Trying to find a balance between quarantining, maintaining peace during this high racial climate, and still pushing toward goals is hard. However, it’s not impossible. I have friends who have started new businesses, gotten engaged, and purchased homes during this time and that is very inspiring. I’ve even launched a podcast which is something I've always wanted to do.
So instead of focusing on all the turmoil that’s happening, I want to talk about one thing that I’ve loved seeing: the importance of ownership. More black-owned businesses are getting the shine they deserve, but most importantly, more people are understanding the importance of homeownership. Not only does it help you build wealth, but it also allows you to have a seat at the table -- which can ultimately lead to you building your own table.
This has been my focus for the last couple of years and so many people have reached out asking me how I prepared for the process of purchasing my first home. My answer has always been the same: finances.
Below are 5 things I did to prepare my finances (which is the most important component in my opinion) for homeownership.
1. I paid off my debt
Initially, when I was searching for a home, I had a ton of student loan debt but I didn’t think that mattered because I was making a pretty decent salary. Well, I am here to tell you, it does. I used to be one of those people who felt like I was never going to pay them off but that is not the right mindset to have. It becomes real once you’re pre-approved and you see how limiting debt can be to the amount that you are approved for.
I got tired of hearing nothing or never having my offers accepted, so I did what I had to do to get those student loans off my back. This actually leads to number 2.
TIP: Start with the loan(s) that have the highest interest rate. Tackle those first and then focus on the others.
2. I gave up my comfortable lifestyle
Now granted, I wasn’t living in some lavish penthouse nor did I blow my money on labels. I had a modest lifestyle but did partake in brunches a lot or weekend trips to NYC. That stuff adds up. It wasn’t until I gave up my independent lifestyle to move back in with my mom that I realized how much money I blew.
I don’t regret it though. I used to take international trips regularly and experiences (to me) are priceless. However, it felt good to put those loans on autopay and see the principal creep down every month. That kept me motivated as I was living with my mom as a whole adult. It also allowed me to pay my loans off quicker than I projected which is a good thing -- because interest rates (particularly on private loans) are very high.
TIP: Take a look at what subscriptions or programs you are a part of that you don’t use. For example, if you rarely order on Amazon, consider removing Prime and use a friend's account when you need it.
3. I started investing in Real Estate Investment Trusts (REITs)
My goal has always been to become a real estate investor and thankfully, there are many ways to do so without actually owning property. I was familiar with wholesaling and flipping, but once I found REITs, I was sold. REITs work similarly to stocks in terms of the overall process. REITs are managed by companies that own (and often operate) income-producing real estate. Think of large apartment buildings, malls, office buildings, etc. You invest a certain amount of money along with other investors and generate a return based on equity and of course, rent payments.
Not only is it passive (meaning no trading your time for money), it’s lucrative as soon as you start investing. I opened my account years ago and have consistently generated returns since then. These helped me to pay off my debt initially, but now, they sit in my high-yield savings account. I received so many questions about REITs that I decided to write an eBook that breaks them all the way down.
TIP: Do not invest blindly without doing your research. My eBook is a great place to start. Also, don’t invest what you cannot afford to go without.
4. I hired a wealth manager
I was always under the impression that only super-wealthy people have wealth managers. When I hired mine, I was still swimming in debt. But after reading an article (that he was featured in) about wealth management, I realized that there are wealth managers out there that work with everyday people like me.
My wealth manager did two important things for me: he helped me to understand how each action I took impacted my finances and also helped me set up a plan to invest beyond my company’s 401K plan.
He is still supporting me, overseeing my portfolio, and educating me on what to do now that my money situation has drastically improved. Education is #1 with every conversation we have, which helps to continuously change my mindset.
TIP: Listen to the “Ask Phillip” podcast. It’s like having a wealth manager, without paying for it.
5. I educated myself
Google is free and I am so thankful because it’s introduced me to people, resources, and opportunities that have helped me fully embrace this financial freedom lifestyle. I have attended various conferences, listened to tons of podcasts, and read many eBooks that have all sharpened my mindset. A few that I personally recommend are Wealth Noir, I Don’t Do Budgets, and The Budgetnista. All black-owned resources and most of the game they drop is free.
These experiences also encouraged me to launch my own podcast, Real Estate Prep, which is for first-time homebuyers who are looking for the tools, tactics, and resources they need to confidently make the biggest purchase of their lives. In addition to highlighting my personal journey, I invite relevant professionals to talk about all things real estate. I get a lot of great feedback and give away a lot of free game on my website and Instagram as well.
TIP: Follow every brand I mentioned above and subscribe to their emails. You will learn!
Moral of the story: get started!