I saw this tweet the other day…
Saying that I agree with this would be an understatement!
Homegirl is on point x 1000!
I control three apartments in my NYC building. My mortgage for that building is $2800 a month including insurance and taxes.
A friend of mine was paying $2,700 a month for a one 2 bedroom apartment before she moved out of state. So by that measure, she most definitely could afford to pay a mortgage.
But sometimes “paying’ the rent. doesn’t necessarily mean that you can afford that rent.
So let’s walk through how you can dig a little bit deeper to figure out if you should buy a house.
And not just any old house…
but a house that you can use to increase your financial stability and take back control of your time and freedom.
I recently talked about the 4 questions to think through to determine if you are ready to buy a house with Jasmin Reed on The Millennial Housewife Podcast.
These two questions below are the most important to ask yourself (and answer honestly) when applying for a mortgage if the goal is to use this house to create financial freedom.
How will this property generate income now and in the future?
Too many first-time home buyers don’t understand the concepts of cash flow and equity. Cash flow and equity are the two ways you make money with any property.
Cash flow refers to money coming in on a regular basis from your house. This is cash you can use immediately, for example, for rent.
Equity is the value of your house that you could access via a loan. Essentially, this is the difference between how much you owe on the house and what the home value is. If you have a loan for 50K and the house is worth 100K then you have 50K in equity.
Before moving forward with buying a house you want to determine which one of these money producing options you want to focus on, and how exactly you are going to generate the cash flow OR create the equity.
Just saying, “when I sell this house I will make money…”
which is what most home buyers believe… is simply not enough.
This is leaving what happens with your house to chance and leaving a lot of income AND freedom producing opportunity on the table.
Are there homeowners that don’t have a specific cash flow and equity plan when they buy their first house that make money? Absolutely. YES!
But they would make a lot more if they understood how to apply investor principles to better leverage their personal home purchase.
You can play a game and win, but you can play better and smarter when you know the rules.
Am I spending less than what I earn?
I ran a poll on my YouTube channel and almost 75% of the respondents said they were NOT using a budget.
Creating wealth comes down to math, discipline, and knowledge.
But the knowledge is irrelevant if you don’t master the math and discipline parts.
The math and discipline formula boils down to this…
spend less than what you make and invest what is left over.
If have any desire to have financial freedom, this is what you have to master. And it starts with having a system to monitor your income and your spending. A budget is critical to that effort.
If you have no idea how much you are spending, what you are spending on, and if you are overspending, then you have already lost the game.
Buying a house that is profitable won’t help you right now.
What action can you take today to get closer to getting a mortgage to buy your first house?
Start understanding what is happening with your money.
Getting clear on this one thing will trickle down to every aspect of your finances…
not just buying a house.
You work SO hard for every cent that you make.
Don’t you want to make each dollar you earn work twice as hard for you?
You can get crystal clear on what is happening with your money by taking the next 30 days to track every single dollar you spend.
The goal is to determine this…
➠ are you spending less than you make?
➠ is your spending aligned with what matters to you?
➠ is there an area you should spend less or more in to meet your money goals?
Answering the questions above at the end of the 30 days will lead to clarity on if you have an income problem OR if you have a spending problem.
Once you are clear on that, you can better determine your next move, while using your budget to keep you on track.
Are you committing to getting clear and taking back control of your money?
Comment below and let’s chat about it!
