Over time, what you want to do is to improve your financial picture. Whilst you may not be able to create generational wealth in a few short years, there is the possibility of changing your family tree (as radio host Dave Ramsey likes to say) if you work on it.

It won’t happen overnight, but there’s a proven path to follow to enjoy greater financial comfort.

Getting Your Personal Finances Organized

When your personal finances are in disarray or you don’t even know where to start, then you’ll never become wealthy. The first place to begin is pulling out statements for all your accounts and writing down (or putting into a Google Sheet) the balances for your various accounts. You’ll want positive balances on one side and negative ones on the other. Then add everything up and see what your personal net worth looks like.

You’ll want to create a budget from past receipts to get a handle on your spending. See where you can make frugal cutbacks to free up cash. Pay down any unnecessary debt and get your finances into a position where you have spare cash every month.


What to Do with Spare Cash Every Month?

Initially, with your spare cash, you’ll clear the debt, but once this is done, you need a plan for the short- to medium-term. You don’t want to leave too much as a cash balance earning precious little – you must make the money work for you. You can put money into stocks, but unless you have experience of the stock market, that’s difficult to get your head around. People tend to become wealthy and then invest in stocks; few people get rich from long-term stock market investing because they cannot safely use leverage to expand their holdings.

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The attractiveness of Rental Property

Real estate investing has attractive features for smaller investors. There are properties from single-family homes up to multi-family units sold as a block. Prices vary from city and town, state to state. Borrowing money to buy a rental property isn’t that difficult. What a lender is looking for is a property that often already has paying tenants and which generates enough regular cash flow to pay for the cost of financing. The idea is that you use borrowed money and tenants to pay off the hard money lending, then after this period, you own the property free and clear. When you start, your spare cash covers upkeep and repairs.

Trading Up

Many real estate buyers end up acquiring many properties over time. They trade up from a smaller holding to buy a larger one. A single-family home later morphs into a deal to buy a 10-unit multi-family complex when selling one and buying the other soon after. And with a track record of reliable repayments on hard money loans, lenders are pleased to help secure funding for larger purchases. Early retirees these days are often doing so off the back of a real estate portfolio they grew over time with plans to live off the free cash flow.

Unlike stock market investing, borrowing to buy rental property isn’t uncommon. In fact, it’s the norm. The regular rental yield from a property in an area where there are good occupancy levels ensures a profitable venture for most real estate investors who know what they’re doing. There’s also plenty of help online with podcasts and books educating the public on how to become a real estate investor to guarantee their future.

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