5 Money Management Tips Every Investor Should Follow

money management

Everyone wants to make money. What most people fail to grasp is that it is not how much money you make but what you actually do with it that is important.  If the money is going out as fast as it is coming in eventually the well will run dry and you will be left wondering what happened.  As a real estate investor there is a certain money management discipline that is needed for success.  The manner in which you earn a living and have access to money is unlike most other businesses.  Just because you get a check at closing doesn’t mean you need to go out and spend it.  The best investors know that they need to allocate most of the funds back into their business and only take a small portion for themselves.  The better you are at managing your money your stronger your business will be.  Here are five money management tips every investor should follow.

  • Understand Expenses. When is the last time you looked at your balance sheet? You don’t need to be a CPA to have a grasp of your business expenses. If you are like most people in business you probably haven’t poured through your bills and expenses in several months. It is not uncommon to be paying costly expenses without getting much of a return from them. Without staying on top of your spending you could be wasting hundreds of dollars every month. The best way to combat this is by taking one day every month or two to break down all of your expenses. Pour through your bills and see exactly where your money is going. Don’t be afraid to eliminate expenses that aren’t doing anything for your business. If the costs are high spend time finding a cheaper alternative. There is a big difference in spending money and wasting it. Always know where your business money is going.
  • Stay On Even Keel. When things are going well in your business there is a tendency to make impulse purchases. You may explore the option of renting office space even if you really don’t need it. You may plan a pricey vacation or lease an expensive car. There are dozens of things you can do with a big check from a closing. As difficult as it may be you need to ask yourself if the expense really makes sense for you and your business. Taking on unnecessary expenses creates a burden that weighs on you with every decision you make. Instead of making a small profit on a deal you will be more inclined to swing for the fences knowing you have to cover a higher monthly expense number. Things can quickly change on a dime with your business. As well as things are going now all it takes is a few deals to fall out to put you right behind the eight ball. Make your decisions with a tentative and conservative approach in mind and always avoid impulse buys.
  • Don’t Put All Your Eggs In One Basket. There is a fine line in any business between allocating money to what is working and putting all your eggs in one basket. One of the most common tips associated with any type of investing is to diversify your holdings. You never want to be too dependent on one stock or one stream of income for your success. When things are going great you will have incredible success but when things take a dip your business will come to a grinding halt. As a real estate investor you should have several different marketing streams and income sources. The more diverse your business is the better equipped it will be to adapt to whatever is happening in the market.
  • Patience. There are no shortcuts to success in the world of real estate. Sometimes some of the best deals you do are the ones you end up not doing. If the deal doesn’t feel right or the numbers don’t make sense there is nothing wrong with passing and waiting for the next one to come along. Getting involved in a deal with limited upside potential opens the door to poor money management. You will make decisions that you know you shouldn’t simply because you chased a bad deal and need to recover. By staying patient and waiting for the right deal you can run your business on your terms and take whatever profit is available.
  • Costly Trial And Error. There is nothing wrong with spending money without knowing what you are getting in return. In business there is always a certain degree of blind faith that is required at times. However this doesn’t mean you should empty out your bank account and hope for the best. If you want to take a shot with a new marketing approach you should do so on a small scale. A smaller list with more repetition is always a better indicator of whether or not something works. If you see that the marketing works for your area and you are having success then you can allocate additional funds. Doing a trial run in any area of your business is a good way to conserve funds until you have a better idea of whether or not something really works.

Good money management can make an average business good and a good business great. On the flip side poor money management can wipe away any success you may be having.  Use these five money management tips to help stretch your business dollar.