September 2021

3 money management tips just for real estate agents

As a real estate agent, you're essentially a business owner. Better budgeting and money management could help you get more out of every commission check and improve your peace of mind during challenging times.

Get organized

Track all business expenses. Start by creating separate bank accounts for your work and personal life. Likewise, carry separate business and personal credit cards. Keep track of mileage, postage, subscriptions, business gifts…everything.

Even if you use a spreadsheet or bookkeeping software, save every receipt. These also can be uploaded to organize your purchases by category. Should an audit ever occur, you'll be ready.

Prepare for tomorrow

Put money aside for taxes. As an independent contractor, you're responsible for paying income and self-employment taxes on your commissions, based on your net earnings. It’s critical that you put aside substantial funds specifically for taxes, including your estimated quarterly tax payments.

You'll want to speak with your accountant, but a good starting point would be to put 20% of each commission check into a savings account exclusively for this purpose.

Save for slower months and life events. Given the fluctuations of real estate, you'll want to build up a six-month financial reserve. If you're starting out, put aside $1,000 or so each month, with the goal of saving a portion of every commission check, until you can cover your expenses for this longer period.

Similar thinking holds for birthdays, holidays and vacations. Know how much you plan to spend and when these key events occur. Then, do the math. If this means putting aside an additional 10% of every sale, do so.

Provide for retirement. It's never too soon, or too late, to build retirement savings into your budget. A Roth IRA is an easy way to contribute after-tax income — from a few dollars each week up to $6,000 a year, if you're under 50. Any funds you eventually withdraw, after age 59½, are tax- and penalty-free.

Plan for success

Spend smarter. Buy business supplies in bulk. Pool resources with fellow agents or purchase office products secondhand. Unlimited data plans save on phone expenses, wrinkle-free clothes save on dry cleaning and higher deductibles save on auto insurance. For marketing, take advantage of any freebies your agency offers — website, blog, signs, etc. Opt for email and social media marketing over printed marketing brochures.Footnote1

Benefit from budgeting apps. While some agents set up budgets in Excel, others are opting for apps. These run the gamut from tracking spending to putting aside funds to creating a complete financial picture on a single dashboard. Clarity Money™, Mint®, Qapital™, Goodbudget™ and Simple are just a few of the apps available for mobile or laptop use.Footnote2 You could also visit Better Money Habits® for a host of personal financial-planning tips.

Effective money management requires a bit of homework, planning and discipline. Create a monthly budget and stick to it. Carefully managing your expenses day-to-day and for the future will help you maintain your business through both lean stretches and boom times.Footnote1

A note from your lending specialist

I’m here for you and your clients. Please refer your clients to me if they’re looking for a prequalificationFootnote3 or preapproval.Footnote4

1 "How to Manage Money for Your Real Estate Business," Real Estate Express, March 24, 2021.

2 "Review: The best budgeting apps and services in 2021," Haven Life, Taylor Medine, January 12, 2021.

3 Prequalification is neither preapproval nor a commitment to lend; you must submit additional information for review and approval.

4 Final loan approval is subject to satisfactory appraisal and title review and no change in borrower credit and financial condition. Preapproval is subject to terms and conditions and timely submission of required documentation; ask your Bank of America Wealth Management Lending Officer for details. Preapproval does not commit to the continued availability of the loan program. The interest rate shown in a preapproval is based on current market rates and is not locked. You may choose to lock an interest rate after we receive the complete and executed purchase contract. Borrower must submit purchase contract within 90 days of preapproval. If the rate at time of lock is higher, or a rate lock expires prior to funding, or for adjustable-rate loan programs when the index value rises, we must determine your ability to repay the loan at the higher rate, which may lower the loan amount or invalidate the preapproval. Not available on all loan products. Not available on refinance loans.

MAP3687559 | 07/2021

More from this month's issue