Real estate can be a boom or bust job.
One month, an agent can close two houses and earn tens of thousands of dollars, and the next month, there are zero sales. Those types of swings can wreak havoc on someone’s finances, which is why learning how to budget with inconsistent income is a critical skill for the self-employed.
A solid budget can help real estate agents ensure there’s enough money in savings to cover tax payments, which typically are higher for self-employed individuals compared to those who are employees.
Few real estate agents may know that truth better than Lisa Patterson, a Charleston-based Realtor at Daniel Ravenel Sotheby's International Realty. Along the way, she’s learned valuable lessons about the importance of budgeting amid the income rollercoaster that real estate can send agents on.
Patterson, who has worked in real estate for more than four decades, shared her thoughts on budgeting with The Independent. The interview below has been condensed and lightly edited for clarity.
Biggest trip up in budgeting
In this business, budget is important. I still see younger agents making some of the same mistakes over and over, especially when it comes to paying their taxes. One of my accountants talks about it all the time.
He'll tell agents how much they owe, and the response is, "How can I owe that much? I don't have the money to pay that!”
It’s important to stick to a consistent monthly budget where money is set aside each month to cover taxes.
Don’t base a budget on your best month
People need to realize that being commission-based means not getting a paycheck every week – and there's good and bad about that.
It's not for everyone. Here’s the way I look at it, though. A weekly paycheck means someone is earning what their employer wants to pay them. If someone is working for themselves and they work hard, they make exactly what they want to make.
What I had to learn early on in my career was that I couldn't base my budget on those big months where I had multiple closings or a big sale, because that’s not how every month will be.
So, when I created a budget, I had to calculate my income based on my worst months and then shape my lifestyle and spending around that.
Thankfully, I learned very early that taking those big months and, instead of splurging on something that’s a want instead of a need, use the money and pay down the principal on a mortgage, putting money away for and increasing savings balances.
I think that a lot of people in this business who are just starting out will have a big income month and go and spend it. Then, when they get into the next month, they're like, "How am I going to live and pay my bills?"
You just have to budget the inconsistent income properly and use money strategically when it’s there.
Set financial goals
I'm a pretty disciplined person. Also, my parents taught me the importance of setting money aside to buy things you really want.
So, I’ve found that having a savings goal, whether it’s a number or a physical thing like a pair of shoes, really helps me stick to my budget.
There are some months when I really want to go buy an expensive handbag. Instead of buying it as soon as I have a bit of money, I look at it as an opportunity to save.
It makes me work harder at budgeting and smart spending because I have something I'm looking forward to, whether it’s a handbag, a vacation or a rental property. I'm going to work harder so I can make it happen quicker.
While creating and following a budget, there has to be that mindset of working toward that goal and achieving it. It keeps me disciplined and helps me avoid going out and blowing my money.
Split each closing commission into pots
Whenever I have a closing, I have figurative pots where I put my money.
For example, I put so much aside out of each closing into my taxes pot. Also, I make sure I put that money in a high-yield savings account so my money works for me while I’m waiting to use it to pay my tax bill.
I have my “shoe and handbag” pot, too. I put a little bit of money in there after every closing. Once I have enough money in that fund, I can go buy that handbag I want.
Also, I set aside money for my investment property pot, too. And it’s not just money that I use to pay the mortgage on those properties, but I’ll also try to put a little extra money toward the principal. It helps pay off a mortgage faster and reduces the amount of interest paid over time.
Keep the pipeline going
In this business, a pipeline of leads needs to be a priority because it helps income stay a little steadier each month. This can really help relieve the stress of trying to budget amid inconsistent income.
Prospect new clients, talk to past clients and make new connections at events, because you can never let leads dry up. If that happens, income dries up and your budget is put under stress.
Hire an accountant and financial advisor
I highly recommend hiring an accountant and financial advisor, because their advice will play a critical role in budgeting.
For example, an accountant will do your taxes, which can be complex for those who are self-employed. But I also appreciate how my accountant will help me make decisions during the year that can impact my tax liability, which in turn impacts how much money I set aside each month to pay my taxes.
Basically, if I plan on doing something new or different with my money, I’ll call my accountant and pitch the idea to him. By the end of the conversation, he’ll tell me if it’s a great idea, what I need to think about before I do it, and if the plan I have is going to be worth the work it requires.
Also, I think it’s important to hire a financial planner. When someone is self-employed and earning inconsistent income, a financial professional can help figure out how to budget to meet financial needs now and in retirement. They can help set up a self-employed IRA (SEP IRA) and figure out how much needs to go into it for a comfortable retirement.
They can figure out how much you’d need to budget each month for other investments, too, whether it’s a high-yield savings account or stocks.
Overall, a financial planner’s advice will help make sure there’s enough money set aside to pay taxes and your savings are working for you by earning interest, dividends or value as a stock grows.
Do these things in your first year as a real estate agent
If you want to have success with a budget, it’s important to set up a few things in your first year as an agent. Some of those things may not be directly related to a budget, but will have an impact on how much there is to save, where to save it and how to invest any extra income:
- Get a good accountant who can set up tax situations that benefit your business, like an LLC or S Corporation
- Focusing on keeping the pipeline full
- If there isn’t any extra income to pay for marketing, leverage social media
- Set an income goal, write it down, and put it somewhere you’ll see it every day
And, finally, set up a budget. If making a budgeting spreadsheet helps, go ahead and use one. Whichever platform is used, be sure to include all personal expenses – rent or mortgage, car payment, groceries and other bills.
Without budgeting, your finances are going to be all over the place every month, and you’ll have no idea where you stand. Most likely, the end of the month will arrive ,and there won’t be enough cash to cover expenses, which will most likely impact that month and the following month.
The three costly purchases that retirees say they regret
Three costly retirement regrets in your 70s and 80s - and how to avoid them
This state might start charging a social media fee — here’s what it means
Four tips to help you diversify your 401(k)
Nearly 40 percent of employees have cried in the workplace, survey finds
IKEA is opening 10 new US stores in 2026. See if your city made the list
