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Manage Your Commission Checks Wisely With REALTORS® Federal Credit Union

Most REALTORS® work on a commission-only basis, which can make managing personal and business budgets a challenge. This is especially the case during sporadic periods when income staggers for weeks or even months between paydays. Real estate agents who plan for the future with each commission check they receive will be well-positioned to weather these and many other storms, many of which may not even be on the radar screen.

Victoria Gillespie of REALTORS® Federal Credit Union, a Division of Northwest Federal Credit Union, offers agents several tips on how to manage commission checks in a video interview entitled “Your Money Matters: Reserves.”

  • Victoria advises all brokers to set aside 30% of their gross income to cover taxes as a first priority. This should be done as soon as commissions are received. Doing so will minimize the risk of any surprises when tax returns are due.
  • All agents should have a tax advisor to help maximize deductions. Qualified tax advisors can help brokers to pay taxes on a quarterly basis to alleviate the possibility of unexpected liabilities at year’s end.
  • Agents are also advised to set aside an additional 20% of each commission check in a reserve account for unexpected events that might occur such as cancelled settlements, vehicle problems or home emergencies. The goal is to have at least 6-months living expenses in a reserve account.  20% of each commission should be directed to this reserve account until this goal is attained. This might sound like a lot; however, having reserve funds is an important practice needed to seamlessly-manage personal and business finances.

Where to Put Your Money:

  • Beyond a regular checking account, REALTORS® may want to consider investing in interest-bearing products such as Money Market or CD accounts, however , these accounts limit withdrawals and may have associated penalties While these are always a good idea, placing money in a liquid account that brings zero penalties for withdraws is advised as a starting point.
  • Basic savings accounts at the Credit Union, for example, allow agents to take money out without penalties at any time, while also bringing a return of .25% annually at current interest rates. This may not sound like a lot; however, it is substantially higher than traditional bank savings accounts.

Brokers who practice allocating portions of each commission check to cover taxes and “rainy day” expenses will find this to become a matter of routine over time. The payoff will be a financially secure position to manage much more than personal expenses. It will also allow brokers to invest more into their businesses and create better opportunities for long-term success.

Where to Put Your Money:

Beyond a regular checking account, REALTORS® may want to consider investing in interest-bearing products like Money Market or CD accounts. While these are always a good idea, placing money in a liquid account that brings zero penalties for withdraws is advised as a starting point. Basic savings accounts at REALTORS® Federal Credit Union, for example, allow agents to take money out without penalties at any time, while also bringing a return of .25% annually at current interest rates. This may not sound like a lot; however, it is substantially higher than traditional bank savings accounts that are currently yielding just .05% annually.

Brokers who practice allocating portions of each commission check to cover taxes and “rainy day” expenses will find this to become a matter of routine over time. The payoff will be a financially-secure position to manage much more than personal expenses. It will also allow brokers to invest more into their businesses and create better opportunities for long-term success.

About REALTORS® Federal Credit Union, a Division of Northwest Federal Credit Union:

REALTORS® Federal Credit Union, a Division of Northwest Federal Credit Union, is also a partner in the NAR’s REALTOR® Benefits Program. NAR members can join theCredit Union for just $5 and gain lifetime access to fee-free personal and business checking accounts, free debit cards, highly-competitive savings accounts, lower  loan rates and more. REALTORS® can also secure mortgage and commercial real estate loans. They can also work with financial planners who are well versed with how cash flow works within the real estate industry—highly qualified professionals who will help you manage your income responsibly. Go to www.realtorsfcu.org or call 866-295-6038 for more details on how to join.