Pregnant with possibilities

Ahhh...

This morning I met up with a friend for coffee to talk about her plans to get into the buy-to-let market. As a couple they own their own house, and baby number 2 is on the way. The wife wants to gradually exit the rat race and develop a plan for financial freedom so that as the children get older, both she and her husband can spend more time with the people they love, doing the things they want, at a time and in a place that suits them. Something I can heartily relate to!

In my experience, our children have provided us with the ultimate impetus for improving our financial future! In fact our initial reason for getting into property was to be able to provide a house for each of our 2 children ... the problem was we kept having children. And so we had to keep buying houses! After 4 it became rather a habit, and we've just kind of continued. [Property that is, not children. I have definitely done my bit for the survival of humanity]. Maybe it's something to do with the wonder of conceiving ... first babies, then business ideas...

My pregnant friend is getting serious about starting to invest in property but recognises that the first place to start is with their personal finances. Investor sensibilus! Until she has a simple system that she can use to manage her own finances, she will just be adding to the complications with another property. We discussed how we manage our finances and I made some suggestions:

• Simplify your systems
• Streamline your spending
• Analyse your accounts
• Regularly reconcile
• Decide to be disciplined (particularly about non-essential spending, and ensuring you put aside a proportion of your income into savings/investments each month )

Each of these areas, done properly and regularly, can really help you to understand where you spend your money, where you could save money and when you could realistically think about buying your first, or next, property. There are many websites and books around to help with organising your money, and others which can help you analyse just how much (or little!) you have. There's a fab online course from Ohio State University that you can work through here to help you do this.  Once you get good at managing your own finances it is so much easier to think about using other people's money to invest (a vital concept).

One of the keys to successful property investment is emotional intelligence - and there's nothing that can wind people up faster than the colour of money. Losing it, winning it, making it, spending it. There's usually a great deal of emotion attached to these behaviours. So to be able to take the long-view, and not get too wound up when the rent hasn't been paid or a tenant is being a pain, or to be patient and wait for the right time to buy a property when the housing market is on a roll, or to avoid getting over excited and mortgaged to the hilt when your property value rises, all takes emotional intelligence.  Coupled with knowledge and some experience, emotional intelligence is one of the core aptitudes that investors need to master. If you can demonstrate to yourself emotional intelligence with regard to your own money, you will be much more confident about property investment. Being confident that you can make financial decisions based on logic rather than impulse is something that only you can know. But unless you have demonstrated to yourself that you can do this with your own finances first, you are not likely to be confident in your abilities as an investor, and consequently much more liable to make basic mistakes.

My friend is very level-headed and intelligent. She is taking her family's financial matters in hand and de-tangling some rather knotty financial transactions and accounts. Despite her bump being a literal barrier to the laptop, her nesting instinct is driving her to consider how they can enlarge the nest further and so she's spending time getting to grips with the family finances. I say to her: Go girl! She's analysing her priorities and asking questions about their spending - do we really need another Laura Ashley cushion on our sofa, or could I save that money into a property investment account??

I'm excited for her because once she knows her own situation back -to-front and inside-out, she will be ready to start pushing (get it??) another integral part of their future - property investment.