This May marks Inman’s sixth annual Agent Appreciation Month. Look for profiles of top producers, opinions on the current state of the industry and tangible takeaways you can implement in your career today. Plus, the prestigious Future Leaders of Real Estate return this month, too.
When commissions roll in, the future looks bright — but when deals stall, bills don’t. This unpredictability creates a psychological and financial strain affecting business decisions and personal well-being.
According to a 2024 National Association of Realtors study, 87 percent of Realtors work as independent contractors. The top 32 percent of performers earn six figures, while 31 percent have an annual income below $25,000.
TAKE THE INMAN INTEL SURVEY FOR MAY
The difference often isn’t just market conditions or sales skills. Experience may play a part, but an even bigger difference I see time and again is financial management.
By implementing these five strategies, you can break the feast-or-famine cycle, ensure predictable personal income and build lasting wealth, regardless of market fluctuations.
1. Pay yourself first — every time
Rather than treating your commission as a personal paycheck, adopt the Profit First methodology developed by Mike Michalowicz.
Create separate bank accounts for:
- Profit/business savings
- Personal compensation
- Tax reserves
- Business operating expenses
When a commission check arrives, distribute it by percentage to each account immediately. This ensures you maintain a consistent personal income while adequately funding your business operations and tax obligations.
According to an often-cited study published in Forbes and Business Insider, 82 percent of businesses fail due to cash flow issues. Having dedicated account systems can solve those cash flow problems.
2. Build a business emergency fund
Just like homeowners, real estate agents need an emergency fund. Aim to set aside at least three to six months of living expenses in a separate account. Commission-based professionals may need even more.
I’m often asked how much someone with variable income should have. My favorite amount, and the one I recommend, is your S.W.A.N. number — “sleep well at night” number. Have as much as you need to ensure you never lose sleep worrying about money.
Choosing a personal S.W.A.N. number ensures that when the market slows down, you aren’t forced to dip into credit cards or rush into bad deals to make ends meet.
3. Create recurring revenue streams
One of the biggest financial challenges in real estate is the unpredictability of commissions. Consider adding stable income sources such as property management services, referral networks or investing in rental properties. Even a tiny recurring revenue base can cover essential expenses during slow sales cycles.
4. Think beyond the traditional retirement plan
Most agents don’t have access to employer-sponsored 401(k)s and are already taking many risks with their financial future. Therefore, many look to build wealth outside of the stock market. Options like Bank On Yourself type whole life insurance policies, and deferred income annuities can create future secure income without Wall Street volatility.
5. Automate your taxes and expenses
The last thing you want is to get hit with a massive tax bill because you didn’t set enough aside. Immediately when that commission hits your account, calculate your estimated tax payments as a percentage of your commission, and transfer to a special tax account as discussed in Step 1.
Then, you’re less likely to be caught off guard at the end of the quarter or around April 15 when your tax professional tells you how much you owe.
What if you have more in your tax account than you owe? Fantastic! You just saved more money. Use that to build your emergency fund, a recurring revenue stream or create future income for retirement.
Take control of your financial future
Implementing these strategies doesn’t require an accounting degree — just intentionality and consistency. Start with one strategy this month, then add another each quarter until you’ve built a comprehensive system.
Remember: Your commissions represent much more than a paycheck. They’re the fuel for your business, your personal financial stability, and your future security. Manage them strategically, and you’ll build a financial foundation that supports you through every market cycle.
Amanda Neely is a Certified Financial Planner with Wealth Wisdom Financial. Connect with her on LinkedIn.
