Did you miss the second class in our millionaire series? Here’s a recap.
Gary Keller & Dave Jenks, authors of The Millionaire Real Estate Investor, state that financial wealth is “the unearned income to finance your life mission without having to work.”
My definition is a little different: “Money is the vehicle by which you can change your world.”
The MREI uses proven systems (models) to create wealth faster. The net worth model will help you focus on your current financial situation and help you track your investment success.
3 numbers you must know are cash flow, net worth & your FICO score. Check out this blog post for more details on these important numbers.
Read Robert T. Kiyosaki’s Rich Dad’s Cash Flow Quadrant to understand how the way you spend money helps determine your net worth .
When your spending habits focus on consumption, you’re “enjoying” shadow wealth. We all know someone who lives in an expensive house, drives a new car, always wears designer clothes, and is one paycheck from disaster. The shadow wealthy usually don’t have savings, or even health insurance. You don’t even need to spend ostentatiously and conspicuously to be guilty of amassing shadow wealth the average American carries over $10,000 in credit card debt, and isn’t necessarily shopping at Saks.
True wealth is based on converting cash flow to assets, which then produce cash flow to purchase assets, etc. Your net worth is your financial scorecard. Reviewing your net worth monthly lets you correct quickly if you get off track.
To calculate your net worth, just add all your assets and subtract your liabilities.
Once you have your finances under control, create your investment criteria. Your personal investment policy will let you evaluate deals quickly and, more importantly, take action. Without a policy, it’s too easy to do nothing (rather than make the wrong decision.) Once you craft your policy, when you find a deal that meets your criteria-BUY IT!
Your investment policy should include your big why, goals, time horizon, risk tolerance, expertise, current cash position, tax consequences and net worth. Contact our office to get a sample investment policy, or visit Morningstar.com or Investapedia.com.
The financial model of the MREI covers the triple benefits of real estate investing: cash flow, appreciation and debt reduction. If you follow the #1 commandment in real estate investing, make your money going in, you begin building equity as your property appreciates and your debt shrinks.
If cash flow is important to you, the combination of rent increases and debt reduction means that your cash flow will grow over time.
Keller & Jenks discuss these models in The Millionaire Real Estate Investor. Contact our office for a free copy and to reserve your place for our next MREI class on August 6th.
Posted By: Betty Kincaid
0 Responses to “MREI Session 2”