When it comes to building wealth through real estate investments, it pays to make realistic New Year’s resolutions. According to a survey by Joseph Grenny (author of Change Anything) quoted in a recent Time financial planning article, people waste about $1,000 on failed New Year’s resolutions each year (think shiny new workout gear and high end juicers).
Although diet and exercise as well as smoking cessation may be at the top of most people’s lists, financial goals can provide more security in the long term. Most people dream of having passive income by the time they retire, but fail to follow through with saving and investing along the way—making it nearly impossible to reach their long-term financial goals. The same survey showed half of people give up on their New Year’s goals in the first month; another 75 percent throw in the towel after 90 days. By having realistic financial goals, you can begin building wealth at any age.
Saving for retirement
One of the more reliable forms of passive income comes in the form of dividends or the profits sometimes given by companies to their shareholders. Instead of wasting $1,000 this year on diet pills, think about opening a Roth IRA. If you already have one, contribute $1,000 to it as long as you meet the income guidelines. For those of you earning high incomes, consider making a conversion from a regular IRA into a Roth IRA so you have tax-free income in retirement. The key is to invest in mutual funds, stocks, or exchange-traded funds (ETFS) that pay dividends. Either re-invest the dividends to buy more shares, or let the cash build up in a money market fund within your IRA.
Buying a turnkey real estate property
A lot of people consider fixing up foreclosures and becoming landlords. This may sound attractive—taking a dump and transforming it into a thing of beauty with your own hands—but if you don’t know a lot about fixing up properties; if you aren’t truly passionate about remodeling; if you don’t have the time or wherewithal to get dirty every weekend for months, maybe you should pause and reconsider.
It’s a lot less complicated to get passive income as a property owner of a turnkey or move-in ready rental property. By paying a property manager a fee, you don’t have to worry about any of the day-to-day headaches such as rent collection, background checks, eviction or even showing the property to prospective tenants. It’s only “passive income” when you can receive the money without doing too much legwork.
According to Time, 16 percent of people include financial planning in their New Year’s resolutions. It makes sense to start working on financial goals in January so you can figure out exactly how much money to budget each month for retirement and emergency fund savings.