“Doing what needs to be done may not make you happy but it will make you great”~ George Bernard Shaw
Cash flow. Cash flow. Despite the fact that I wholeheartedly embraced the Real Estate Millionaire: The Essential Starter Course and could not wait to begin, I became apprehensive when I was confronted with this topic.
I am not a big fan of numbers and calculations.
During my school days I always hovered between average and poor in mathematics. As a result I viewed it with a mixture of dislike and trepidation and never really developed confidence with numbers. Unfortunately one cannot get away from figures as they are a part of our everyday lives.
So I took a deep breath and started to do my personal cash flow assessments, hesitantly in the first week but more confident and diligent by the third week (thank you Excel). In one of the lessons students are advised to get their personal finances in order before buying a property – this includes doing proper cash flows.
To digress a bit, with the other major topic of goal setting I want to believe I have fared fairly well. Although I’m still a bit fuzzy on some of it, I’ve got a clear idea of what I want to do, when and how. Apart from real estate investing goals I have other things going on as well but real estate investing will be the key area of focus until I purchase the first property.
Back to finances. Dave advises that the importance of doing cash flows is that one is able to see where one is spending their money and how much they are spending.
I then had to take a long and hard look at my finances. I’ve never looked at my cash flow before. This doesn’t mean to say I was a run away spender. Actually I was careful with money, never wanting to be in debt and saving for other projects. BUT I was not doing cash flows. Every month I would make all the important payments like rent, water, electricity, school/college fees, telephones, investments and savings, etc. Afterwards what I did, or rather did not do, is where I now realize I need to seriously work on if I am to make progress towards reaching my goals.
After paying bills I would relax. In the absence of cash flows (or a budget) I most likely lost money through non-critical purchases, which money could have been used to boost my savings.
So now I do my cash flows. I started on the first of August. I am using the templates which Dave thankfully provided. Since I feel I have a lot to discover about how I handle money, I have amended the cash flow calculator by adding “weekly columns” as opposed to having only one total for the month. This means I can track my expenditure on a weekly basis and I intend to study the weekly trend over a few months.
On the summary sheet I have added a column “average monthly expenditure” to help me to see average monthly trends over the next few years. These could one day help me to make investing decisions possibly with regard to timings.
I need to track my cash flows for a while before drawing a conclusion about how I’ve progressed.
The most important adjustment I have had to make in order to purposefully move towards achieving my goals has been to change the way I do things. While setting my goals it clearly occurred to me that in order to achieve success I had to change some of my habits regarding finances. I had to make sure that I saved more each month and did not lose money unnecessarily.
One of my real estate goals is to buy a property in the next 12 months. To this end I have started saving for a down payment and this has necessitated that I live below my means in order to free as much money towards the savings as I can. I do not intend to reduce myself to poverty but I will eliminate certain luxuries, gradually, so that I can make progressive steps towards my goal.
Just to share with fellow students, when in the supermarket I now avoid impulse purchases and will strictly stick to my shopping list. The supermarket is one place where some destructive behaviours take place and there are certain areas which I now avoid. This can be agony but I have to keep telling myself to keep my eyes on my goal but sometimes I feel my strength failing me!
Prioritizing purchases and tracking cash flows is not easy to do if one has habitually been allowing oneself some deviations. High levels of self discipline are required. In my first full month of behavior change I’ve sometimes felt brutalized, by myself of course, and have suffered withdrawal symptoms (emotional ones) from luxuries. The symptoms range between mild and severe. Surprisingly when I look and see that amounts saved every week are gradually increasing, I congratulate myself even for the narrowest saving, knowing that it could have been another purchase but will now move me towards my goal.
Cheers for now.
For Part One of Monica’s Post Please Visit:
Published on September 10, 2009