As King Solomon tells us, wisdom leads to good decisions about everything in life, including finances. And wise financial decisions create a firm foundation for the kind of prosperous life blessed by God that the great King describes in Proverbs 3:2: “length of days, and years of life, and peace.”
And those wise financial decisions are ones that anyone can make. As a recent article from Business Insider points out, it’s not about how much money you have or save; it’s about how you think about money and what it means. And for income property investors, that’s pretty good advice indeed.
The goal of successful investing is to get a good return – not thrills. Get rich quick schemes and “grab it or it’s gone” deals promise quick money and the excitement of taking risks. But investing for maximum returns is really a slow process that calls for patience and consistency.
That’s the key to building wealth in rental real estate. The old saying, “Don’t wait to buy real estate. Buy real estate and wait” captures the essence of Jason Hartman’s recommendation to buy and hold rental properties for the long term. Quick flipping of houses may bring fast cash but not a real return on the investment.
Do things differently. As Morgan Housel of The Motley Fool points out in that Business Insider guest post, “Most people are bad with money. Being good means doing things differently than they do.” Copying other people’s investing and money management strategies may not mean that you’ll get the same results. Successful investing means carving out your own path, regardless of what others think.
Carving out that individual path to wealth requires taking control of the whole investing process rather than turning over decisions to financial managers and other money professionals who manage your affairs as they see fit – not as you do. Jason Hartman’s 10 Commandments of Successful Real Estate Investing remind investors to educate themselves and keep control of their investments.
That doesn’t mean going it alone, though. As King Solomon says in Proverbs 1:5, “ A wise man shall hear, and be wiser.” The wise investor who isn’t guided by what other people think will also recognize when it’s useful to have the advice and input of qualified professionals. That’s where knowledge comes in: learning about real estate and the investing process helps investors to know what they don’t know and to weed out unqualified advisors.
Wealth is not about ego. If the goal is to build wealth, it’s important to leave the ego at the door. That means not spending money to show people how wealthy you are – and to take responsibility for the money you do spend. It’s a question of having money or having things – and things don’t equal money.
In real estate investing as in other areas of money management, it’s not about how big a portfolio you have or how expensive your properties are. Building wealth means choosing the less glamorous pieces of real estate that show promise for the highest long-term returns. Many of the world’s truly wealthy people actually live quite modestly – and that reflects the decision to build wealth instead of owning things.
Successful money management and investing also involves a recognition that anything can happen – for any reason, or for no apparent reason at all. Markets can surge and markets can crash. Savings can vanish in one moment of crisis. It’s essential to know that and allow for it. That’s why wise investors diversify holdings over as many areas as they can. Buying multiple properties in diverse areas offers a hedge. If one market fails, another may flourish.
Managing money wisely also depends on defining what wealth really means and planning accordingly. Wealth is a relative term; it’s easy to use other people as a yardstick for success and money. And it’s easy to forget that even the poorest Americans are wealthier than much of the world.
Understanding what you consider true wealth is the first step toward figuring out how to get it. That could be as simple as figuring out how much money you need for the retirement you dream of – and what you need to do every year to achieve that goal.
It’s often said that failure is a better teacher than success. Learning from others’ mistakes is a good way to find out what works and what doesn’t – and avoiding bad decisions can be more important than making brilliant ones. That’s part of an investor’s education too.
Recent studies reveal that the majority of Americans suffer from financial illiteracy. Sound money management for everybody depends on education, awareness and planning – the basics for creating financial wisdom that would make King Solomon proud. (Featured image:Flickr/phuketphoto)
Housel, Morgan. “8 Financial Rules That Apply to Everyone and Their Money.” Business Insider. businessinsider.com 28 Sept 2014
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