Denise Says: Get Control of Your Money!

By Denise Lones M.I.R.M., CSP

When you cash that big commission check, how do you feel?  Pretty good, huh?  At that moment, you love money.  But what happens when you haven't seen a commission check for weeks?  Money becomes your despised enemy.

Unfortunately, this is the relationship with money that most real estate agents have.  While this business can seem  "feast-or-famine," it's really a matter of becoming friends with money.  Because some feasts are bigger than others and some famines last a very long time.

Living commission check to commission check is a terrible way to live.  Most agents think they have no choice but to live this way.  "It's the nature of the business," they say.

I have news for you:  It doesn't have to be this way.  Mastering the money side of your business is simpler than you may think.  It just takes a little discipline and a new way of looking at it.

Here are some tips for making friends with money:

1.  Know what it costs you to live. 

When I ask agents "What does it cost you to live?," I always get the same answer.

First, they stare at me for a few seconds and start rattling off expenses.  "Hmm.  Well, there's my mortgage, my car payment, my kid's tuition." 

This is "Income By Dissection."

You should never have to dissect your income.  Whenever that question is asked of you, you should immediately know the exact number of dollars it costs you to live.

It's all about awareness.

Get your "nut" in order.  Make a list of every single ongoing monthly expense you have.  Estimate for what you don't have fixed numbers.

Once you figure it out, pay attention to it.  Think about it every day.  Make it a part of your routine.  By being aware and knowing where you stand, you can almost feel the money coming in and going out.  This prepares you for what you need to do in order to boost your income.

2.  Avoid budgets.

"What?!  Denise, how can I live without a budget?"

I'm not a big budget fan.  I call it the "B" Word.  

The simple truth is that most budgets don't work.  When on a budget, we limit ourselves by constantly referring to what we can't spend.  Whenever we focus on a negative, we create further negative thoughts.

Instead, I tell agents to focus on their net worth.  Knowing your net worth is the first step to escaping that evil phrase, "All I ever do is pay bills."  When you're constantly aware of your net worth, you know where you are and where you are going.  And your desire to increase that net worth makes you actually want to save money.  A budget does the opposite.  It makes you want to spend money because it creates an artificial limit.

It's all in the head-in the way you look at it.  A budget limits, but net worth empowers.  Tracking your net worth, you have something to show for every penny you spend.

Still not following?  Look at it this way.  Every time you pay a bill, it has a negative effect on your cash flow.  If you're using a budget, all you're aware of is your lack of cash.  But when you look at your financial life in terms of net worth, every time you pay a bill you become a little bit richer.  See what I mean?

In the end, your net worth is the only scorecard that matters.  It's your reward for all the hard work you do.  Pay attention to it.

3.  Work three months ahead.

Let's say you bring in $20,000 of closings this month and it's costing you $7,000 a month to live your life.

A typical gut feeling is "Wow!  I made an extra $13,000 this month.  I'm taking two weeks off to go to Hawaii.  And maybe I'll get that deck addition we've been talking about."

Not so fast.

Here's a better idea.  Take that $13,000 and put it in your Three-Month Ahead Account.  A hard (but powerful) lesson to learn when you're running your own business is that there are going to be lean times-very lean times.  A good business is always three months ahead of time.  This is a rule I've implemented for years.  If you don't have three months' expenses saved up somewhere, you will find yourself in hardship at some point.

There will be times in real estate when you won't have closings for three months.  What are you going to do if you don't have a Three Month Ahead Account?  Think about that.  Think long and hard about that.

4.  Have financial goals.

When you read those personal finance books and audio programs, they talk about income as something that's "fixed."  As a real estate agent, this is actually something you can control.  You have the power to increase your income by implementing better systems and lead generation techniques to find more clients.

The problem is that most people don't know how to "Think Big."  They limit themselves by not having big enough dreams, plans, or personal missions.

Are you in this business just to live transaction at a time?  Or is there something you're working towards?  What is it you really want to accomplish?

These are questions for which you should have solid answers.  Exact dollar amounts.  Exact experiences you want to have.  Exact places you want to go.  You should be making money to live, not living to make money.

What about retirement?  Most agents don't have a retirement plan.  This creates absolute havoc in so many lives.  This is why there are so many agents working into their later years.  Because they didn't think about it when they were young.  Start thinking about it today.

5.  Pre-plan vacations.

Whether you're an experienced agent or just starting out, this is a necessity for your business.  You cannot overlook this required part of your life.  We all need time to recharge and get away.  We often forget to plan this into our schedule and what happens?  We forget and end up working three years without a break.

A vacation is not something that should be treated as an "if-we-get -an extra closing" event.  A vacation is as important to an agent's psyche and ability to be good at what they do as anything else in their business.

Agents who are well-rested and who take time to enjoy their lives are agents who provide better expert service for their clients.

By following these tips and making friends with money, you're in a powerful position to get to the next level of your business.  Know your net worth.  Know what it costs you to live.  Know what it will cost you to live the life you want.  Implement changes and take vacations.

If you make friends with money, you can't lose.

Denise