Where do I Start???
I want to talk about the importance of “Foundations” in this post. The first thing I do when I look at a house as an investment is go straight into the basement. If I don’t see that the house has a good foundation I promise I will walk right out for good. Many times I have went straight into the basement with a realtor and then straight out the door without even looking at the rest of the house. A bad basement is a deal killer when it comes to affordable housing, cracks or bowing walls- later I’m out!
Just like the house you buy as an investment must have a good foundation, so you too need the same. If you don’t have your personal house in order you can forget being successful as an investor. Im talking about not only your credit score but a number of other things too. You need to be solvent financially which means having your consumerism in check. You will want to have a good financial stream of income. Equally as important is to be in control of your time.
There are more than one way to skin a cat but I can only advocate how I did it. I made as much as I could while spending as little as possible. I always paid my bills and saved as much as I could. If your behind on your child support then you probably need to worry about that first. Same with any unpaid bills.
Part of having a good foundation is filing and paying your taxes. In my businesses I have always worked with lots of sub-contractors since its the most efficient path. Unbelievably, there are a lot of people out there that are self employed and don’t file or pay taxes. I get it, who wants to go through the hassle and expense but if you want to get ahead you’re going to have to build your foundation.
I’ve had sub-contractors that don’t have a business checking account resulting in the fact that they can’t even cash the check I pay them with. This is all part of building your foundation, and that friends is gonna be a requirement to really building wealth.
These are some of the obvious steps- make a lot of money, pay your debts, and spend as little as possible. This is really personal finance 101 but it amazes me how many people try to skip all this. Below I’m going to give some examples of what I’m talking about.
In my retail events business I use self employed sub contractors or Non-statutory employees. Picture an avon seller or am-way where a self employed person works in conjunction with another company. One of the challenges of working with subs is that they invariably will need some of their profits before they have actually earned them. We call this a draw, basically a loan against a persons pay which comes at the end of a job.
When you have a lot of subs it can turn into an accounting nightmare to need to be giving daily cash draws to these subs. Trying to come up with a better way prompted my company to set up a credit card system whereby any and all payments come in the form of money put on a credit card in the subs name. I set a date and let my subs know that as of that date all draws and final pay would be put on their own personal credit card on a daily basis if necessary.
All hell broke loose as most of the subs objected. Some had entitlement they received and were afraid they would be discovered and lose them. Others had huge child support debt and were afraid that the government would garnish any money paid to them. Many of them were just afraid of change, they had never had a credit card and weren’t interested in getting one now.
This way of looking at money and finances is short sighted. To get your house in order you have to change the way that you’re looking at money. Realize that money in and of itself is worthless, it’s only a piece of paper that represents what you can accomplish with it. Think of it as a way of keeping score. Real wealth will be accomplished when you have honesty, integrity, and character. Then and only then will people go out of their way to do business with you.
Don’t believe those that will tell you that you have to be greedy to be wealthy. If you are driven by greed you likely will not build your foundation by paying your debts. Greedy people cheat or don’t pay income taxes, or perhaps ask for money they are not entitled to. You have to have an attitude of abundance regarding money which is the opposite of scarcity which leads to greed. Trust me if you don’t hoard money or resources they will flow freely in and out of your life at will.
Here’s the thing, if you’re self employed and want to buy a house you will have to show your income tax return that shows that you are making money and paying taxes. If you can’t do that you can forget going into a bank for a loan to buy a house. Question:If you have to hide your income from the tax man what are you going to do with it? You can’t invest it because you will be at risk of being discovered. Do you see the pattern here? The same greed that keeps you from paying your obligations will, at the same time, keep you from building real wealth.
In summary, if you wish to get ahead in life check your financial foundation first. If its shaky then work on shoring it up first and foremost. Make sure you know the difference between greed and frugality. One is toxic and the other is good. Don’t be afraid to rethink your belief systems about money, your financial future depends on it.