Being able to control the income is really where agents get into trouble. Too many agents’ pay comes irregularly. A Champion Agent’s income comes consistently. It enables them to control it better, save more, and invest more to create wealth. It is not what you make, it’s what you keep. I have met too many agents who make $300,000, $500,000, even a million dollars a year and are broke. Part of their problem is their expenses. The other part is in their personal and business system of controlling the income. I will share with you a simple plan to help you control your income and become wealthy.
Your business checking account is merely a holding tank. Don’t keep large amounts of money in there. When a commission check is received, put it all in the business checking account. Set up a business savings account and deposit 10% of your gross commission in there. That is your rainy day fund, dividend fund, and source for the future. You can build up a lot of funds through this method. At the same time, set up a tax savings account. Deposit 20% of every check to the tax savings account. This method guarantees you have the funds available when quarterlies are due.
Create one last account for your investments savings account and deposit 10% in that account. This account can be built up to fund your retirement accounts, 401K, simple IRA, whatever vehicle you use. I am a firm believer that as a business owner we need to take advantage of these tax free investment opportunities. You can save the money to buy property. The more you can segment or even hide money from yourself, the greater the chance you can avoid wants becoming needs. When the money comes in bunches, wants can easily become needs.
If you are unable to put 10% in each of these savings accounts, start with 5%, 2% or even 1%. It’s the habit that we are trying to establish. The habit will lead you to wealth.
Collect a significant monthly personal compensation out of the business in salary and dividend that you can segment or hide your money again. You want to pay yourself enough to cover your personal expenses while at the same time, saving and investing in your future as well. I have used the 70/10/10/10 way of managing my money for years. It’s a simple approach, I don’t have to budget extensively and it works. The seventy percent is what my family gets to live on. Joan and I can spend it any way we would like. There are usually long discussions about that in our home. We give 10% of our income to charity. For us, it’s our tithe to our church that equates to that 10%. The blessings have been awesome since we make that commitment to bring in the whole tithe years ago.
We save 10% in a general savings account for emergencies, property taxes, family fun, and large purchases like a new car. I am not a believer in debt, whether car or credit card. My view is the only debt I will accept is appreciating asset debt like real estate or possibly business debt. Because we have been doing that so many years, we rarely pull money out of savings for anything. It’s just another area to create wealth. We then save 10% for investment. This can be real estate investment or after tax investment of stocks bonds, CD’s or any other source we choose. I am not professing that I have created the perfect system, but it works for me and works for thousands of other people I have taught it to, both inside and outside of real estate.
When I started this system well over twenty years ago, I was not able to do 70/10/10/10. I had too much month at the end of my money due to debt and lack of income. I wanted to do 70/10/10/10, but couldn’t, so I started with 95/1/2/2. That quickly became 90/3/3/4. Within twenty-four months, I was able to do 70/10/10/10, and my life has never been the same.
The real skill of a Champion is to control the resources and money they have to create the quality of life they desire. We all need to live within our own means to make sure our future is secure. I believe that you won’t be blessed with more unless you wisely use what you have now. People who acquire wealth learned to control small amounts well before they acquired large amounts. Control what you have now and more will be granted to you.