2 - Busting Money Myths

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• Episode Transcript

  Joe Rodriguez

  Hello. My name is Joe Rodriguez and you're listening to Get the Money Right with Todd Butzer. Todd has decades of experience in giving real estate agents the training and resources they need to get their finances on track. In this episode, Todd will be going over and correcting some common money myths. And now, here's Todd.

  Todd Butzer

  Thanks, Joe. Hello, everybody. Welcome to Episode Two of Get the Money Right. And, you know, last week we took a look at some assessments regarding your business. We asked you some questions for you to analyze how you're doing. We also talked about the predictable outcomes of what happens when you do get the money right versus when it's a little haphazard. So if you haven't done that yet, we invite you to go back and take a listen to that.

  So, as Joe mentioned, we're going to we're going to look at some common myths surrounding money. And these are just myths, frankly, that I've observed over working in the industry over the last 40 years. All right. Let's just let's just take them one at a time here.

  The first one is myth number one. Let's call it the income myth. In the income myth is that when I meet with a real estate associate, and we're doing a financial analysis of their business. I'll ask them, “How much money did you make last year?” And they will quote me a number. They'll say, “I made $75,000, or I made $275,000 or a million”. There's just one big challenge with that number that they quote me. The number they're quoting me is their revenue, not their income. And I'll explain that real briefly if we're going to make $100,000 in real estate. We have a business to operate. That business has a cost of sale. It has expenses. We'll explain these later. There are costs that come off the top of operating this business enterprise. And so what agents typically will do is they will essentially co-mingle those thoughts. “I made a hundred grand last year.” No, your business had $100,000 in revenue. You actually made $50,000 pretax. Now, incidentally, Joe, if we get this part right. Then we're well on our way to really getting our money right. Let’s sort out the income myth that if I need to make $100,000 a year, I can't target $100,000 a year as my sales number or my revenue. I have to get revenue in the ballpark of $200,000. A good rule of thumb here is that if you apply about a 40% to 50% ratio to the revenue, that would be a good ballpark for what you can expect to have as your net operating income before tax. So the income myth is simply: “My number that I made of 200 grand is the number I'm going to keep,” and that's just not the truth. The truth is, is that your net operating income will fall somewhere around 40 to 50% of the gross.

  Okay. Let's look at myth number two. And I call this one. I'll catch up later. And here's what I'm referring to. I can tell you countless associates that say, “Well, my tax obligations, I'm behind on them, but I'll catch up to them later when the market improves or when I hit spring market or I'll get it. I'll get to it later in the year. I'll catch up later on my retirement planning. I'll get that figured out somewhere down the line. I'll catch up later regarding my debt. I'll get that figured out a little ways down the line.” And I'm going to let you know something, folks. And I say this from my soul. You're not going to catch up later. The time to catch up. The truth is, we need to do it right now. We don't need the IRS as our bank. We don't need to be owing them any money. We need to take advantage or I believe we want to take advantage of any appropriate retirement plans that we can. And fortunately, a lot of us in the industry, we say, well, you know what, I'll get to that later, because the reality is we're busy. We've got a lot going on. And so we sometimes shelve these discussions. And I'm just going to ask you to look inside and say, are you using the catch up later myth? Are you putting things off that you believe you're going to figure out later on and later on doesn't show up. In fact, it gets worse. The hole gets deeper. So myth number two, I'll catch up later. The truth is, we really don't.

  Okay. Myth number three: “I'll just make more.” And I kind of smirk at this one, folks, because this was me. I'm just telling you, in my early twenties, in the early part of the business, I had no respect for money. I'll just say it. I didn't. My idea was I would tell my wife of only a few years at that time, still the same one, by the way. I would tell Jody, “You know what? I'll just make more.” Meaning if I overdraw an account buying some tacos and they cost me $40 instead of $4, I'll just make more. Here's where we really make more folks. We get a handle on our money right now. “I'm behind on my tax, so I'm going to pay an interest and a penalty. Yeah, I'll just make more.” But it's expensive, isn't it? So this myth around I can just generate more. It shows in me, anyway, it showed a complete lack of respect of money. I'll just tell you that. And once I flipped that thinking and thought, “oh, my gosh, this is just unacceptable behavior.” I started respecting money at a really high level and saying, “Look, this, this is something I'm going to pay very, very close attention to. And I'm not going to go with the idea that I'm just going to make more.” So examine yourself and think about is that something you rely on?

  Myth number four: “You know, I don't really like all this money stuff. My accountant is really good. They can take care of it for me.” Yeah, but they don't. Your accountant is no doubt a critical member of your team. They are. They will save you money if you've got a great one. They'll help you make money if you've got a great one. But it's not their money. It's your money. They’re only really as good as the data and the information and the questions, in my experience anyway, that we give them. It's the ability on our part to be able to ask in-depth questions or suggest strategies to them and bounce it off their expertise. So we need a great one, a great tax strategist. But to say, “I'm not going to pay any attention to this, I'm going to let my accountant do it,” Trust me, no one cares more about your money than you. Incidentally, let's just take a very quick sidebar on money. We're going to talk a lot about money on these episodes, and many of you have never met me. So I'm just going to say this when I'm talking about money, I'm not talking about stuff. If you want to buy stuff, great. You want nice things? Great. You want watches or jewelry or cars or whatever. That's great. What I'm referring to when we're talking about money is assets. Security. Jim Rowan The late great Jim Rowan had a had a wonderful line. He said it in one of his programs, “Have you built the financial wall around your family that nothing can break through?” That's what I'm referring to when I'm talking about money, I'm not talking about I want to go buy this latest thing. If you want to do that, that's fine. I'm not judging that. I'm just saying what we're talking about is security and assets and the ability to take advantage of future opportunities. So this myth, “my accountants, are going to take care of it.” They'll take care of what you asked them to take care of. But again, it's not their money. It's your money.

