Best Budgeting Hacks for Real Estate Professionals
By Anna Kinney, Chief Product Officer
Effective budgeting is crucial for ensuring financial stability and long-term success in the real estate industry. Here are the top five budgeting hacks that can help real estate agents manage their finances more effectively:
1. Create a Commission-focused Budget
Why It’s Important: Since real estate professionals are paid through commissions, which are naturally variable, a commission-focused budget helps manage these fluctuations and ensures that agents are prepared for both high and low-income months.
How to Implement:
Track Historical Income: Review your income over the past one to three years to understand your earning patterns and identify seasonal trends.
Average Your Earnings: Calculate your average monthly income to set a baseline for your budget.
Prioritize Fixed Expenses: Allocate funds for essential fixed expenses like rent/mortgage, utilities, and insurance first.
Pro Tip: During lower-earning months, consider strategically using a commission advance or a more flexible commission-backed line of credit to even out your cash flow and continue investing in your business growth.
2. Separate Business and Personal Finances
Why It’s Important: Keeping your business and personal finances separate simplifies tracking and ensures that you have a clear picture of your professional expenses and income.
How to Implement:
Open Separate Accounts: Maintain separate bank accounts and credit cards for business and personal transactions.
Automate Transfers: Set up automatic transfers from your business account to your personal account for your “salary” based on your budget.
Track Expenses Separately: Use accounting software or apps like Expensify, Hurdlr, or Zoho Expense, or QuickBooks Solopreneur to track and categorize business expenses (note: see more about financial tools below).
Pro Tip: This separation is also helpful for tax purposes, making it easier to claim deductions and manage your financial records.
3. Evaluate and Track Marketing Expenses
Why It’s Important: As a real estate agent, marketing and business development are critical expenses that can fluctuate significantly. Diligently tracking these costs ensures you’re getting the best ROI for investments in your business growth.
How to Implement:
Create a Marketing Budget: Allocate a specific portion of your income to marketing efforts, based on your overall financial goals and past spending.
Monitor ROI: Regularly review the return on investment (ROI) for each marketing activity to ensure you’re spending money effectively.
Cut Unnecessary Costs: Identify and eliminate marketing strategies that aren’t yielding results, reallocating funds to more effective methods.
Pro Tip: Leverage free or low-cost marketing tools and platforms, such as social media, to maintain visibility without breaking the bank.
4. Invest in Financial Management Tools
Why It’s Important: Using specialized financial management tools helps you track your income, expenses, and financial goals more efficiently, providing a clear picture of your financial health.
How to Implement:
Choose the Right Tools: Select financial apps and software tailored to self-employed professionals, such as Expensify, Hurdlr, Zoho Expense, and QuickBooks Solopreneur, which I mentioned above.
Automate Bookkeeping: Use tools that automate bookkeeping tasks, such as categorizing expenses and generating financial reports.
Set Financial Goals: Use your financial management tools to set and track financial goals, such as saving for retirement, paying off debt, or investing in new business opportunities.
Pro Tip: Regularly review the data from these tools to adjust your budget and financial strategies as needed, ensuring you stay on track with your financial goals.
By incorporating these budgeting hacks into your financial routine, you can better manage the unique challenges of being a real estate agent. These strategies will help you maintain financial stability, reduce stress, and ultimately, grow your real estate business faster and more effectively.