I talked to an associate the other day who has a knack for scoring the big deals. I haven’t checked his sales record for the year, but I imagine he’s easily making $300,000+ annually. Even so, he tells me that he’s constantly stressed about his income and often feels like he’s just squeaking by. I wondered how he spent his money until he showed me pictures of his recent landscaping project, complete with water feature, koi pond and wooden bridge.
I suspect he practices what I call “per-deal spending”. Some agents consider big spending projects in terms of deals: A landscaping job can be a “three-deal” cost. An exotic vacation is a “two-deal” cost. If you’re on a hot streak and closing four deals this month and three deals next month, these kinds of expenditures seem quite doable.
Unfortunately, our business is unpredictable. You may have a great March and April lined up income-wise, but you can’t know yet what July and August might hold. Then you hit a long, dry summer and begin to worry where the money will come from for the mortgage payments due in the fall.
One of the most useful and practical tools to avoid these kinds of cash-crunches is a recurring savings account. This is not a “rainy day fund” account, but a place where you put aside the money you want to use for larger expenses, like home improvements or a big vacation. Some people hate the word “savings” and equated it with deprivation. It’s a very “un-fun” word for some people because they think money they save is money they won’t have available or fun stuff, like nice dinners or lavish gifts for friends. You can alter your attitude towards the idea of a savings account if you remember that money “saved” is money meant to be “spent.” Once I understood that the money in the account was going to be coming back out for fun stuff like home remodeling and big vacations, it was easier to set it aside.
A recurring savings account can also offer peace of mind about the money being there when it’s needed for property and income tax payments. Some agents simply see a tax payment as a “one deal” cost and dedicate the funds from an escrow to it. In this regard, a deal check arriving just in time to pay a tax bill can be a blessing, but also exasperating. Luck makes the money immediately available, but it also sucks to see the vast majority of a big check get eaten up by the IRS or Franchise Tax Board.
A recurring savings account achieves three things:
1. It enables you to spend money on the “fun stuff” without any niggling guilt or worry.
2. It gives you peace of mind and security about having money available for large recurring expenses like income and property tax payments.
3. It offers a place to turn for the “sh*t happens” category, like unexpected car repairs or medical bills.
I’ll be honest: I don’t make as much money as he does, but I also don’t lose sleep over money. And while I may not have enough to run out and score a koi pond and wooden bridge, I can cover the big-ticket items like a master bedroom remodel or a luxury vacation without worrying too much about it.
Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email firstname.lastname@example.org. www.ceceblase.com