Millionaire Money Management

The only way you will ever find great success as an investor is if you first develop solid money management skills. Once you have built up the capital to enter the real estate market, you will be dealing with large sums of money which requires you to have a much higher level of financial intelligence. Here are a few things to remember as you develop your money management skills... I've had to learn these the hard way on my way to becoming a millionaire.

Assets Vs Liabilities

You always need to have a clear picture of your assets and liabilities. I follow the definitions given by Robert Kiyosaki in his best selling book "Rich Dad Poor Dad". Which gives an asset as being  anything that puts money in your pocket as a net result. In contrast to your liabilities, which take money out of your pocket as a net result. So an investment property can be both an asset or a liability depending on whether is giving you positive cashflow or costing you money. Any potential for capital growth is just that, potential and should not be counted on and only treated as a bonus. On the other hand a boat or a car only ever cost money and so we should try to minimise the impact of these on our financial situation and over time work on replacing the income we get from our work with income from Assets.

Build a Budget

Once you have a clear picture of your income flow, make sure you have an accurate budget of expenses. You need to understand where your money is going and how you can set up a plan for savings so you can increase your portfolio of assets in the future. I find that I feel guilty about spending money on my self for entertainment or buying others presents, unless I have budgeted an amount each month to cover these.

Pay Yourself First

This is a very famous saying and what it really means is to put the money aside for your investing and your longer term goals first before you go paying expenses to others. I find that unless I pay this across to an account that cant be withdrawn from as soon as I get paid, I would get to the end of the month and have nothing left to pay myself with.

Track Your Expenses by Category

There a lot of different things you will find yourself spending money on both in your personal life and with your investments. It is important that the budget you create for yourself recognises this and treats those different areas as distinct categories. This will let you see if one part of your investment is eating too large a portion of your money. I use a free tool created by ANZ called money manager to do this. Anyone can use it regardless of what bank you are with.

Debt Repayment Strategies

It may go without saying, but if you have multiple debts that you need to deal with, always start with the one with the highest interest. It may be tempting to deal with a smaller and lower interest debt to get it out of the way, but the reality, this is simply going to cost you more money in the end. Deal with your largest interest debts first and as quickly as possible and then take the money you were using for those repayments and use it on your next highest interest loan. Once you get

When you show the universe that you can handle money well, it will give you more to handle!