Small Financial Changes, Big Differences
Are small financial changes the key to your big success? We think so and are going to prove it to you!
Such a little thing, but the difference it made was great…-Morrissey
I was speaking with my co-worker, Scott, a little while ago about the duplex he owns. We were discussing real estate in general and he told me his process for choosing the property, which isn’t located in the best neighborhood right now, but it’s up and coming.
He said, “A little research showed a certain area just outside where I really wanted to be was selling for significantly less. Not only that but geographically, it was in the direct path of improvement. There was literally no other direction neighborhood improvement could go, except for this area.
I felt like I knew something that was obvious to everyone, and couldn’t figure out why more people weren’t acting on it. Anyone that lives in Denver can see the development and the general direction of improvement, the light rail, the redevelopment of the highway, the “gentrification,” the demographic changes, etc.”
A small change to his geographic search area allowed him to purchase a duplex and “House-Hack” it. He lives in one room of his 2-bedroom half of the duplex, and rents out the other half. He also rents out his second bedroom to a friend. The rent from his friend combined with the rent from the other side pays his mortgage and he lives for free.
Scott is still close enough to downtown that he doesn’t miss out on anything. But rather than only being able to afford a one- or two-bedroom condo, he basically doubled his space. The small change made a huge difference. On the other hand, it really didn’t make much difference to Scott’s life to be a mile farther out.
An added bonus is that he gets to try his hand as a landlord on a small scale to see if he likes it. Scott’s already looking for his next duplex to house hack.
Keeping up with the Joneses
The Debt Free Guys write about their experiences with finances and debt. John and David felt a need to keep up with the Joneses during their 20’s. New clothes, cars, dinners, and drinks out. Saving money didn’t come into the equation until much later. I get it. I did similar things.
I used to be a waitress at a bar. A gambling boat opened up on the other side of the county, and some of my fellow waitresses decided to go one night after work. I didn’t have anything else to do, so I joined them.
I remember sitting at the blackjack table, completely unaware of how the game worked. I took my cards and did my quick math. I would ask for another card or not, depending on my extremely limited knowledge, and would bust out far more frequently than I would win. It took less than 40 minutes to lose every dime I had just spent eight hours making.
That is where that tale of woe ends. I didn’t go to the cash machine and get more in an effort to “win it back.” I did learn my lesson about gambling. That money wasn’t really wasted on the boat, though. I would have done something else stupid with it, I’m sure. Clothes I didn’t need, shoes I didn’t need, movies I would forget as soon as I walked out of the theatre.
But what if I had made small financial changes? What if I would have invested that money in the market? I still lived at home with my parents. What if I would have bought a house? I could have started house hacking like Scott. Try this tool to assess your money situation to when you, too, can start house hacking.
Real Estate Investing
I did end up buying a condo a few years later. I had graduated from college and was working at my first real job. A friend was going through a divorce, and had rented an apartment, but had to break the lease early. I took it over, without consulting the landlord. (oops!) Rent was $410 a month for this 1-bedroom. But when the lease was up, I moved back to my parent’s house to save for a condo to purchase. I didn’t want to keep throwing my money away on rent.
That small change, from renter to owner, made me a lot of money. My mortgage payment was $417, so I was spending an additional $7 a month, but I ended up selling that condo for 50% more than I paid for it. The amount of money I made selling that property prompted me to start investing in real estate.
New Year, New You
I really hate New Year’s Resolutions. The big ones always involve huge life changes, as though by the calendar flipping to January, you will magically be transformed into this non-smoking, healthy-eating, exercise-enjoying go-getter who will rule the world.
When you don’t succeed, your failures are magnified because it’s a new year, you should just be able to make that change. Change is hard. BIG change is even harder. Small financial changes are easier.
So as the calendar flips, take a look at your life. What small financial changes can you make?
Mindy Jensen is the Community Manager for BiggerPockets.com, the premier real estate social network. She writes about real estate and personal finance, and in her spare time, she’s a real estate agent and investor, flipping houses with her husband. Keep up with her on Twitter (@MindyatBP) or follow her on Facebook.
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