There isn’t a perfect formula on how to save enough money for your first investment – especially not an immediate solution. Saving money is still more than feasible, and is a great decision to work towards. No matter what time or place you’re in right now, it’s wise to start saving and aiming for an investment that will in turn get your money working for you.
One of the smartest things you can do is find a trusting professional or investor to share experiences and insights with you. Seeking out advice may be one of the most powerful tools and assets to your future investing. In some cases, professionals and investors end up with your business partners or long-term business relationships.
Whether you’re looking to find a low-cost fixer upper for yourself, or a multi-family property that’s ready to be rented – cash always wins. The more cash you have, the better off you’ll be with buyer-seller negotiations and options with your choice of loan. Not to mention if you end up in a bidding war, or a rather competitive market. Cash shows the seller that you have the ability to take on the investment and have your money in order. Whether or not that’s entirely true, doesn’t matter. What matters is that you get the investment you’ve been wanting.
Here’s a few initial steps to take when starting to save money on a regular basis:
Establish realistic goals
It’s important to be ambitious and determined to save enough money for any type of investment. However, it’s just as important to be realistic. Make sure you’re establishing realistic goals, and are honest with yourself from the beginning.
The realistic goals will also keep you in balance when it comes to actually making the investment. If you’re realistic and have proper expectations, you won’t be caught off guard throughout the process. Know what you can afford, and know what you want to spend on your first investment, and stick to it.
Give yourself a deadline
Whether or not you’re a procrastinator by nature, deadlines are good for your mindset and perspective. Without a deadline, the idea of investing is always just an idea. Setting a tangible and realistic deadline applies the right amount of pressure to start saving, and stay on track.
The deadline can be any sort of timeframe; six months to two years. Regardless of the deadline, you’re more likely to accomplish the goal with a due date.
A deadline will also give you the time to start looking for the type of investment you want to make, prior to actually entering the market. There’s a deadline for researching and learning all you can about the investment type as well.
Since you’re establishing a savings plan, it’s important to know your money, and where it’s going.
Determine your savings budget
Maybe you’ve already started saving, but now you want to be more intentional with the amount. Start with your income, and start determining how much of that money you really need each month for your lifestyle. Maybe you know upcoming expenses you have, and some months may vary in the amount you can put in your savings account. Set tiered amounts of savings you have available each month. Have a spreadsheet helping you keep track, and helping you to keep you moving forward.
Once you have a substantial savings account, you’ll be able to afford the down payment, closing costs and additional expenses that come with the investment.
Cut down on unnecessary expenses
Once you see where your money is going, you’re more than likely going to almost immediately see unnecessary expenses. You don’t have to stop spending money entirely. You just need to cut out expenses that are not adding value to your quality of life. Maybe you opt for a cheaper, off brand of your groceries. Maybe you go to a movie during a matinee time, rather than the late night showing.
Keep track of your expenses each month, and see what you can remove or alter the next month. Whatever money you save due to your changes of the expenses, immediately save. You’ll be less likely to spend it, if it’s out of view.
The less unnecessary expenses you have prior to investing, the more money you’ll have to apply to new expenses. You’ll have new expenses attached to any investment you make – especially real estate. You’ll now have different taxes, potentially HOA fees and repairs. If you’re used to living within a specific budget, the additional expenses won’t actually hurt you and your investment plan.
Pay down debt
Have some lingering debt from previous years – student, car or house loans? Start paying them down as much as you can, prior to investing in your first investment. The debt doesn’t need to be completely erased, but you don’t want to only add to the debt.
Also, the less debt you have to your name when you go into a bank or credit union, the more assistance and loan options you will encounter. You’re also establishing a great credit score and reputation of being able to pay your debt – which is exactly what lenders want to see.
Regardless of the type of investment you’re hoping to get involved with, it’s important that you know where you stand with your money – and your options. The more you can save prior to the investment, the easier everything will be. However, don’t be afraid to start the discussion early on.
Making your first investment can be overwhelming and extremely intimidating. Regardless of the type of investment, plans are extremely important. Even if everything doesn’t go as planned, you at least have an outline of what you need, when you need it.
Deals can happen rather quickly, so the more you know prior to the actual process, including your financial options, the better. Learn the market or industry you’re wanting to get involved in, and see what it has to offer you. Draw up your own plan for saving money now, and establish steps to reach your goal once you’re ready.