From planning for April 15 to planning for the future, coach Verl Workman offers strategies to help you stay on track with your financial prep.
Building on Inman’s popular newsletter for first-year agents, The Basics, February is New Agent Month. Pick up the tools, tech and tips needed to survive and thrive in 2025 as a rookie real estate agent.
Real estate agents face unique financial challenges that require careful planning and savvy decision-making. From navigating variable income to managing taxes and saving for retirement, real estate professionals like you need a strategic approach to their finances. By implementing smart financial moves, agents can achieve stability and build wealth and long-term security.
One of the first steps in financial success is separating personal and business finances. Maintaining a dedicated business bank account is essential for keeping track of income and expenses. This simple yet effective strategy makes managing cash flow, identifying deductions and ensuring accurate tax reporting easier.
Tax planning
Alongside this, you must also plan for taxes. Setting aside a portion of every commission is critical without an employer withholding taxes from paychecks. Many agents find success by allocating 25 percent to 30 percent of their earnings to a separate tax savings account. This disciplined approach ensures you’re prepared for quarterly tax payments and avoids last-minute financial stress.
Tax planning doesn’t stop there. You have access to a range of deductions that can significantly lower your taxable income. Expenses like mileage, marketing, continuing education, and home office costs are all deductible. Keeping meticulous records and consulting with a tax professional can help you maximize your deductions and save thousands annually.
Building financial stability also requires looking beyond immediate needs. Retirement planning is often overlooked by agents focused on growing their businesses, but it’s a crucial component of long-term financial health. Without access to employer-sponsored retirement plans, agents can take advantage of options like SEP IRAs, Solo 401(k)s, and Roth IRAs. Even small, consistent contributions can grow significantly over time thanks to compound interest.
Save it
Given the unpredictable nature of real estate income, an emergency fund is another must-have. Slow seasons are inevitable, and having three to six months’ worth of living expenses saved can provide a vital safety net. With the overwhelming devastation of the L.A. fires, the Los Angeles real estate market will be upended for months, if not years to come. You should prioritize building this fund during high-earning months, ensuring you’re prepared for market fluctuations… and the unknown.
Managing irregular income also requires careful budgeting. Unlike salaried employees, agents must account for fluctuations in earnings. Creating a baseline budget that covers essential expenses, based on the lowest-earning months, helps agents avoid overspending. High-earning months should be viewed as opportunities to save or invest, rather than occasions to splurge.
Invest and grow
Investing in professional and personal development is another key financial move. Whether it’s upgrading marketing tools, purchasing customer relationship management (CRM) software, or attending training seminars, these investments can yield substantial returns. Agents who continuously improve their skills and stay updated on industry trends position themselves as market leaders, attracting more clients and higher commissions.
Diversifying income streams can also provide additional stability. Some agents supplement their earnings through property management, teaching real estate courses, or investing in rental properties. These additional revenue streams create financial resilience and open up new opportunities for growth and expertise.
Delete your debts
Debt management is another area where you can optimize your financial health. While credit cards and loans can be helpful tools for managing business expenses, they must be used wisely. Paying off credit card balances in full monthly avoids costly interest charges, and any new debt should be approached cautiously. You should ensure you can comfortably meet repayment terms, even during slower months.
Finally, working with financial and tax professionals can make a difference. Experts who understand the real estate industry can help you create a comprehensive financial plan, maximize deductions, and meet tax deadlines. Their guidance ensures you stay on track and avoid costly mistakes.
By adopting these strategies, you can take control of your finances, weather the ups and downs of the market, and build a secure and prosperous future. Financial success isn’t just about earning more—it’s about making smarter decisions with what you earn. Agents are making these smart financial moves… are you?
Verl Workman is founder and CEO of Workman Success Systems. Connect with him on LinkedIn or Instagram.