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As a new real estate agent, you’re learning to wear many hats. You’re a salesperson first and foremost, but you also moonlight as a designer, social media guru, and psychiatrist.
Another job to add to the list is an accountant. As an independent contractor who works on commission, this is one of the most important jobs your juggle. Balancing your books keeps you in business.
To make sure you’re taking on this task like the boss that you are, check in with these two essential tips. They help any brand new agent get started on the right foot.
Lesson #1: Build a Solid Emergency Fund
REAL REALTORS® Federal Credit Union’s Victoria Gillespie suggests savings as much as 20 percent of your income in an emergency fund. An emergency fund is a financial failsafe in case you’re struck by expenses you didn’t include in your initial budget.
While 20 percent is a substantial portion of your earnings, this number helps you be prepared for anything. The bigger you build your emergency fund, the more it will help.
Relatively small funds are a great resource for unexpected bills or repairs that rock your budget, and you can lean on larger funds during a crisis, like when the market shows signs of softening.
Depending on the size of your savings, you may have enough to weather any storm. But if you’re just starting out, it may dry up before it’s over.
If you face an urgent and unexpected personal expense that you can’t cover on your own, you may consider an online installment loan for help.
Direct lender MoneyKey says an online line of credit may bridge the gap, but only if you’re facing unexpected emergency expenses. For more info, you can visit MoneyKey to learn about when an installment loan might make sense.
In the meantime, balance your budget to make sure you’re prioritizing savings with each commission.
Lesson #2: Always Take out Taxes
With or without the new extension, tax time can be stressful for anyone, but you might be feeling the crunch more as a real estate agent. You don’t receive a typical paycheck like most salaried workers, so your taxes aren’t taken off automatically.
You’ll have to manually withhold taxes and other deductions from your earnings, including cash for healthcare and social security.
The good news is this is easier to do now than ever before. There are online calculators that help you estimate how much to withhold from your commissions. Funnel this money in a specialized account, so you aren’t tempted to spend it.
Create as many accounts as you need for your with holdings, including but not limited to taxes, Medicare, and SSI. As long as these accounts are free, there’s no harm in opening several. Separating your cash this way means it won’t mingle with your spending money, which helps you avoid accidentally spending money you owe to the government — or to yourself!
If it’s possible, put this cash in a high-interest savings account. This way, you’ll earn as much as you can on your deposits until you have to withdraw the cash. Just make sure these accounts don’t have minimum balances or limits on your withdrawals.
A Good Agent is Always Prepared
The housing market is always changing, but that’s just one of the many things that makes your job so exciting. Learning how to roll with the punches helps you live through the ebbs and flow of the market. So be prepared for the worst to help you flourish with the best.