What to Buy When You Get Some Cash

Excerpt from The Millionaire Real Estate Mindset by Russ Whitney

It's understandable that once you start to accumulate some cash you'll want to spend it on some luxuries. Resist that urge until you have built up some serious wealth, or at least until you have acquired some appreciating assets like real estate that are throwing off positive cash flow. Most things we consider luxuries are consumer purchases such as cars, entertainment, electronic gadgets, furniture, clothes, and jewelry-all depreciating assets that lose a substantial portion of their value the day you bring them home. When you have appreciating assets that are generating positive cash flow, you can use that money to buy the depreciating assets.

When you have the millionaire mindset, you'll spend your money on appreciating assets-things that will increase in value-especially in your early wealth-building days.

When I netted $11,000 cash within three weeks on my first real estate investment, as I discussed earlier, I wasn't tempted to spend part of that $11,000 on clothes or a fancy night out on the town. Why? Even though I didn't completely realize it at the time, I had the millionaire mindset. I knew that if I was going to achieve my financial goals, I had to take every penny from that first deal and reinvest it in more real estate.

It was years before I was comfortable spending money on non-essential consumer goods. In fact, I didn't even buy my first new car until years after I had reached a net worth of $1 million.

I did, however, buy a new small truck within the first couple of years of investing in real estate. It was necessary to effectively maintain and manage my rental units. While it was new, it wasn't anything that could be even remotely considered a luxury vehicle. I used a line of credit to make the purchase and let the cash flow from my properties make the payments.

When I finally decided to indulge in a new car, I was twenty-nine and the car was a Porsche 944. It was beautiful-white with a custom red leather interior and loaded with extras. And just as an aside: I got taken to the cleaners on the deal. I leased it, and the salesman sucked me in. At the end of the lease, I was completely upside down (meaning that the car was worth much less than what I owed on it). But I loved the car, and I was making enough money that it wasn't a problem. And that's my point: I may have spent far more on that car than it was worth, but I was spending cash I had already earned, not racking up debt on a depreciating asset.

My strategy-and self-discipline-paid off. Today, my wife and I enjoy a luxurious lifestyle that we can easily afford because we didn't waste our money on depreciating assets in our early years of wealth-building.

If you found this excerpt from The Millionaire Real Estate Mindset valuable, you'll want to read the entire book. In his always practical, easy-to-understand style, Russ Whitney explains how to develop the millionaire mindset and use it to achieve financial freedom through real estate investing. To order your copy, visit www.russwhitney.com/mindset.