One of the great things about being a real estate agent is you are an independent contractor. You’re in charge of your own time and pretty much in charge of how you run your own business.
Because almost every agent’s income is commission based that means, at least in theory, your income is unlimited. It also means your income is uncertain. One month it will be up, the next month it may be down.
Learning to deal with that uneven income flow is one of the challenges every real estate agent faces.
How Tracking Income & Expenses Helps
When you know from month to month, even day to day, exactly how much money you bring in and precisely how it goes out you can begin to really understand the ebb and the flow of your business. Keeping this kind of detail helps you make all sorts of business and personal decisions about money.
For example, if you track all your expenses, both business and personal over a month, you’ll begin to see how you’re really spending your money.
The classic story is the one about the person who realized they were spending something like $300 a month on four cups of coffee a day. They weren’t making their own, but going across the street to the espresso shop.
While this tale may be an urban legend, the point it makes is true. It’s so easy to develop money leaks because it’s so easy to spend a dollar or two here, and another two or three there. If you’re using a debt or credit card it’s even easier.
The point of tracking your expenses isn’t that any particular expense is good or bad, it’s that you want to be conscious of what you’re doing. When you’re aware, you’re in a position to make choices that support you.
Tracking business expenses
Keeping track of all your business expenses will obviously help you at tax time. You don’t want to miss any deductions you’re entitled to.
There is, however, another aspect of how you spend your money on your business that is also important. If you’re not keeping track you won’t know if you’re spending too much or too little on items like marketing and business entertainment.
One guideline is that you should spend roughly 10 percent of your commission income
on advertising. Mileage will vary, of course, but truly successful agents do spend more on their business than those who are less successful.
How to track your income and expenses
Although it’s possible to accurately track your income and expenses by keeping receipts and enterthem on ledger paper, you probably will want to go digital.
There are all sorts of programs out there that will do the job. I use You Need a Budget,
others I know like FreshBooks. QuickBooks
is used by some.
You want a system that you can use on your computer, tablet and smartphone. It becomes a habit just to note an expense right at the register, using your smartphone.
Of course, none of this tracking will make any difference if you don’t pay attention to the results. You’ve got to tally those numbers, or be sure your software is adding them up, in order to get the full picture. Once you get going it generally takes no more than 10 or 15 minutes to see precisely where you stand. Doing it weekly gives you the kind of control you really want.
How this helps with uneven income
Knowing how your income ebbs and flows allows you to plan for that unevenness.
For example, you may discover that in your market people really are more likely to buy during September than November. When you know this you can plan for it.
Or, if you plan to give you clients some sort of gift to celebrate the holidays, you can work this into your thinking about how and when you’re spending money.
Of course, the biggest help knowing your expenses is in planning savings. A savings account can go a long way toward smoothing your income.
How do you keep track of your income and expenses? Any tricks or tips you’d like to share – tell us in comments.