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What should I do BEFORE I invest in property?

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What should I do BEFORE I invest in property?

The quickest way to build wealth, make money, become financially free, financially independent, retire early is via Bricks or Business. Simple right. Well not quite.

There are of course a lot of other types of investments (and savings). The stock market, savings accounts, but in my opinion these should come second to either business or property.

Let’s stick with the term “investing” for now, which could be in whichever asset class you wish.

There are things you should do BEFORE you even think about investing in anything.

1. Obtain An Accurate Financial Picture

The first thing to consider is “Where am I now?” .

Take a look at your incoming and outgoings per month. Plot them in a basic spreadsheet. Don’t leave anything out; consider dividing annual expenses by 12 and including them. This can include things such as:

  • Car / life / house and gadget insurance
  • Car tax & MOT
  • Boiler servicing
  • Holidays

Once you know what you are spending and what you are bringing in there are three golden rules:

  1. Spend less then you have coming in
  2. Spend less then you earn
  3. Do not spend more then you have coming in.

Hopefully this makes sense. Everything left over is your road to freedom, flexibility and wealth.

2. Reduce Expenses

Once you know how much you have left over, it’s time to make the most of what you have. 

At this point you may need to consider setting some Goals to help motivate you. Don’t worry we can help you there. Head over to our post on goals after finishing reading this.

Now it’s time to identify where you can reduce your outgoings.

Be honest, be realistic, be practical. 

Here are some common area’s where most people can make positive changes:

  • Mobile phones – reduce your contract or go sim only
  • TV and streaming services – Consider consolidating into one package
  • Broadband – shop around
  • Coffee, Tea and lunch while out and about (this can seriously add up)
  • Insurance
  • Smoking / Drinking

There are lots of other area’s where most of us spend money, that lets’s be honest is optional. It’s upto you where your priorities sit,  genuinly. It’s your choice and the choices you make will come down to your goals, your timeline and ultimately what your priorities are.

At some point you will have reduced your expenses as far as you are willing to go (or as far as you practically can). An important note: Reducing expenses has a limit. There is only so much you can reduce you expenses by. Which brings us to….

3. Increase Your Income

There are a lot of ways to increase your income. This will be a full separate topic at some point. Here are a few ways you can increase your income:

  1. Business – Start One
  2. Property – If you already have the savings, invest it
  3. Side Hustle – Sell / Make / Do

4. Protect Your Money / Build a Buffer

Get insurance. There is no point working hard to save and invest if it all comes crashing down with one major life event. The following should be considered to form a strong foundation for your wealth:

  • Life Insurance
  • Critical Illness Insurance
  • Get a Will

Now consider building a financial buffer. A minimum amount of cash that does not get invested. Used for day to day spending , bills, shopping etc.

Everyone is difference and the amount you choose will depend on your spending habits and your apatite for risk. This could be anything from £1000 to 6 months salary. Everyone has a different idea of their own comfort blanket. Just make sure you have one of your own.

5. Clear Debt - Make yourself the MVP

Debt. A big issue. There is GOOD debt. And there is BAD debt. This is a bigger discussion for a whole new post but very simply, I want to focus on getting out of bad debt. Bad debt does only does one thing: 

TAKES MONEY OUT OF YOUR POCKET.

If you are not using debt to make more money (BTL mortgages) OR buy a home then you should focus on paying that off first. For example:

  • Personal Loans
  • Credit Cards
  • Finance (Department Stores etc)
  • Pay day loans

These should all be paid off first because they do not make you richer. They charge high interest rates, which will only take money out of your pocket. The longer you leave them unpaid, the more they cost.

If you are very deep in debt, struggling to make the minimum payments or taking out more debt to make the payments on the debt you already have, you need to seek help.

The following links can help you get that help:

www.gov.uk/options-for-paying-off-your-debts

https://www.moneysavingexpert.com/loans/debt-help-plan/

https://www.moneyadviceservice.org.uk/en/articles/options-for-clearing-your-debts-england-and-wales

 

 

One more thing: DEBT MAKES OTHERS RICH AND KEEPS YOU POOR

When you think about this, if you are paying someone else via a loan or credit card to fund your lifestyle, they are the ones getting rich not you. This should make you angry! Motivated to pay off debt? Make yourself the Most Valuable Player. 

A quick summary of they key points:

  1. Most debt is bad, some is good (BTL & home mortgages for example)
  2. Used properly debt can be useful but there is risk
  3. Debt makes others rich, and keeps you poor
Change this and make yourself the MVP by using the…

The Debt Snowball / Volcano

This is in my opinion the fastest way of clearing your debt.

  1. Decide how much of your monthly expendable income you’re going to use to pay off debt – as much as you can
  2. Use that money to build a starter / buffer / emergency fund first
  3. List your debts in order of outstanding amount – smallest first
  4. Blast that smallest debt with as much money as possible – make minimum payments on the rest
  5. Snowball / Volcano

Let the amount you are focusing on one debt build and build. Every time you pay off a debt, add that to the amount you pay off the next in line. This builds and builds until eventually you are left with no debt and a habit of saving a large amount of cash.

Maintain that habit and INVEST.

6. Invest

Now you’re bad debt free you can start investing. Here at MVP Properties, we like property! This is one fabulous asset class, but it’s important to know there are other ways to invest and other assets that should be considered as part of your overall portfolio. 

The basic asset classes can broadly be labelled as:

  • Equities (stocks, shares, funds)
  • Gilts and Corporate Bonds
  • Cash
  • Commodities (Metals like Gold, Silver, Copper, Iron, Oil and Gas and Soft commodities like wheat and sugar)

And of course, Property – The King of Wealth (in my opinion of course!)

For more information on investing we recommend Monevator.com

See our article on why Property is a great asset to invest in.

How do we achieve all this while working full time? See our post on this here

See Other Free Articles

3 thoughts on “What should I do BEFORE I invest in property?

  1. Long time reader, first time commenter — so,
    thought I’d drop a comment.. — and at the same time ask for a favor.

    Your wordpress site is very simplistic – hope you don’t mind me asking what theme you’re using?
    (and don’t mind if I steal it? :P)

    I just launched my small businesses site –also built in wordpress like yours– but
    the theme slows (!) the site down quite a bit.

    In case you have a minute, you can find it by searching for “REMOVED” on Google (would appreciate any feedback)

    Keep up the good work– and take care of yourself during the
    coronavirus scare!

    ~Justin

    1. Thank you for your comment Justin and the kind words. I am pleased you like the website.

      The theme we are using is linked in our footer, it is the Zakra theme. It has proved to be very flexible and has all the functions we need.

      Stay safe, all the best.

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