I am a frugal girl. I save on things that don’t matter to me, so I can spend on the things that I want. But not that much matters to me. I don’t care about the label on my clothes, my car doesn’t inspire lust in anyone, and I stay at plain, boring hotels when I travel. As long as there’s a free continental breakfast waiting for me in the morning, I’m happy.
My cell phone is 3 or 4 years old, but it has Google Maps to get me to the office, Podcast Addict to entertain me on the way there, and the ability to make a phone call if I forget to download the latest episode of the BiggerPockets Podcast, so I’m all set there, too.
I spend a LOT of time in the forums. I see the same question over and over again.
“How can I invest in real estate with no money and bad credit?”
I’ve talked about how you can improve your credit score in several articles. Let’s look at why you have no money.
I have tattoos. This isn’t meant to be a slam against people who have tattoos. But a good quality tattoo costs a lot of money. Heck, a bad tattoo still costs a lot. This is quite possibly the least important thing you could ever spend money on.
The federal minimum wage is $7.25, although states can impose their own, higher minimum wage. Let’s go with California’s minimum of $10 for mathematical ease.
Let’s say you want to get a tattoo that will take 3-4 hours to complete. That will cost around $400, not an unreasonable sum for quality work. You are going to have to work an entire 40-hour week just to pay for it. Actually, you’ll have to work more because of taxes and social security.
More than 25% of your entire month’s salary is going to that tattoo. How are you paying for rent, food, gas, etc. if you only have 75% of your salary leftover after your new ink?
If you’re only just making ends meet, body art should not be the last thing on your list — it shouldn’t be anywhere near your list. Showing your love for the Tasmanian Devil can wait until your finances drastically improve.
Your Brand New Car
According to this article from Trusted Choice, your brand new car can lose up to 11% of its value simply by driving it off the car lot. The average cost of a new car in 2015 was $33,560. You stand to lose $3,691 by the time you get home and park it in your driveway for the first time.
Let’s do some math. Let’s say you purchased that car brand new above and drove it for 10,000 miles. You are paying $3.36 per mile, plus taking a hit for depreciation.
Now let’s say you buy a 5-year-old used car for $10,000 and drive it for that same 10,000 miles. Those miles only cost you $1.00 each, and you don’t take the huge depreciation hit.
I’ve heard the argument that when you buy a used car, you’re buying someone else’s problems. I don’t believe that. I’ve had mostly used cars my whole life, and they run just fine as long as you take care of them. I had an Acura Integra that I put 100,000 miles on AFTER I bought it with 150,000 miles on it.
If you are barely scraping by, you don’t need a new car. A quality, used car will get you from A to B just fine.
Your Leased Vehicle
Worse than buying a brand new car is leasing a brand new car. You are essentially renting the car for a specific period of time, and then you give it back at the end or buy it outright after you have made years of payments and it’s worth a whole lot less.
Worse still is that you only get a certain number of miles with your lease. Go over, and you pay per mile. I’ve seen leases where you pay $.30 a mile for overage. That’s $300 for every 1,000 miles you go over!
More House Than You Need
I was guilty of this financial sin, too. I had far too much house for my needs — to the tune of more than 4,000 square feet for 4 people. Four bedrooms, 4 bathrooms, 2 stories, plus a full basement AND a 4-car tandem garage. Guess how many houses I owned when I lived in that monstrosity? One. I could only afford that one house. All my purchasing power was tied up in one mortgage. I literally could not qualify for any additional loans while I lived in that home.
While we lived in that house, I was a stay-at-home mom, and my husband felt the burden of H-A-V-I-N-G to work to pay our mortgage. There wasn’t any wiggle room in our finances.
We sold that house and bought another home, slightly smaller in size but significantly lower payments. When we sold that house, we actively looked for a decidedly smaller home. We currently reside in 1,800 square feet. Our considerably smaller mortgage can comfortably be paid even if we both lose our jobs and have to work for minimum wage at an entry-level job.
And I can now invest in real estate again. (If I could only find a deal…)
How much house do you REALLY need?
How frequently are you going out to eat? I know as a stay-at-home mom, some days I just didn’t feel like cooking. As a working mom, those days have increased significantly.
According to this article from The Simple Dollar, you can cook a relatively easy meal at home, hitting all the right spots on the food pyramid, for a family of four for around $10. Not only that, but frequently that meal was too big for just four servings, so there was food leftover for lunch the next day, making these meals less than $2 per person!
The same article shares that the average American eats out at a restaurant 18.2 times per month, to the tune of $13 per meal per person.
