Whether you’re just starting out in real estate (congratulations!) or making the switch from another career, there’s a lot of excitement in store for you. You’re in a field with absolutely no financial ceiling and unlimited earning potential—but there are also many expenses that you’ll have to prepare for. I get asked a lot about how to set a budget, so I’ve put together a plan to guide you. Here are the four important expense categories to prepare for, and exactly how to prioritize them.
From your very first commission check, start saving for taxes. This isn’t like your last job when you had a W-2 and taxes were already taken out of your paychecks—you are solely responsible for saving for and calculating what you owe the government each quarter. If you don’t have enough money for your taxes, the IRS won’t care that you spent it on shoes. Talk to your accountant and figure out an amount to use from every paycheck for your taxes. Transfer that money from your checking to savings account each month—and keep it there.
2. Living Expenses
With the money left over after you transfer over your tax budget, calculate what you need for your monthly living expenses. Figure out what you need for food, rent, transportation, and other essentials. For those just starting out, times might be a bit lean—my debit card was once declined when I tried to buy a yogurt—but it will get better. Get a roommate, cancel cable, cook at home, and do what you must to keep expenses low while you’re getting started.
3. Business Expenses
After your taxes and living expenses are accounted for, you’ll have to pay some business fees. Typically, that includes professional dues, state license fees, and required courses. It’s also very important to stay on top of news, stocks, and market trends, so I recommend adding a subscription to The Real Deal, The New York Times, or another news outlet to your budget. You never know what questions your clients will have, and chances are they’re reading up on the market and current events—so you need to be prepared with answers.
Next, it’s time to spend money on marketing in order to grow your business. That includes things like social media ads, print and digital ads, signage, and events—as a real estate agent, you front the money for all of it. Down the road, when you start getting really busy, you’ll add someone else to your team; At that point, budget for a small base salary for that assistant, plus a percentage of commissions that you’ll give to him or her.
If you have anything left over after all of that (and if you’re just starting out in a high-cost city, you may not!) invest it. Aim to put 10 percent of your income away in a retirement fund. You can also use it to invest in cryptocurrency or stocks, or to buy some real estate of your own.
These budget tips will help you prioritize your expenses, prepare for the future, and ensure nothing catches you off-guard. Have more questions? Tweet them to me @RyanSerhant.