in the customized categories. These could include groceries, eating out, entertainment, auto repairs etc. These total so the student can see very clearly the amounts spent in all categories. This can allow one to adjust accordingly to those areas of overspending.
The next part of the spreadsheet allows the student to list all of the balances of their assets(things of value) and liabilities (debts). The totals of both of these areas are then automatically placed in the net worth tab. This net worth can then be continually monitored to see if one is progressing with their financial goals and independence.
Finally, we discussed once you have a list of your liabilities or debts in one place, you can then formulate the best strategy to pay down your debt in the best order. Basically, we want to pay down the debt the quickest and by paying the least amount of interest. The coaching support line has software that can figure it out. Normally it works out that the best way is to pay down your debt from the highest interest rate to the lowest interest rate. So, if one had an extra $100 dollars a month after paying all of their bills, they would take that and pay it on their debt with the highest interest. All of the other debts are just paid on with the minimum amount. After the 1st debt is paid off completly then all of that extra money and the minimum payment amount would be snowballed onto the next highest interest debt. This process is continued until becoming completely debt free.
This can create more flexibility in the monthly finances of the individual. This can bring peace of mind knowing they are paying off their debt in the fastest way. Then more satisfaction can come from investing in real estate knowing that extra money from that can pay down their debt even faster.
Let’s all work on our own finances so our investing goals can be met sooner.
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