I noticed that when I started at BiggerPockets, all of the sudden we went out to restaurants a lot more. Once I started meal planning, my restaurant spending dropped to almost nothing. I love not having to worry about what to make for dinner based on the ingredients I have in the refrigerator, and I spend one Friday night per month preparing the meals. I invite friends over, and we have a glass of wine and chat while we chop.
Are you trying to get ahead, but every step forward seems to turn into two steps back? Try cutting back on restaurant visits to free up some space in your budget.
I used to watch the TV show Cheers. I thought the premise of the show was a bit ridiculous — the same people went to the same bar every single night to sit in the same chair and drink the same drink while talking to the same people.
Then I got a job as a cocktail waitress at a bar. That show is 100 percent accurate! I worked there for two years 20 years ago, and I can still remember the guys who came in every single day.
Does this describe you? First off, bars are expensive. A good quality craft beer is going to run you anywhere from $4-$8 (really, really good quality beer is going to run even more than that!), while an entire 6-pack at the liquor store will run more along the lines of $8-$12.
Second, alcohol isn’t a healthy choice. I’m not slamming alcohol. I love a good chocolate stout, and my city, Longmont, CO, is home to nine microbreweries today. (I say “today” because there are three more opening up this summer.) Alcohol in small quantities is just fine. But alcohol is 100 percent not necessary.
Do you regularly find yourself short of cash? Stay home — or better yet, go for a bike ride or run, rather than to a bar.
My sister-in-law’s ex-boyfriend spends $300 on his cable bill every single month. He has every channel available, every package, multiple boxes, and all the other bells and whistles the company offers.
Guess how many houses he owns? One. Which, I suppose, is better than zero.
Do you know what his life consists of? TV. He gets up in the morning, goes to work, comes home, and plants himself on the couch, watching TV all night long. Lather, rinse, repeat.
I’m pretty sure that if we were to go visit him in a few years, his life would look remarkably similar to today.
Cable TV is expensive, and with all the more affordable options out there, including Netflix, HBO GO, Hulu and Amazon Prime, it is completely unnecessary. If you find your pockets are empty too frequently, cut the cord.
There isn’t a go-getter on the planet who sits and watches TV all day every day. Not one.
The average American watches five hours of TV every day. FIVE! Do you know how much you can accomplish in five hours?!
Regular TV is basically free, so this isn’t an outright money-drain. But all the money you could make in five hours adds up, so if you need more money, stop watching TV, get a second job, and start saving.
Your “I Deserve It” Attitude
Do you need it?
Can you afford it?
Then no, you DON’T deserve it. You want it. Learn the difference between a want and a need, and then fulfill the needs and prioritize the wants.
How badly do you want to be debt-free? How badly do you want to start investing? How badly do you want to quit your job? How badly do you want financial freedom?
Seriously? In this day and age, when cigarettes cost $8 a pack and it is a proven scientific fact that they cause cancer, which can KILL YOU, why are you still smoking?
Stop. Now. There is zero argument against this. You can’t afford to smoke, even if it was free.
Hiring it Out
There is a debate on BiggerPockets about DIY vs. hiring it out when it comes to home repairs. That isn’t really what this one is about. This is about doing things for yourself instead of hiring them out, like mowing your lawn, shoveling your sidewalk, raking leaves, landscaping, pool/spa maintenance. The list goes on forever.
I used to live in a neighborhood where everyone had a lawn sprinkler system. It gets hot enough in the summer that sprinklers are very helpful in keeping your grass from dying — especially if you combine it with a timer to water at night so it soaks in before the sun bakes it away. But every single person in the neighborhood paid someone to come blow out their system before winter.
You don’t need a manicure every week. You don’t need a pedicure every week. You can live for the rest of your life without ever having another one. And no, you don’t deserve it.
It’s very easy to paint your own nails, and you can connect with a friend to paint each other’s left hands. When you have to choose which bill you’re going to pay and which one you’re going to allow to go into delinquency, the state of your nails is your absolute last priority.
Harsh? Maybe. But look at your life. Do you want to continue to live like this forever?
I haven’t named one N-E-C-E-S-S-I-T-Y. Not one. Every single thing on this list is something you don’t need.
You want to invest in real estate? How serious are you? Cut out these unnecessary expenditures, start saving up your extra cash, and become the investor you want to be.
What are some unnecessary expenses you have been able to cut in order to start investing?
Let me know with a comment, and let’s help each other make better financial habits.