2014 was apparently a very good year for our little real estate business. Our rentals cash flowed in the right direction. Steve made about $30,000 in commissions wholesaling. We made another $30k profit flipping our first house. All of this came fast and furious. There was no time for us to think and plan, just do. The money that came in went to paying off huge amounts of debt and overdue property taxes from when things weren’t going so well. We filed for a tax extension and figured we’d deal with it in October.
Well, Happy October, everyone! Between the IRS, the PA Department of Revenue and our local tax collector, we ended up owing almost $11,000! “It’s a good problem to have,” said our accountant, in an attempt to soften the blow. He was right. We’re players now! I’ve been working very hard on straightening out our finances since the spring, so I actually had the money to write the checks. Time now to “groan and get over it.” Move forward. Get smarter. Better, not bitter. But… OUCH!
Business growth requires personal growth. That’s the journey I’m on now. I’ve always been poor – growing up in rural Vermont we never had much. I entered a career in broadcasting which is notorious for low pay. I got pretty far up the chain, but the most money I ever made working full-time on the radio was $57,000. That was in 2007, before the Crash (and before I became a Mom!) That included not only my full-time salary but ratings bonuses, talent fees for live appearances, commercial endorsements, emceeing a club night every week and voicetracking another station. And that was also over twenty years into my career!
Money has never been a huge priority in my life, so long as there was enough to meet my basic needs and a few of my wants. Priorities change, though. I am no longer young, and I am no longer childless. $57,000 a year isn’t enough to provide the kind of life I want for Savannah. Not that that matters – that job I had no longer exists, it was eliminated in a round of budget cuts in 2012. And even if I still had it, there’s no way I could keep up the kind of hours I was working in 2007, not with the shift in my priorities.
The smartest thing I ever did was save up those talent fees. I had about $10,000 in the bank, and combined with some family money my husband had, we started our business in 2008. We bought our first 6-unit apartment house, then a 2-unit and another bigger 6-unit right after that in quick succession. Today, including our rent-to-own houses we have 28 units. I have a whole series of blog posts on How It All Began – if you’re curious about how we started our business please go back and read them. It was like therapy for me to write out our history like that. It made me feel like maybe I do have what it takes to make this work! But I have to get clear about money. I’ve always been very vague about money, and that has to change because I am not going to pay another $11,000 tax bill!
Overcoming Underearning. Barbara Stanny service marked that phrase, but maybe she won’t sue me if I link to her YouTube channel and spread the word about her amazing book of the same title:
I started thinking about my own underearning tendencies when I contemplated taking the real estate course to get my agent’s license. For thirty years in radio, I underearned. I realize some of my radio colleagues will tell me $57,000 is a King’s salary in our industry, but we are an industry made up of underearners if you ask me. So I was afraid that if I paid all that money to take the course, then sit for the test and get my agents’ license, I would just be buying my way into another low-paying job. I know some real estate agents are very successful and can earn 6 figures. But I did my research – the average real estate agent makes about $40k, and beginning agents can expect to make maybe $15k the first year. They actually tell you to keep your day job!
Bottom line: you can’t be a successful real estate agent with an underearner’s mindset. I’ve come to the conclusion you can’t be a successful anything with an underearner’s mindset. So I’m doing everything I can to bust out of that mindset!
Plenty of Time, Money & Love. When I want to learn more about a subject, I start Googling. While Googling underearning, I found this great website www.plentyoftimemoneyandlove.com
Every day is a new short blog – a meditation – on our personal relationship with money. It’s put out by Debtors Anonymous, which is a twelve step program based on the principals of Alcoholics Anonymous.
I don’t think I’m a Debtor. I understand the difference between bad consumer debt and using other peoples’ money for asset-building. When my monthly income is sufficient to cover my everyday expenses and the needs of my family, I carry a zero balance on credit cards. Sure if I have a bad month I’ll carry a balance, but I don’t go on wild shopping sprees or take elaborate vacations. All of my bills are paid in full and on time and no creditors are calling me. My credit score is right around 780.
But I do have a lot of Debtor traits. My history of underearning is one of them. So is my vagueness about money and my “math anxiety.” My tendency to put off taxes until the last minute, requiring the filing of extensions year after year. These are my new areas of personal growth. This is what I’m working on with myself so that I can grow my business. When you’re an entrepreneur, your self and your business are one in the same. It’s a truth we all need to get comfortable with!
We need to take care of ourselves! Get enough sleep. Exercise. Eat right. Make a little time for fun that isn’t work-related. Don’t live in a state of deprivation for the sake of the business.
That last statement really hit home for me when I read it in one of the Plenty of TML blogs about Business Debtors Anonymous – a spin-off group of DA for business owners. If you’re curious, here’s a good link to start: http://plentyoftimemoneyandlove.com/minding-our-own-business-and-thriving-with-bda-tools/ and this: http://www.debtorsanonymous.org/BusinessDA.htm
One of the behaviors BDA points out that leads to compulsive business debting is “living in a state of deprivation for the sake of the business.” I thought about this past year, 2015, the Year Without a Vacation. I had three weeks of paid time off from my full-time job, and I used almost all of that to handle emergencies with the business. I had one week off planned around the 4th of July up in Vermont with my family, which I had to cancel because of some turmoil with our rentals. This will never happen again!
Steve and I are building our team to include a professionally-trained, experienced, competent property manager and a maintenance crew. This is uncharted territory for us and will make for some great future blog posts, I’m sure! It’s going to be expensive, and we’re going to have to buckle down and live off credit for awhile. I won’t be quitting my day job anytime soon! But I’m confident that with Steve finally freed from the headaches of rental management and maintenance, he can concentrate on income producing activities like wholesaling, flips, rent-to-own properties, private lending, and building up the NEPA Investors Network. And I can spend my 10 hours/week – which is all the time I have outside of my full-time job and family responsibilities – tending to the finances.
Me? The Chief Financial Officer? Why would someone with admitted “math anxiety” and a sordid relationship with money appoint herself as CFO? Several reasons:
#1 - Of the two of us, Steve and myself, I am more inclined towards organized record-keeping. We have an excellent accountant. We’ll be hiring a bookkeeper on or before January 1. But someone has to at least get our records into an understandable format so those professionals can crunch the numbers to our greatest advantage – that is how I see my primary role as CFO.
#2- Improving my relationship with money is a necessary avenue for personal growth. The hours I spend on our business finances are worth hundreds of hours in therapy. Every day I feel a little more comfortable with money, as the vague slowly turns to clarity. Money and I are becoming friends. Perhaps one day we’ll be lovers!
#3 – I am uniquely qualified to navigate this tricky path, relying on credit now to build a business that will be immensely profitable later. As I mentioned before, I grew up rural poor. I got to college on my wits – the first thing I did freshman year was get a work-study job in the financial aid office to learn how the system worked! When I graduated with immense debt into a weak job market in 1992 and went into radio (which paid next to nothing) I got into some bad trouble with credit cards. But by my mid-twenties I had figured it out. I paid off my last card at age 30 and my student loans went away about five years later. All this on a DJ’s salary!
So I can do this, I have done this and I will do this. The real estate gurus and the house-flipping “reality” shows make it look so easy, but I’m telling you like it is. I hope to inspire you. If I can do it…