The hardest part about getting rich is getting starting.  The reason you will read this and not put any of its ideas into action is primarily fear.  Fear can be paralyzing.  The first step is often a leap of faith, because you are doing something that you have never done before.  I hope that you will take the leap of faith and take the first step on the road to becoming rich.

The key to doing something new is to be prepared and knowing what to expect. Start by taking baby steps.  Start small, in your spare time, without risking the security of your current situation, be it a job or other form of security.  Then at your own pace increase your investment both time and money.  You need to have a plan as to what you will be doing, either in business, in real estate, or both. But first, let’s take a look at getting our personal finances in order.  If you want to be truly rich, you must do what the truly rich do.  This means having your “house in order” before or during your adventure into business or real estate.  There are 5 key factors you can put in place now to get you on the right path at your personal level. The stage you are in life will determine how easy or difficult it is to implement these ideas.  I am not saying that you must do any of these to become rich, but these little steps will help you to have more money and credit available for building wealth.  These suggestions are for you to modify your lifestyle while you are both preparing and on your journey to riches, so that you can be arrive faster and keep going.

Key factor #1: Live within your means

One of the keys to becoming a millionaire is to live within your means.  That means that at the end of the month you have money left over for investing or savings.  According to “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko, published by Longstreet press, Inc. Most millionaires got that way by living within their means, saving, and investing. This is a book that I recommend you read if you have not done so already. In today’s society it is increasingly difficult to live within your means.  As our status symbols become more portable and personalized, it takes increasingly more dollars to keep up.  Cars, smart phones, the latest gadget, cappuccinos, etc.  These are all symbols that tell other people that we are “cool”.  The unfortunate part is when we keep trying to get the latest, best thing, just because it is the latest and best thing right now, we put ourselves in a hole.  We may have a perfectly good car that may be almost paid, but we want the latest model because we want to be the first kid on the block with the new toy.  This is very wasteful if you want to get rich.  Why spend so much money on something just to impress your neighbors?  Depending on the technology, you can get the same thing six months to two years later for an incredible discount. Now I am not saying not to get some toys once in a while. What I am saying is not to get a toy for someone else.  Get a toy because you want it, but first be sure you can afford it.  Don’t get into wasteful habits that are like turning on the faucet and letting your money run down the drain. A perfect example is when someone has to have their cappuccinos every morning, at about $4.00 a pop.  This comes out to over $1,000.00 a year in coffee, not including weekends.  What could you do with $1,000.00 more each year?  What about people who eat out every day for lunch and dinner?  What about the drink after work and every weeknight?  Don’t even get me started with cigarettes. Don’t get me wrong, I like to go out and have nice meals, a cappuccino, and a drink.  My purpose here is to let you see where some of your money may be going, to see where you could save money to live within your means and get out of bad debt if you have it.  If you packed a lunch every day for work, you would save $2,600.00 in a year.  And if you usually charge it for lunch, you will save even more in interest.  This does not have to be a permanent habit, nor does it have to be all or nothing, but you can save this money and use it to pay down debt or invest in to let you see where some of your money may be going, to see where you could save money to live within your means and get out of bad debt if you have it.  If you packed a lunch every day for work, you would save $2,600.00 in a year.  And if you usually charge it for lunch, you will save even more in interest.  This does not have to be a permanent habit, nor does it have to be all or nothing, but you can save this money and use it to pay down debt or invest in assets.

