REALTORS® face exceptional challenges when it comes to their financial wellness. In addition to household expenses like mortgages and car payments, REALTORS® have business expenses too. Household and business expenses coupled with irregular income leaves finances difficult, but certainly not impossible, to manage. The tips listed below will help agents create and maintain their financial wellness.
Employ a Budget
No, budgets aren’t sexy, instead, initially, they feel like the financial equivalent of a diet. But, in time, and with a little bit of practice, a budget will liberate your spending, telling your money where to go, instead of you being left to wonder where it went. Budgets offer endless advantages (as cited in a recent Canadian financial study) including being on top of bill payments, spending less than one’s monthly income, and helping to expedite debt repayment. Start budgeting now and take advantage of the popular and versatile budgeting apps like Mint and YNAB.
Account for Taxes
All too often GST and income tax wreak havoc on REALTOR® finances. Left to collect then remit both taxes on their own accord, REALTOR’S® are notorious for spending these funds, then scrambling to reimburse them later. Incurring penalties and interest charges, a small financial problem quickly snowballs into an unmanageable financial disaster. By splicing commission cheques (upon receipt) into separate bank accounts for GST, income tax, and money leftover, agents will safeguard these funds while removing them from temptation. Additional tips include filing taxes like GST quarterly rather than annually and leaning heavily (year-round) on bookkeepers and/or their accountants.
Keep Your Eyes on Your Overhead
Business and personal expenses slowly balloon over time. Fast-paced schedules mean these expenses are often overlooked. Scheduling a quarterly review for expenses helps ensure all costs (including personal and business) are necessary and reasonable. It’s good practice to comb through each expense asking oneself if there’s a way to reduce the cost, or if it’s even necessary at all. Costly and sometimes overlooked expenses include interest rates on debt, dining and entertainment, and subscriptions.
Build an Emergency Fund
Perhaps the fastest way to curtail financial catastrophe is through an emergency fund. Meant to fill an income void or cover a larger-than-usual unexpected expense, emergency funds are a necessity in the realm of healthy finances. While emergency funds are, as the name implies, meant for emergencies, it’s safe to say that a significant reduction in income or long lapses in income would constitute an emergency too. To get started in creating an emergency fund, consider setting up a separate bank account (for this purpose) and then contributing a regular amount every month.
Focus on Your Debt
Debt is just plain expensive. Adding another obligation to a lengthy list of expenses, debt (as it’s been said) is you robbing from your future self. While paying debt down in big lump sums is instinctive, it more often than not creates more debt. Choosing a repayment strategy is the first step in successful debt repayment. A person with multiple debt sources (multiple credit cards, multiple lines of credit or some other combination) should begin repaying the debt with the highest interest rate first (the avalanche method) or start instead with the debt that has the smallest balance (the snowball method). Then, begin debt repayment by choosing reasonable monthly repayment amount while ensuring other monthly obligations are accounted for first.