SETTING GOALS THE SMART WAY
One of my favorite questions for new investors is:
“What do you want to make next year with your real estate business?”
I’ll get answers ranging anywhere from $100,000 to $5 MILLION bucks. Now listen, NO ONE would ever accuse Craig Fuhr (yes, I did just refer to myself in the 3rd person) of being a dream stealer. I love dreaming big – but $5 MILLION? C’mon, dawg!
The bigger question is:
“Why does this person think they need to make $5 million?”
As you sit down to contemplate your goals for 2015, you should first think about why you got into the business of real estate investing…
Ask yourself, “Why am I doing this?”
Most people answer, “I want more freedom in my life.”
I’m down with freedom and being able to live the life you want, but do you really think you’ll have a lot a freedom while building a $5 MILLION dollar per year business? Forget about the 5 million – do you think you’ll have much freedom while building a $300,000 per year business?
Maybe – but only if you first get a serious grip on the amount you need to make versus the amount you want to make.
A QUICK STORY
My mentor loves to tell the following story:
He started out as a manager of a well-known food chain. Living in an apartment for $450/month rent, he had almost everything he needed. He decided to make massive changes in his life; giving up alcohol, finding Christ, ditching the restaurant business, and following his dreams to be a successful real estate investor.
In just a few short years, he succeeded on every front! He was known in Maryland as the top dog, and even known around the country as one of the country’s premier real estate investors. There wasn’t a moment of rest for the guy. Thousands of investors flocked to him for advice and he tried to help everyone – all while running a massive real estate flipping business.
Most thought he was the happiest, most successful investor in the world , but personally – he was dying inside.
Why you ask?
My mentor found sudden fame and fortune. He was earning big money from speaking and education products, and hundreds of thousands of dollars per month as a real estate investor. But with the new-found fortune, also came all the debt-laden trappings of success. He ditched the $450/month apartment and paid-off Honda Accord for a McMansion in the burbs, 3 new cars in the garage… it was a several thousand square-foot house in the hills of North Carolina.
Get this – at one point, he earned $1 MILLION dollars in one year, but he was living a 1.5-million lifestyle! He made $1 million in a year, but was broke! He was miserable – and he longed for the easier days of the apartment.
BUT THAT AIN’T ME
If you think the story above can’t happen to you, you’re a fool. Ask yourself now – can you name 3 people in your inner circle who have an abundance of money left over after they pay all of their monthly bills?
Look, even a millionaire, earning $85,000/month can be broke if he’s created a $100,000/month lifestyle.
So don’t tell me this can’t happen to you.
PLAN FOR EASY STREET NOW
If you want to avoid the mistakes of 90% of all over-leveraged Americans, and guys like my mentor – you can. And, it’s pretty damn easy! Go get a blank sheet of paper and a fresh #2 pencil, because Ole Cousin’ Craig is about to lay some wisdom on you.
You need to come up with a plan for your success, even before you start making that green – and you need to do it now. So here we go!
MONEY PLAN STEP #1 – WHAT DO YOU NEED?
Right now, write down all your current monthly bills. They might include car, gas, insurance, phone, cable, mortgage, gas and electric, groceries.
These are the things you need, as well as the debts you must pay. This is NOT a place to include the things you want. We’ll get to that later. List ONLY the essentials in Step #1.
Now add up the list, and put a big red circle around the total and move to Step #2.
NOTE: You must also figure for taxes paid to The Man! So, for example, if you came up with $3500 as your monthly need, you have to earn close roughly $4500 to NET the $3500.
MONEY PLAN STEP #2 – WHAT DO YOU WANT?
Okay, in this step I want you to think responsibly. What will make you content? This is the step where you are earning enough to be happy, and content and free.
Now, if you have debt, this is where you make a plan to retire that debt early. If you haven’t yet funded your IRA or 401K, this is where you throw a conservative number at the monthly amount that you’ll invest.
If you need a new car because your car is on its last leg, put a figure on the paper for the monthly expense.
If you want to reward yourself with good health and you need a gym membership – write it in.
>Give yourself a monthly budget for things like: a couple vacations per year, Christmas gifts, clothes, and entertainment.
And, just like above, you’ll want to multiple this end number by 1.3 or 30% to make sure you are earning enough to pay your taxes.
Step #2, is where you reward yourself by increasing your monthly needs and wants – but the WANTS have to be responsible wants! When you arrive at this super-responsible number, circle it!
MONEY PLAN STEP #3 – DREAM BIG
I promised you we would have some fun and this is the step where “The Baller,” version of you comes out to play. I want you to dream a little here.
If you’ve always wanted a Ferrari, find out how much one costs and write in the monthly amount for it. Want to take 4 vacations per year – great! Plan for it. Want a 5,000-square-foot dream house – okay…
But you must realistic when you write in the amount the mortgage will be. Don’t just shoot from the hip. You’re gonna need a whole bunch of furniture for that house, so be sure to add in a monthly expense for that. How about maid service once a week to clean the McMansion? Why not!? Throw it in. Want a few million in your IRA, plan on it here. How about that cosmetic surgery you’ve always wanted? Sure! Get that new nose. J
Have some fun here. Dream of that baller lifestyle you’ve always wanted – but remember, your numbers for each line item, MUST be the real numbers.
Would it surprise you to know that most Americans have no idea how much they truly need each month to live? Would it surprise you to know that most don’t earn enough to support their current lifestyles?
Haven’t you always heard, “The more money you make, the more you spend!”
I can’t tell you how many students I mentored who have gone onto success, who are now making more than they ever dreamed of – but who are also FLAT BROKE at the end of every month!
The 3-step exercise above is going to directly benefit you in several powerful ways:
- It will give you a crystal clear picture of how much you truly “need,” to live each month.
- It will then give you a solid plan for your money when start making enough to support your “responsible wants.” You’ll know precisely what you need to earn to live a super content and happy life.
- It will give you a few lofty goals to shoot for – and a rock-solid plan for your BIG MONEY when you finally arrive at that BALLER STAGE!
Most importantly, it gives you a plan so that you don’t end up like my mentor who made $1 million, but needed $1.5 to live. Don’t just give into the notion that you’ll spend more as you make more. Have a plan for your success – because you WILL GET there! Craig