Key factor #2: Car payment hell

Having a car in most parts of the united states is a necessity.  We Americans love our cars.  I am a car lover myself.  The problem with cars is when you have a car payment.  A car is the biggest purchase you make for something that goes down in value.  Cars depreciate so fast that as soon as you drive it off the lot, it is worth much less than you paid for it.  If you get rid of your car payment you can have that extra cash to use to pay for an asset that will generate income or appreciate in value.  Not only that, but you will have more credit available to leverage investments like real estate, which typically appreciates in value. How do you get a nice car without having a car payment?  Well sometimes you don’t get the nice car until you have built up your assets so you can just pay cash for it.  In the meantime, you drive an economical used car that is reliable, until you can buy the car you want.  Remember most millionaires buy cars that are at least two years old.  Sam Walton, of Wal-Mart, drove a pickup truck, when he could have bought any car he wanted in as many colors as he wanted. You don’t have to wait until you have $60,000.00 to buy your luxury car.  You can probably get the same model, two-to-four years old for just over half that amount, if you look carefully.  Always try to get the best deal when you buy a car, because it will depreciate. Another thing is to find an asset that will produce the profits that will pay for your car.  Having something like that as a reward can really motivate you if you want the car or any other thing bad enough.  Don’t get trapped in car payment hell.  If you are already there, analyze your options and see how you can get out of this place.

Key factor #3: Get out of bad debt

Bad debt is debt that takes money from your pocket without providing an offsetting income.  Examples of this are credit cards, car payments (as mentioned last week), and even your house that can just suck money out of you.  Getting out of bad debt is not hard, but it is a systematic process that needs to be followed to get out of debt. The first thing you must do is to stop the bleeding.  Cut up the credit cards and don’t take on any more personal debt.  Next, you need to take inventory of your debts, list them in order from smallest to largest, with the monthly payment amount and interest rate.  Then take the extra $300.00 per month you are saving by cutting out cappuccinos and lunches (or more if you can afford to) and pay it towards the smallest debt every month until it is paid off.  When the first debt is completely payed off, take the $300.00 extra you were paying plus the amount you were paying on the first debt and pay it towards the next smallest debt until that debt is paid off.  Continue this process until you are completely debt free.  That includes your house being paid off.  You will be surprised how fast you are completely out of bad debt.  The beauty of this system is that you can control how fast you go through it by how much more you pay towards your debts.  Remember when you have an 18% interest credit card, every payment to principal saves you 18% guaranteed, which in today’s economy is an excellent return. When you are bad debt free, your credit score improves, your attitude improves and you have more money available to spend on investments, and even toys – so you don’t have to borrow to get them.  Think about this. What could you do if the only things you had to pay for each month were your utilities, food, and clothing?  No car payment, credit card bills, or house payment.  That would add up to a lot of money every month.  You don’t have to wait until you are bad debt free to start your business and real estate investments.

Key factor #4: Charting your business road map

If you find a business that you would like to get involved with, evaluate it for profitability and then determine if it can be done at some point without your direct labor and still be profitable.  The key in the business road map is to build a business, not create a job.  By this I mean that at first you may start your business on a part-time basis on weekends or after work.  During these beginning stages the business owner often does all the work until the business makes enough profit and has enough work to justify hiring someone. At that point, you will have two people doing the work.  You will find that at some point, if you develop your business properly, you will be able to have the “work” done by others, while you make the decisions and planning for the company’s future.  You will find that being able to see the forest and the trees will help take your business and investments to a higher, more profitable level.  Establishing a business plan will help you to analyze your business and help establish your road map for business. Many times, it is necessary to get into debt (good debt) to get your business started.  Don’t be afraid of credit but treat it with respect and use it when appropriate.  I think it is entirely appropriate to borrow money to start a business if you have made an analysis and determined that it can be profitable and put money in your pocket.  What is not appropriate is charging to buy toys that do not make any money.

Key factor #5: Setting up your real estate plan

For real estate, you should start in one of two ways; buying an income producing property or buying a property to fix up and sell, or both.  For those that choose the income property approach, you can be a millionaire with little effort in fifteen years, or much sooner with some effort. Once you complete your first deal, you will find that the rest become easier and easier.  The more you are involved with real estate, the more you will have deals coming to you instead of you looking for the deals.  I never stop looking though.  When two roads converge, you will find an incredible synergy which can help to multiply the speed of your investments.  Your business at some point will need a location where the work gets done.  If your real estate business rents the property to the business, each side will have its benefits, which will increase profitability and reduce taxes.  Feel free to venture on both roads.  As you have seen, they often are intertwined.  If you are diligent, they will lead you to your goal of becoming rich.

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