A real estate agent’s job is intense. As CEO of a financial advisory firm that has specialized in helping real estate agents of all types over the years (e.g., ranchers, luxury specialists, industry newcomers), I know that the issues remain the same: juggling short-term and long-term cash flows. When a job requires an enormous amount of time and attention, it’s easy to prioritize short-term needs over crucial long-term financial planning. That’s why real estate agents need to fight the urge to overspend and save effectively for the future. There are five buckets of money that every real estate agent should establish for their future self.
1. Emergency Fund
This amount of money should be set aside for six to 12 months of expenses to weather income variability. As you are aware, it could be months before you close your next deal, so if you don’t have a backup plan to pay your bills, your credit card will be the default. Then you’ll get yourself over your head in debt, adding additional stress to your life. If you have another source of income, such as a working spouse, then six months of expenses in your savings account may be sufficient. Otherwise, without an outside income source, 12 months gives you the ability to survive an economic downturn similar to the one we experienced during the great financial crisis of 2008.
2. Expense Fund
This amount of money should be allocated to business expenses and should cover what is necessary to run your business effectively. You will pay all of your marketing, gas, utilities and other business expenses from this expense fund. The key to making it work properly is to map out the expenses. There is an old saying that a business takes longer and costs more money than you think, so add some room for “fluff” expenses. Although a yellow pad will suffice, using Excel or an online tool like QuickBooks can provide real-time visibility, keeping you on track.
3. Tax Fund
You will be required to pay self-employment taxes. If you were ever an employee, you would have paid only half of the self-employment tax, which is considered the self-employment portion. Now, you must pay both the employee and employer portions, totaling 15.3% in 2026. In bad months with no sales, it will be tempting to spend this money. Don’t do this. Also, in future years, work closely with your CPA to model your quarterly estimated payments. Most people would avoid a tax penalty if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year. Some real estate agents become too comfortable with these obligations and spend the tax money; I want to encourage you to respect the obligation and ensure that you make every payment on time.
4. Simplified Employee Pension (SEP) Plan
This type of account, per the IRS, allows you to set aside money as an employer, up to 25% of your employees’ pay. This upper limit of 25% contribution rate is significantly larger than the limit for IRAs for high-income earners. Unlike 401(k) plans and pensions, SEPs are generally easier to set up and maintain. However, be careful: If you have employees, you are likely obligated to contribute to their retirement plans as well. That may not be a bad thing, but it must be considered annually. If you do take on employees, the traditional IRA or Roth IRA may be a better alternative.
5. Opportunity Fund
If you are good at your job, you will find real estate opportunities because of fire sales, foreclosures or legal inside information. As excited as you might get, don’t take from the other four buckets. Instead, start saving money in this opportunity fund so you can take advantage of market inflection points and buy real estate at a potentially discounted price. Downturns come, and you’ll want to be prepared.
These five buckets of money will help you weather storms and save for the future. Even as a real estate agent, eventually, you may want to retire, or, at the very least, pivot into another chapter with less Saturday work. In an ideal world, if you followed this model, you would have set aside sufficient funds in cash and securities, as well as a well-diversified real estate portfolio. Then, when you retire, you can turn on the income from these assets to fund your lifestyle. A life of income flows from passive sources will feel completely different than the current situation, where you spend three months without closing a deal. Wouldn’t that be nice? Start saving today, and your future self will thank you for it.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
