Manage your finances to get ready for your first real estate deal!

Last Updated on September 14, 2019 by Jay Castillo | Filed under: - 41 Comments

This is Part 1 of a series on Managing Finances. After reading, don’t forget to read Part 2 and Part 3!

One of the biggest stumbling blocks for beginning real estate investors is that you realize that you have little or no money to invest. The big question is “Where do I get the money for investment?” I believe that the starting point is to get it from your savings, which you get from managing your personal finances well.

When you always have savings available for investment, you can grab opportunities as they arise. Remember: great deals and opportunities may come anytime, and you don’t want to miss out on such opportunities because you simply don’t have enough cash on hand for downpayments, and/or have little chance of getting bank financing approved. Come to think of it, how can you expect to manage the cashflow from your properties (when you already have them) if you can’t even manage your own personal finances?

Before I managed my personal finances

When I was single, I never paid attention to my personal finances and I was even able to accumulate a significant amount of credit card debt. I also remember that I was living from paycheck to paycheck, with little or no savings at all. Fortunately, I was able to get out of that hole that I had dug for myself just before I got married.

After our wedding, my wife and I were able to continue with the savings plan that we devised that helped me get out of credit card debt and save enough money for our wedding, but that was short-lived. We ended up buying a house even if we really had no plans to buy one yet. Because of the monthly amortizations, we were again back to living from paycheck to paycheck.

After some time, when I first got interested in real estate investing, I suddenly realized that I really had no money to invest and our options were very limited because we already had an existing housing loan. We were stuck in the rat-race!

The book that started it all

Sometime in August 2005, my staff who also became a good friend of mine introduced me to the book Rich Dad Poor Dad by Robert Kiyosaki. As I have said in the past, this book started everything for me. I experienced a paradigm shift and started to question the financial decisions I had made in the past.

I started to learn the differences between assets and liabilities and I also began to “pay myself first”. I can still remember the arguments my wife and I had when I would bring up the subject that our house was not an asset but a liability.

Take note that my wife is a CPA-Lawyer and believed that such thinking was nonsense (thank God this is already a thing of the past as she has already read the book herself and understands). This was also the time I first got interested in real estate investing and realized that I really had no money to invest.

Sure, I started paying myself first but I still remember that at the end of each month, I often would need to get money from our savings just to ensure all our obligations are paid. The mind shift had already started but there wasn’t much progress in our bank account.

The “Latte factor”

During the latter part of 2005, I was able to read “Automatic Millionaire” by David Bach. What I remember most about this book was the “Latte Factor”, or those little luxuries and expenses that are unnecessary which, when added up, eat up a good chunk of your money.

I applied it in real life, managed to start saving a bit, but there was still not enough money for a real estate investment as it would take time to accumulate substantial savings for this. I also tried to look for ways to “automate” my savings but this mode was not yet in place for most banks during that time.

Other Robert Kiyosaki Books

For the most part of 2006, I continued reading other books from Robert Kiyosaki like the “Cashflow Quadrant”, “Rich Dad’s Guide to Investing”, and other similar books from other authors on the same subject matter. I was like a sponge and absorbed as much information as I can. They all reinforced the importance of financial literacy.

They helped a lot because during this time I experienced having a significant pay cut when I returned to a previous company I worked for. Inspite of the pay cut, I still managed to have a positive cashflow because of financial literacy. I was able to keep money earned through bonuses as they remained intact and unspent.

At that point, I already began looking at foreclosed properties but felt I was missing opportunities because my cash on hand was not enough and I also lacked information on the “how-to’s” of foreclosed property investing in the Philippines.

Feelings of frustration

After almost a year of reading books, except for increasing my savings mainly due to my being able to save my bonuses from work, I had little to show when it came to actual results with regards to foreclosure investing.

Feelings of frustration crept in and I was thinking that what I had learned from the books I have read are really hard to apply here in the Philippines.

On December 31, 2006 however, my prayers were answered when I saw the book “Think Rich Pinoy” by Larry Gamboa at National Bookstore. I bought it and immediately started reading it. This book again made a big impact on me and my frustrations were suddenly changed into a belief that the Rich Dad principles can really be applied in the Philippine setting as Larry was actually doing it! Now all I had to do was to save enough money for my first real estate deal.

What broke the camel’s back

I continued on my quest to learn more about personal finance and stumbled upon the “How To Become Truly Rich” Seminar by Bo Sanchez which I attended last July 21, 2007. This seminar really helped establish a solid foundation inside me when it came to managing my finances and it also helped correct myths about money which I erroneously believed in at that time.

From that point onwards, I believed that there was nothing wrong with striving to become rich if the ultimate purpose is to use it to help others. This somehow completed the pieces of the puzzle and suddenly I felt a heavy burden got lifted from me.

The money jars

At the same time, I was also listening to an audio recording of T. Harv Eker’s Millionaire Mind Intensive program. I also learned so much from listening to Harv Eker and one of the most remarkable things I learned was the concept of setting up “money jars” that would actually represent bank accounts for my financial freedom account, long term savings for spending account, education account, tithe, my “play” account, and expenses.

I would say that this was a big turning point in my quest to manage my finances as this broke the camel’s back, so to speak. Want to find out what results I got? I’ll discuss these in the next part of this series on how to manage finances so don’t miss it!

Head on over to Part 2 or Part 3 of this series.


To our success and financial freedom!

Jay Castillo
Real Estate Investor

Real Estate Broker License #: 20056
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Text by Jay Castillo and Cherry Castillo. Copyright © 2009-2010 All rights reserved.

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