I’ll get around to it.
There will be more time next week.
It’s really not that big of a deal.
Have you ever found yourself saying any of those things as it relates to personal finance?
I have, and for some reason today as I was doing more 2019 planning the cost of that laziness hit me….
I’ll share it with you in a few examples so hopefully, nobody repeats my mistakes, minor as they may be in the scheme of things. Some of these things I’ve waited many months to do, some many years, and in the interest of privacy I won’t use real numbers – instead loose examples to make the point.
In investing and many things in life, as the old quote says, the best time to act was 20 years ago.
The second best time is right now.
High yield online savings account.
You need one. So do I.
It just makes sense.
This one is low hanging fruit in the personal finance arena, while most banks are paying you a paltry .08% or less on your deposits, some major online banks such as Ally and Discover are paying as much as 2% or more. I realize that the return on that seems meager compared to what you can expect in the market or in a RE deal, but if you are like most people it makes sense to have some cash on hand. So for the example purpose let’s show the difference in $50,000 set aside for a year in both accounts.
At .08% your interest earned would be $40.00
At 2.00% your interest earned would be $1,000.00
Opportunity cost of procrastination = $960.00
Necessary time needed to complete task = Less than 20 minutes.
Decent ROI on this one? I think so…
The difference of $960 equates to an hourly rate on your time of $2,880!
I’m not sure what your day job is, but it’s a safe bet that most people aren’t earning anywhere near that per hour. If you are, I’m impressed! And even with that you are likely able to save so much that it would make a much bigger impact for you than most people. As with everthing, it’s all relative.
Not utilizing the BRRRR method from Bigger Pockets?
This one is a little more difficult to implement time wise, but with that effort also comes the potential for greater gains. If you aren’t a real estate investor and don’t plan to be, then this section won’t mean anything to you or be at all helpful. If you are, this is a powerful strategy.
The BRRRR method is shorthand for Buy/Renovate/Rent/Refinance/Repeat. After reading that you can see why they came up with an acronym, other than generally being difficult to remember it’s a tongue twister as well. Regardless, this one is genius if you want to move forward in the real estate game.
Let’s say for example sake, you buy a home for $200,000 and you put 20% down on that investment – or $40,000 for simple math.
You then renovate that property for an additional $40,000 cost and the properties ARV (after repair value) is $300,000.
You Rent the property for $2,400 per month and that debt service is around $1,500 – netting a positive cash flow before expenses/vacancy of $900.
Does this sound good to you? It should, those are decent deal numbers.
Here is the issue, you now have $80,000 trapped in that home and likely don’t have the cash to start your next project that would generate potentially another $900 per month.
Using the BRRRR strategy you would refinance the property to pull out the equity, assuming the lender is comfortable with maintaining an 80% LTV (loan to value) you could get up to $60,000 back out of the property to put down on the next one.
While STILL maintaining the $900 cash flow (minus any increased payment from additional debt burden). Then repeat the process again. And again.
That get’s wordly quickly, but you get the point. For each month you don’t do this, but think about it, it could cost you somewhere between thousands and tens of thousands depending on your market and skill level. I realize this one comes with risk, but most investing does.
I could go on and on about how procrastination hurts you financially, but the short answer is if you are not doing anything because of analysis/paralysis or just plain laziness, let’s STOP THAT in 2019.
Use the new year as an excuse to do utlize those strategies you’ve read about on this blog, or another blog, or a podcast, or book, etc… Take action, if you don’t – as shown above. It WILL cost you.
Let’s do the math
Calculate your mortgage or work with the compound interest to see what it can do to expedite your wealth building.