real estate agent looks at budget

8 Budgeting Tips for Real Estate Agents

If you are like most real estate agents, your income is commission-based, which means it varies from month to month. Therefore, budgeting is a crucial skill to develop to stay afloat. Here are the top budgeting tips for new and experienced real estate agents.

8 Tips for Budgeting as a Real Estate Agent

A variable income is both good and bad. Of course, one of the drawbacks of income fluctuations is that it makes budgeting difficult. Here are some tips to help you get on the right foot regarding money. 

1. Estimate monthly income

Estimating your monthly income can be tricky – especially if you are just getting started in the industry. However, as time passes, you’ll better understand your sales funnel. (You’ll be better able to look at your current clients and property listings to estimate your income for the next few months.) With time, you’ll also be better at estimating your income based on market and seasonal fluctuations. 

Related: How much can you make as a real estate agent?

2. List your expenses

As you estimate your income, don’t forget to deduct the costs of doing business, such as brokerage fees, marketing costs, transportation, professional development, and other business expenses. Of course, you must keep track of these expenses for tax purposes.

3. Save for retirement

Many traditional jobs have mechanisms in place to help employees save for retirement. However, when you are a self-employed real estate agent, you’ll need to save for retirement on your own. Set aside a certain amount for your retirement funds each month, and talk with a financial planner about how best to invest that money.

Learn more about budgeting as a real estate agent by reading tips from 12 real estate professionals.

4. Budget for a cash emergency fund

It’s prudent to set aside a portion of your income each month for emergencies. An emergency fund can help you weather financial challenges caused by slow seasons, personal crises, pandemics, or other factors out of your control.

5. Save money for marketing costs

Marketing is an essential part of any real estate business. Make sure you set aside enough money to effectively advertise your services so that you can continue to bring in new clients, land new listings, and generate a steady stream of income. (Download this checklist to help you determine how much you will need to save to start a career in real estate.)

“A trick I learned is having a budget for everything, especially marketing. The reason for this is when you have money saved for marketing, and the market goes south, you will not have to compromise your marketing.” – Eric L.

6. Set aside money for taxes

It is a common mistake for agents to underestimate the amount of annual income taxes they’ll be required to pay. Be sure to set aside a portion of your earnings for taxes, and remember to pay your estimated taxes each quarter. Otherwise, you may owe a considerable amount at the end of the year.

“I always set aside 35% of my earnings from each transaction to pay for taxes. My last transactions of the year go to license and desk fees for the upcoming year to reduce the stress of where to get fees when they are due. I also donate a small portion of each sale. I truly believe what goes around comes around, and sharing truly makes you feel grateful.” – Kerstin B.

7. Use budgeting tools

It isn’t easy to budget when you have a variable income. When you are just getting started, estimate your earnings and expenses in your budgeting tool. Then, monitor your actual income and expenses each month to compare against your estimates. Analyze your budget regularly to identify areas for improvement and adjust your strategies as needed.

8. Stick to the budget

People with a variable income must be disciplined. Abiding by a strict budget will not only help you get through the slower months but also allow you to prepare for the future. 

“My advice to all new agents is to budget well so that you can avoid some of the stress if a month goes by without any commissions. I think a lot of agents spend massive amounts of time trying to increase their income (which of course is not bad), but many fail to spend a considerable amount of time controlling the income they already have.” – Seth W. 

Minimizing costs is one way to meet your budget. Reduce your continuing and post-education expenses by using Colibri Real Estate as your education provider. Our real estate continuing education courses are affordable and full of actionable tips and insights to help improve your customer service (and income!).