Insights and Strategies to Secure Your Financial Future in Real Estate Amid Economic Uncertainty
In the midst of unsettling economic news, your financial concerns might be causing a sense of unease. The existing market slowdown, referred to as a “housing recession” by National Association of REALTORS® Chief Economist Lawrence Yun, could be particularly daunting for real estate professionals, whose income fluctuates with the ever-changing real estate cycle.
As recent as November, a survey conducted by Alignable, an online network for small business owners, revealed that 37% of agents were grappling with paying office rent. This financial pressure is not unique to real estate, as a late November poll by PYMNTS and LendingClub indicated that approximately six out of ten consumers, even among those earning over $100,000 annually, are living paycheck to paycheck. Adding to the context, the median gross income for REALTORS® in 2021 was $54,330, with earnings generally increasing as experience accumulates according to NAR data.
In light of potential business challenges, financial experts have compiled ten invaluable money-saving recommendations:
1. Strengthen Your Reserves
- Establish a reserve account to cover unforeseen expenses, a critical lifeline during financial hardships.
- For the self-employed, a rule of thumb is to have savings equal to six months’ expenses in a secure account.
2. Reassess Spending Habits
- Scrutinize expenses to identify areas where you can trim excess.
- Trimming non-essential expenditures like daily lattes, memberships, and extra television services can yield substantial savings.
- Shopping around for services like auto insurance can save a considerable amount annually.
3. Review Investment Allocations
- Evaluate the value of your various accounts such as checking, savings, investments, and retirement.
- Keep funds needed in the next three years in stable, cash-like investments, while considering a more conservative approach in economic downturns.
4. Optimize Tax Strategy
- Collaborate with a qualified tax adviser to maximize available tax-reducing strategies.
- Tailor your income distribution between W-2 pay and dividends based on your business structure.
5. Develop a Comprehensive Budget
- Create both personal and business budgets to estimate earnings and expenses.
- Utilize tools like Mint.com, banking resources, or the Center for REALTOR® Financial Wellness for budgeting assistance.
6. Establish Specialized Savings Accounts
- Open separate savings accounts for emergencies, taxes, retirement, and business expenses.
- Allocate a portion of each paycheck for taxes and savings to ensure disciplined financial management.
7. Continue to Invest
- Adopt a dollar-cost averaging strategy to maintain consistent investment during market fluctuations.
- Leverage apps like Acorns to round up everyday purchases and invest spare change.
8. Explore Side Income
- If funds are tight, consider supplementing income with a side hustle that aligns with your skills.
- Research platforms like SideHustleNation.com and Upwork.com for additional opportunities.
9. Prioritize Retirement Savings
- Allocate a minimum of 10% of gross income towards retirement savings.
- Capitalize on catch-up contribution limits during peak earning years to boost retirement savings.
10. Seek Expert Guidance
- Consult financial advisers and tax planners to devise personalized strategies for achieving savings goals.
- Leverage resources like financialwellness.realtor for ongoing webinars and comprehensive financial planning.
Amidst economic uncertainty, these expert strategies will empower you as a real estate professional to navigate financial challenges with foresight and confidence.