Money management is an important skill for budgeting and to keep afloat in this commission-driven profession—especially during the initial phase of launching your real estate business. As a new real estate agent, you must deal with the unpredictability of when and how much you earn. Past jobs guaranteed regular paychecks with tax deductions, so you knew what you could spend. But as a real estate agent, you will not receive paychecks, tax withholdings, or retirement savings. You are in business for yourself, in many ways like an independent contractor. Managing your money carefully will increase your chances of success.
Here are some money management tips that will help you budget and manage your commission income.
Step 1: Create a personal and business budget
- Start with a debt-reduction plan. Cut your debts to zero (or close to it) if you can. Being overburdened with debts increases pressures to make money, causing unnecessary stress.
- Create a safety cushion. Calculate your real estate start-up costs, then plan to cover your monthly expenses for up to six months without a paycheck. You could tap into your savings to pay for personal marketing expenses such as advertising, personal website, and blog. Don’t forget to account for rising car expenses, as you will be traveling more for meetings, viewings, showings, etc. If you can’t afford to start a real estate career just yet, access resources that can help you get your finances ready for a new career.
- Have funds in reserve. Set aside money for unexpected business expenses so you don’t have to borrow money or overuse your credit card with high interest rates.
- Get a business line of credit. Every small business needs a line of credit as a buffer in case of emergencies.
- Spend 10% on personal marketing. Promote yourself beyond what your office provides for the company. As the old saying goes, “You need to spend money in order to make money.” But, don’t overspend.
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Step 2: Become an expert at money management
- Be creative to save money. Buy unlimited data and call plans for your smart (or cell) phone, which saves you money in the end. Buy wrinkle-free clothes for less cleaning/pressing expenses. Buy a car painted white, tan, or silver as they require fewer washes, saving you money. Choose the highest deductibles on car insurance.
- Track your expenses. Keeping detailed logs on everything you spend by the month shows where your money is going. How much you spend on coffee or gas might astonish you. Research shows agents who track marketing ROI consistently earn more.
- Find discounts. Join the REALTOR Benefits® Program, which provides member discounts for sales and marketing tools and apps, along with cars, insurance, and many other essential business products.
- Spend more for longer-lasting products. Purchasing the cheapest tech tools will not work in the end. Spending a little more for longer-lasting products saves you money over time.
- Take advantage of everything your company provides. Free website, free blog, free advertising, free signs, and free marketing assistance all help to advance your real estate career. Some companies may offer free medical plans, dental plans, and other discounts.
Step 3: Use money management apps and tools
There are several free money management apps and tools that could work well for real estate agents. Here are a few good options:
- Mint: Mint is a free app helping to manage your budget, earnings, spending, and investments by pulling your accounts into one place, allowing you to see the entire financial picture. This works on your PC and mobile devices. Constant updating offers new integrations with bank accounts, loans, and other financial data. It calculates spending by category so you can see your spending patterns. It even alerts you when you are over-budgeting.
- Mvelopes: Like Mint, Mvelopes is a free real estate agent tool for monitoring finances to make smart financial decisions. Their free version allows you to connect up to four accounts like banks, credit cards, and PayPal. It also provides an overview of spending habits.
- Expensify: This free app tracks business travel, mileage, and time. It also records receipts and creates expense reports. It includes both business and personal credit card and bank accounts for tracking daily spending. Their mobile app (Android, Blackberry, iOS, Windows) has a SmartScan to import receipts by snapping a shot. You can easily consolidate receipts from different programs like Evernote, Dropbox, and your email inbox. This app also creates graphs and charts, helping you to analyze your financial status.
Money management for new real estate agents requires organization and discipline. Being in business for yourself has its benefits, but pay close attention to your financial situation. Create a monthly budget and follow it. Budgeting and carefully managing your expenses will help keep you and your business afloat until the commissions roll in.