If you are like most real estate agents, your income is commission-based, which means it varies from month to month. Therefore, budgeting is a crucial skill to develop if you want to stay afloat. Last year in our Trick of the Trade campaign, we asked real estate agents across the country for some tips and tricks to help new agents get started in their careers. Here are the top budgeting tips they provided.
#1: Stick to the budget
Creating a budget is the first step, but it is not enough. You have to stick to it. Abiding by a strict budget will not only help you get through the slower months but also allow you to begin investing in your future retirement.
One of the hardest things about being a real estate agent is the variable income. I have found that because my income is commission-based, it makes it that much more important to create and stick to a budget. There are a lot of different ways to keep track of your budget, but my advice to all new agents is to budget well so that you can avoid some of the stress if a month goes by without any commissions. It also helps to start investing early. Investing is another reason why budgeting is so important. If you can realize where your commissions are going to, it will be easier to figure out how much you can put towards retirement investing. Like most agents, I have had months in which my commissions were high and other months in which my commissions were low or non-existent and I have been able to survive. I think a lot of agents spend massive amounts of time trying to increase their income (which of course is not bad), but many fail to spend a considerable amount of time controlling the income they already have. – Seth W.
#2: Save money for marketing costs
Marketing is an essential part of any real estate business. Make sure you set aside enough money to effectively advertise your services so that you can continue to bring in new clients, land new listings, and generate a steady stream of income. (Download this checklist to help you determine how much you will need to save in order to start a career in real estate.)
A trick I learned is having a budget for everything, especially marketing. The reason for this is when you have money saved for marketing and the market goes south, you will not have to compromise your marketing. – Eric L.
#3: Set aside money for taxes
It is a common mistake for agents to underestimate the amount of annual income taxes they’ll be required to pay. Be sure to set aside a portion of your earnings for taxes, and remember to pay your estimated taxes each quarter. Otherwise, you may owe a huge amount of taxes at the end of the year. (Check out this article on the top 5 most commonly-asked questions regarding real estate taxes.)
I always set aside 35% of my earnings from each transaction to pay for taxes. My last transactions of the year go to license and desk fees for the upcoming year to reduce the stress of where to get fees when they are due. I also donate a small portion of each sale. I truly believe what goes around comes around and sharing truly makes you feel grateful. – Kerstin B.
Do you have a trick of the real estate trade? Let us know by filling out the form below or visiting this page! You could be featured in a future blog post!