Real estate owner who started in 2007 shares how to bulletproof your business before a downturn. Print your last three to six months of expenses and cut anything that doesn't return 10x. Then split your money into buckets for taxes, savings, and reinvestment so you're not caught flat-footed when the market shifts.
So let's talk about expense review. This is natural when you go through some tough times. So let's say I got Into Real Estate 2007, mid-2007, three months after I got into real estate, the market completely dropped out where buyers just said no. It was the full on mortgage crisis and inventory shot straight through the roof starting in June 2007, probably for 12 to 18 months like nobody was buying. And it was just a weird time. And foreclosures were big in our market and all of that stuff. And I continued to not let any of that affect me. I sold more homes every year for like the six, seven years that followed. But what the good times allow you to do that, the bad times don't. The good times allow you to spend money on a bunch of stuff that is not. You're not holding your expenses accountable. And when I say you, I'm preaching to me just as much as anyone else. So when the market is going well, you're making more money than you ever have. We have a tendency to look at the money in our account and want to spend it right. We have no way of moving money around in a way that you're seeing and you're storing, you know, hopefully not cash. I think cash is, you know, it's not king. I think cash is trash right now. I'll get to more of that in part four of this series. But you have to be constantly looking at your expenses and this is the exercise you need to do. Print out. Hopefully you're running your business expenses through, you know, a business credit card that you're paying off every month just as convenience, not for consumer debt. Print out, you know, three, but really six months worth of business expenses. On the one hand, print it out physically and staple it and then your personal expenses do the same thing. Actually personal is next week. Sorry. So we're just talking business, but I'm still going to make you do the same thing in your personal. And I want you to go through a line by line. This could be your bank accounts or credit card statement. Go line by line and ask yourself if this expense is producing a 10x return. Pick a number, right? A multiple of the actual expense. We tend to try a bunch of things. We tend to forget that we have all these monthly recurring debits set up on our bank accounts or our credit cards. We tend to just be really loose with our finances when things are going well. So that's number one is to hold your expenses accountable. Number one A is that have a system for moving money around in your business to account for savings, to account for taxes, to account for, you know, feeding money back into the business in a premeditated pre calculated set of criteria. The system that I use, I've modified it a little bit, but it's Based on Mike McCallowicz Profit first book, where essentially I do it weekly, he does it twice a month. I just look at all the money that came in and I sort of put all that money in different buckets. And as a result, I just systematically am increasing my net worth and I'm always aware of how much money I'm spending in the businesses that I have.
