Tips for Managing Your Rollercoaster Cash Flow

As a Realtor, there’s little you can do to change the unpredictability of your cash-flow. Being self-employed means your finances might feel like a roller coaster – scary, exhilarating, with lots of highs and lows. Even after years in the business, you’ll likely never know exactly how much you’ll earn in any given year, or when you’ll earn it. Thankfully, employing the financial tips listed below will not only help to level out your cash-flow, but they’ll also greatly reduce your money stress too.

Here are three things you can do to help manage your rollercoaster coast flow.

Plan Ahead for Irregular Expenses

Planning ahead sounds simple enough, but sadly, few people take the time to anticipate larger irregular expenses. Creating financial stress and hardship, expenses like income taxes, property taxes and insurance policies creep up each and every year. 

An example of a common real estate related irregular expenses are the licensing fees owed to the Real Estate Council. The fees, payable every second year (or every 24 months) cost Realtors roughly $2,000 – making them really easy to forget. Rather than scrambling to pay a large expense like this one, consider dividing the amount of the expense ($2,000 in this case) by the number of months until it’s due. 

So, rather than shelling out $2,000 all at once, you’d tuck away $83 per month so that when the expense is due, you’re ready.

Work within a Budget

Yes, I know. 

Budgets sound boring. 

But, in the same way companies operate by using a budget, you should do the same. Rather than restrictive, a budget (done well) is liberating, offering you permission to spend with less guilt.

And, as personal finance expert Dave Ramsey says, “A budget tells your money where to go, so you don’t have to wonder where it went.”

Since your income is hard to pinpoint, it’s helpful to take into consideration your total annual expenses, and approximate average annual income, then divide by 12 to get a sense of your monthly budget.

While you don’t necessarily need to budget for everything – giving yourself parameters for things like entertainment, marketing, holidays (to name only a few) is helpful in keeping your finances on track.

A budget will also ensure, you save and spend on things important to you too. For convenient, simple budgeting, check out Mint, YNAB (You Need a Budget), and Mvelopes.

Build a Buffer

Let’s say you spend an average of $5,000 every month.

Building a buffer of cash will help in providing you with advance notice for impending slower months. 

So, with average expenses of $5,000 each month, it can be beneficial to keep $15,000 (three months), or every $30,000 (six months) of excess cash set aside.

In other words, once you decide upon a buffer amount, you should only spend money that’s over and above your buffer. During times you need to deplete your buffer, your first priority should be rebuilding your buffer.

The Bottom Line

While there’s little you can do to change the irregular nature of your earnings, there’s much you can do to better manage your finances. Planning ahead, using a budget, and building a buffer will go a long way in helping you to level out your unpredictable cash flow.