Get ahead of the inevitable rate hike
Fannie Mae’s economists dusted off their crystal balls, peered into the housing market’s near future and came away upbeat.
In the overall economy, they predict strong growth and low unemployment rates to continue. So, bring on the rate hikes, right?
They predicted four rate increases in 2018 (up from the three they predicted in March) and then another three in 2019. Hopefully, this won’t impact too many of your buying clients.
Their housing market-specific news includes a continued tumble in the conventional mortgage application rate. Which is why, in a business so dependent on a healthy economy, it’s important to be strategically budgeting both your personal and business money.
I did a deep dive into the experts’ opinions on what it takes for an independent contractor to financially succeed during the tough times. Here are several of their basic tips.
Start with your personal budgeting
Taking care of your personal finances is job one. Once that’s done, you’ll have a clearer picture of how much money you need to make and how much of it you can devote to your business expenses.
When budgeting, you need to be flexible enough to accommodate your income swings and to allow for an emergency fund. Most financial pros suggest you’ll need enough to cover both your living and business expenses for six months.
Once complete, that budget may be a real eye-opener. Look for ways to cut needless spending and redirect that money elsewhere.
Forbes.com’s Laura Shin suggests taking a critical look at your recurring spending. “Are you really using all the offerings of your mobile phone plan …? Do you go to the gym often enough to justify the monthly cost? What if you took up running, played tennis with a friend or used exercise DVDs instead?”
She also mentions that you consider cutting the cord. Cable TV has become ridiculously expensive when there are other, less expensive options (streaming) out there.
Your business budget
If you don’t already have a business account, open one now. Your tax preparer will worship the ground you walk on.
And, if you do your own taxes, you’ll be immensely grateful every quarter that you don’t have to pick through your expenses to separate the business from the personal.
Your real estate business budget needs to include more than your listing expenses, gas, and auto maintenance costs. Among the other categories, ensure your budget includes money for: taxes, health insurance, disability insurance, website expenses, salaries, marketing your business, closing gifts, wardrobe, and professional fees.
Once you’ve created the budget, it needs to be maintained. Track your expenses and income and tweak the budget, as needed.
If you’re like a lot of us, you haven’t a clue where you spend your money and how much is wasted. Budgeting is a pipe-dream that you know will never meet reality.
So, make budgeting a game, of sorts. Divide your expenses into three “buckets.”
1: The first bucket holds all your ongoing expenses, such as utilities, house and car payment and other debt payments.
2: The next bucket is for expenses such as food (both dining out and groceries), entertainment and clothing.
3: The third bucket is for the money you’ll spend in the future for things like healthcare deductibles, retirement accounts, home repairs and maintenance and vacations.
Do the same with your business expenses.
Your business expense bucket
Start the system with bucket number three, decide how much of each commission check you’ll need to set aside for future expenses. Experts suggest that you open a separate account for your third bucket. The first payment you make from each commission check should go to this account. The rest of the check goes toward monthly personal expenses (bucket number one).
The amount left over after taking care of recurring expenses is what you can dump into bucket number two.
To remain on track, monitor your spending for two or three months to determine how much you’re spending from the second bucket. Take the average, multiply it by 12 and divide by 52. This will give you the amount of money you can spend, weekly, from the second bucket. Divide it again by seven to get your daily limit.
Remember to be mindful of your spending, especially for business items. “Expenses should create income. If an expense doesn’t create income, it should be eliminated,” Tom Wheelwright, CPA told Inman.com’s Dani Vanderboegh.
Question every purchase. If you don’t need to make it, don’t.
A smart way to utilize your marketing budget? Attract buyers with a proven method of marketing.
Send the Don’t Wait postcard from the Fence-Sitter Series to at least 100 prospects in an area where you want more buyers.
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Three Click Postcards – Just snap a home photo & create a postcard all from your mobile phone
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Market Dominator System – Become a neighborhood brand
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