Grow Up – and Do Your Taxes!

When speaking with agents on intake calls, it’s unfortunate that more often I find myself asking, “How far behind are you on taxes?” versus “Are your taxes paid and up to date?”. In my personal experience as a Real Estate coach, 9 out of 10 agents I talk with are behind on paying their taxes, and 3 out of 10 aren’t just a little behind; they are years and tens of thousands of dollars behind. One could make the argument that this is an epidemic in our industry. We call ourselves professionals yet imagine a sports team not knowing where they are on the field, what quarter they’re in, what the score is, and still trying to make decisions on how to win the game. So, if you are behind on your taxes, what do you do? Here are a few steps I recommend to my clients:

First, you need to acknowledge that you have a problem, and commit yourself to fixing it. Keep in mind that this might not be a quick fix. Oftentimes however long it took you to get into the mess, it will most likely take you just as long to get out.

After you have made that acknowledgment, the second step is to stop digging the hole deeper. What I suggest is allotting 50 cents of every dollar earned to go to the IRS. I imagine you’re saying, “there’s no way I can afford to do that”, yet if you’re not paying taxes on the current money you’re bringing in, all you’re doing is getting deeper into debt. As Dave Ramsey often says, “you can’t outlearn stupid.” This isn’t a math problem, this is a behavior problem, this behavior of allotting 50 percent towards taxes, once established, will benefit you in the long run. After your back taxes are paid, if you continue to set 50 percent aside, 25 percent will be for taxes, and the other 25 percent will be for creating margins and wealth. However, if you don’t solve the cashflow problem, you’ll forever be in the hamster wheel. 

The third step is awareness, which is transformational in and of itself. You must get clarity as to what your full current financial reality is. This might mean getting your taxes done, calling the IRS and making payment arrangements, and facing a clear reality of where you stand financially. Once you have a clear understanding of your full financial picture, you can see if you have an income problem or a cashflow problem. It most likely is a combination of both. So, what chess moves, if any, can be made to stop the bleeding and start moving forward.

Paying taxes is part of being an adult. So many times, I hear,

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“I’m not good at numbers”, or “I leverage that out”, or even, “It’s not the highest and best use of my time”. Every time I hear these excuses I respond, “Oh grow up!”
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The truth is, you’re broke!

When you get a handle on your taxes, you’ll have the confidence to engage in more conversations around money. The more conversations you have the more confidence you’ll gain.  It’s through that confidence you’ll have the ability to start building some real wealthy by raising your financial IQ.  

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