  Let's look at myth number five, one of my favorites. “Taxes are due on April 15th, but I can also extend.” You can extend. Yes, you can. You can extend from April to the fall into October. Perfectly legal to do so. Here's where the mishap occurs. I've talked to countless agents who believe that their tax bill then gets extended, and that's not what happens. In fact, your taxes aren't even due on April 15th, folks. The U.S. tax system is a pay as you earn. Tax system means when you earn the money, you have to pay the tax. Now for the self-employed, the IRS code says we can pay it four times a year throughout the year. We will get into how to do it, how to estimate it. All of that will come up on a later episode. Let's just be very, very clear, though, that as we go through a year and if we're thinking, well, I'm going to wait till April 15th and then I'm going to file my return and pay my tax, we will be paying a tax plus penalty and interest. Instead of paying the appropriate amount throughout the year. So for example, if you're looking at listening to this on the 1st of April and you're saying, well, I still got a couple of weeks to pay my tax. No, your tax was already due the previous January. It was due previous January. So we have four installments. We have one in April, one in June. They're not technically quarterly. We call them quarterly, one in September and one in January. So the tax are due then, not on April 15th and we can extend the return, that is legal to do. Many people do it. I extend every single year as I wait for some documentation. It's perfectly legal to do. What's not legal to do is to pay it late. I mean, it's legal, they’re just going to charge you interest and penalties.

  Let's look at myth number six: “A budget really isn't for me. I need more flexibility. I've tried a budget before and they just don't work.” Okay, so let's look at this and say the companies you most respect that you do business with. They operate from a budget. And we do it on purpose. A budget just determines where our money's going to go. It lets us track how we're doing in terms of investing in our marketing or our lead gen or what our expenses are actually running versus what we had originally budgeted for. It allows us literally to track the performance of our company. If we're operating without a budget, we're really not comparing any number to any number. We're just we're just kind of floating along. So, here's the truth about a budget. And we're going to take you in depth on how to build one of these in a future episode. And they're really not nearly as difficult as you might think. But here's the truth about a budget, and I'll promise you. It will free you up. It will not be restrictive. You're going to find, and incidentally, I recommend that you do this on a personal basis and on a business basis. The one we're talking about is for your business. I'd absolutely recommend that you do it on a personal basis as well. And what you'll find is this: You're going to find you have more money. You're going to find that you keep your expenses in line better when you have a budget. You're going to find, strangely enough, that you're going to be hitting your income goals more effectively. Why? Because you've already you've already put numbers down. Really, all a budget is an advance look at a profit and loss statement. It's just an advance look at where our money's going to be coming in., how much of it's going to be coming in and how much of it is going out. We're going to pre assign where the money goes versus look back at the end of the month and go, where did the money go? We're going to know in advance where the money's going. We're going to show you how to do it. Let's bust that myth of, “Hey, budgets are not really for me. It's too restricting.” It's absolutely freeing. I promise you, those of you that have done this, you know exactly what I'm talking about.

  Myth number seven. “I really don't like numbers. I'm just not really good at them. So, if I if I've got money in my checking account, I'm kind of good to go.” I can't tell you how many people have come up to me and told me that. It's a countless number. “I really don't pay much attention, but if I have money in my checking account, I'm kind of good.” How's that working? How's it working from an investment standpoint, from an obligation standpoint, from a debt standpoint? From a business expansion standpoint, how's it working? It's been my experience that if we treat this where “I don't like this, so I'm not… I like working with people. I like being out showing homes and listing homes and working with my team.” Great. Who's watching the money? I asked agents one time in a survey, I said, “How often do you visit your money?” Meaning, how often do you look at it? And as the survey was going, the number one answer was never. And then it got beat finally by seldom. Meaning we just don't look at it that often. We don't look at it because we don't really like to, some of us. So, the myth is I really don't like numbers. I'm just not good at it. So, I'm not going to pay any attention to it. And the truth is, anyone can learn to manage their financials at a higher level. Anyone can do it.

  That's it. So, what do I do now? We just gave you a list of items, and if you really think through that list, most of it comes down to your attitude regarding your money. So, I'm going to invite you at this moment right now to say “Those days of me not paying attention are over. I'm going to start paying attention right now. I'm not going to, quote, ‘catch up later’. I'm not going to misinterpret the amount of money that I'm making. I'm not going to allow somebody else to handle all my financials and not give any input. I'm going to take charge of this because it's a big deal in my life.”

  Joe Rodriguez

  Thank you for listening to this episode of Get the Money Right. Be sure to subscribe on your podcast platform of choice and leave a five-star review. If you're a real estate agent who is getting their money right and want to be a guest on the show, please submit all inquiries to GetTheMoneyRight.Podcast@gmail.com. You can find us through social media on our Instagram page or LinkedIn group. Just search, Get The Money Right and look for the show artwork. You can also find direct links to everything mentioned here in the description on this episode or on our website at GetTheMoneyRight.com. Thank you for listening and have a wonderful day.

In this episode of Get The Money Right, Todd Butzer outlines and corrects some common misconceptions real estate agents may have about their money and finances. Here are the seven Money Myths:

(1:06) “My revenue is how much I made last year.”

(3:25) “I can catch up on my finances later”

(5:12) “I’ll just make more money.”

(6:51) “My money is better handled by an expert.”

(9:07) “U.S. Taxes are due April 15th.”

(11:20) “I’ve tried, a budget just isn’t for me.”

(13:53) “As long as I have money in my checking account, I’m ok.”

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Hosted by: Todd Butzer

Produced by: Joe Rodriguez