Strategic Finance for Luxury Realtors: Amplify Your Earnings and Secure Your Future
Strategic finance is the key to transforming success as a real estate professional into lifelong wealth. As a luxury realtor, you have the potential to earn a significant income, but it's important to be strategic with your finances to maximize your earnings and secure your financial future.
In this edition, we'll discuss tactics that savvy luxury realtors can use to amplify their earnings and safeguard their financial future.
1.) Understand your financial situation
The first step to strategic finance is to understand your current financial situation. This applies to both your personal and business finances.
Personal Finances
Here are some tips for understanding your personal financial situation:
Knowing your income and expenses.
By keeping track of how much money you make and how much you spend you’ll be able to analyze if your current lifestyle is sustainable and make sure there are enough funds to put towards growing your wealth.
As a real estate professional, your income can be variable and unpredictable, making it even more crucial to have a system for tracking your income and expenses.
Calculating and tracking your net worth.
Your net worth is your assets minus your liabilities (debts). It provides a snapshot of your current financial situation and lets you track your financial progress over time.
Business Finances
Here are some tips for understanding your business financial situation:
Organized Bookkeeping
Organized bookkeeping is important for every business. Accurate books help with:
Keeping track of cash flows
Preparing for taxes
Meeting IRS record keeping requirements
As a realtor you should be keeping the following business records:
General Ledger
The general ledger keeps a record of all transactions of the business (income and expenses) and labels them under different categories.
Profit and Loss Statement
Also referred to as an income statement, this is a report that shows a business’s revenues and expenses to calculate the net profit (or loss) for a given period.
Balance Sheet
Like your personal net worth, a balance sheet keeps track of the business’s assets and liabilities. It is a statement of what your business owns and owes.
2.) Set financial goals
Once you have a good understanding of your finances, you can start to develop a plan to achieve your financial goals for the short term, medium term, and long term. Example goals include:
Saving for a new home or investment property.
Retiring early
Helping your children pay for education, or
Creating wealth that will last for generations.
Once you know what your financial goals are, you can start to develop a plan to achieve them.
Here are some tips for setting financial goals:
When first considering your goals, envision the life you want to live and the things you want to accomplish.
Make sure your goals are SMART: specific, measurable, achievable, relevant, and time bound.
Break down your goals into smaller, more manageable steps. This will make them seem less daunting and more achievable.
Write down your goals and put them in a place where you can look back at them to check your progress and motivate you to stay on the right path.
3.) Create a financial plan
Your financial plan should be focused on achieving the goals you’ve set for yourself. It should consider:
your income, expenses, and savings
investments
debt
taxes
insurance coverage
estate planning
After analyzing your current situation and the goals you’ve set, the financial plan provides the direction and clarity towards achieving your goals.
One of the most important aspects of financial planning is understanding the importance of thoroughly mitigating risks to financial stability and prosperity. The possibility of unexpected life events and market fluctuations is always present. It is important to include techniques that mitigate the risks that could derail your financial future.
4.) Invest wisely
Investing is one of the best ways to grow your wealth over time. There are many different investment options available, so it's important to do your research and choose investments that are appropriate for your risk tolerance, risk capacity, values, and financial goals.
Here are some tips for investing wisely:
Diversify your portfolio. This means investing in different types of assets, such as stocks, fixed income, and real estate. It is difficult to predict which assets will outperform. By having a diversified portfolio, you can more easily capitalize on performance whenever and wherever it occurs.
Consider the timeline of each goal you’re investing for. There is no one-size-fits-all in investing. For example, investing for retirement could be decades away, so you’ll likely prioritize assets with historical higher long-term performance. On the other hand, if you’re saving for a down payment a few years away, you’ll likely prioritize stability and liquidity rather than performance.
Consider investment account types. Different account types have properties that make them more or less optimal depending on the goal and timeline. Retirement accounts have great tax advantages but are also not accessible for the most part until the investor reaches a certain age. Other investment account types don’t have the same tax advantages as retirement accounts but allow the investor to access those funds if needed.
Patience is key. Investing is one of the most powerful tools to amplify your earnings and secure your financial future. But it takes discipline to stay committed to your goals and allow time to compound your investments.
5.) Protect your assets
It's important to protect your assets from financial risks. Some risks that can significantly affect your financial future include:
extended periods of lower-than-normal income
unexpected deaths or disability events
lawsuits
medical bills and long-term care costs
higher than planned for living expenses in retirement
Recessions and lower than expected market returns
Common techniques for protecting your assets include:
Emergency savings
Insurance policies (such as life, disability, long-term care, and umbrella)
Prudent retirement planning
Estate planning and use of trusts
Strategic investing with a diversified portfolio specifically designed for you
6.) Seek professional advice
If you need help with your financial planning, seek professional advice from a financial planner. They can help you develop a financial plan, choose investments, and protect your assets.
Here are some tips for choosing a financial planner:
Ask if they provide financial planning in addition to investment advice.
Ask if they specialize in working with realtors and if they have experience with situations similar to yours.
Ask if they are fee-only. Fee-only means they do not receive commissions or other payments from the providers of financial products they recommend to clients.
Ask how they charge fees. Fees can be charged in a variety of ways such as assets-under-management (AUM), hourly, or project based. Make sure your financial planner has options to be able to choose which is best for you.
Make sure the financial planner is a fiduciary, which means they are legally obligated to act in your best interests.
Secure Your Financial Future
Strategic finance is essential for luxury realtors who want to amplify their earnings and secure their financial future. By following the tips outlined, you can develop a financial plan that aligns with your financial goals and protects your assets from financial risks.
This material is provided for informational purposes only and is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change at any time without notice. The information and opinions contained in this material are derived from proprietary and nonproprietary sources we deemed to be reliable and are not necessarily all-inclusive. All investing involves risk, including the possible loss of principal.