The Numbers You Need to Succeed Financially in Real Estate
I understand the feeling completely. You feel like your hair has electricity running through it. All day long until you go to bed it is the only thing that runs through your mind. When you wake up it starts all over again. Your neck hurts, you’re grouchy and can’t seem to smile. I can still feel the tension, the anxiety that never-ending pit in your stomach. The questions looms: “How am I going to my bills? I am broke.”
It’s no secret. For many, this is a hard game we play. Seems like only a handful around us make it to the big leagues while many others struggle and fade away. Some are mega-producers and start teams, and some can’t sell an umbrella in a rain storm.
But why do you think that is?
There can be several reasons really, but one thing I know for sure is that one reason is a lack of business management experience. With that comes lack of financial literacy. Sure, we all understand spending money, but as a business owner —which you are—it is vital you understand the flow of money within a business.
Taxes and business expenses equate to about 50 percent of the take. Failure to understand this concept will slowly back you up, like one log getting stuck in a river. Then another, then another, until you have a full-on log jam and you are screwed.
It is the same thing with credit cards and the taxes. They do suck, but they do exist and you need to make sure that those things are accounted for first and foremost. Otherwise you find yourself in debt and is not favorable. The stress that comes with that? The extra $3,500 a month for credit card and tax payment? With a little more discipline in the flow of money, you could have that accounted for.
Playing catch up stinks, but it is possible to get back to even. And when you do, put safeguards in place so that it never happens again. It might require that you skip a few nights out a month or maybe skip a 3-day weekend here or there. But you are capable of doing it.
Some believe that another market correction is in our near future, so do you want to have money in the bank, no debt and survive the correction? Or do you want to HAVE to bust your hump twice as much just to make it? Maybe even need to do some BPO’s to buy groceries. No, thank you.
Break it down like this:
Start to get in to a habit of putting away 25 percent for taxes. If you owe, it will not be greatly more and if you get a refund, then rejoice!
Put 10-20 percent away for business expenses.
Put 10-20 percent away for savings.
That which is left is income.
Change the whole way you look at things. Focus on your savings goals and reverse engineer your whole year based upon it.
I know it is uncomfortable first hand. I had that journey myself so I can relate to any pain, but shift your thinking. Now that you know you only get 40-50 percent to the bottom line, make your business plan and goals around those numbers. Many of the agents I coach have become financially literate and understand this, and that is why they set higher goals. You can’t make $150,000 Gross and live like you make $150,000 net. They are positioned to weather a storm better now than initially.
Strive to have at least three but try for six months of reserves. I put 20 percent of each check away into a reserve account. When that equals one month, I transfer it to my main savings account. I continue to do this until I reached my savings goals for the year. If I am able to stash three months away every year, then after four years I have one year banked. Adjust for your goals and lifestyle. But basically after 12 years, I have four years of bills saved in that one aspect.
This does not include any retirement strategy that I have.
That is another discussion totally. Look at retirement as long term and your rainy day/savings strategy as a get-out-of-jail-free card. It is there for emergencies, slow market, goose egg. Plan enough to have it, but hope to never use it. This actually reduces stress since it removes the never-ending need for the next sale.
Caution: Do not think for one minute I would ever slow down. That is why I have goals, and I will not rest until I hit those goals. That is why I track my business so I know where I am at any given time. What are you doing to track your business? You must track it. There is not a successful company out there that does not track their business.
If you want to stop feeling that pain, if you want to stop that anxiety and stress, put actionable goals in place now. These include not just financial goals but also a financial blue print on how they will be achieved. Simple spreadsheets that show what you need to accomplish. Where money is to be allocated. Then plan to do it. Put it in to action and have the discipline to follow through and do it. By tracking the results, you build accountability and it is that accountability piece that is missing in failed agents.
Be Accountable. Be Successful.
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