Who is Sandy MacKay?
I help Canadians achieve financial freedom through real estate.
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Dear friends,
I don’t like to work for money. The only times in my life when I worked for money was in jobs that I hated.
The real estate industry, and Keller Williams, has really helped me understand this.
I work to become the best version of myself, and to serve others. (serving others is a big part of becoming the best version of me)
Some people have a hard time believing this, but if you know me well enough I’m sure you can vouch for it.
Money is simply a tool that people trade me in exchange for my value I create. It’s not the “why” though.
Although I generally love this mindset that I’ve developed over time, it also has some major downsides.
For example… I’ve never been good at budgeting. It’s never been something I naturally wanted to care about.
When you aren’t working for money, you can sometime lose sight of the fact that money is still very important.
It took a big ass tax bill one year to make me understand it’s importance better.
But then, even after I got that figured out, I still fell back into old habits.
Real estate sales has some seasonality to it. Winters can be slower.
When you build up a real estate business with a whole bunch of fixed costs, and minimal focus on a budget, you will eventually have some big issues! 😅
You know the saying, “Fool me once, shame on you. Fool me twice, shame on me.”
Well shame on me multiple times over.
I know painfully well the importance of a budget. I’m still not amazing at it yet, but I’m getting better.
Budgeting is important. It’s by no means my favourite past time, but I need to do it in order to earn my other goals in life.
Thankfully, net worth tracking is also important. And I love tracking those numbers! I call it “networthing”.
Budgeting = managing cashflow
“Networthing” = managing net worth
You need to do both…
Budgeting
Since 2020 we’ve faced 2 threats of recessions. Not just local recessions, but potentially global recessions. And we may even be in one right now.
A traditional definition of a recession is 2 consecutive quarters of slowing economy.
The US was in one in the first 6 months of 2022 based on this definition. The economy shrank by 1.6% in Q1 2022 follow by a 0.6% in Q2.
I don’t know if we’re in a recession now or not. Based on that definition, we’re not.
March 2020 was an instant halt to business due to the pandemic. That sure felt like a short term recession.
Both of these “recessions” have made me get very uncomfortable around budgeting.
We’ve spent hours and days diving into budgets line by line to decide what was worth keeping, and what was not. Sometimes it’s not a what, but a who.
Debating about cutting a who is never fun.
All of this would have been a whole lot smoother if we were simply budgeting more often. More often meaning every week.
Budgeting is really quite easy to do. But there are some mindset checks needed first before you begin.
Questions to check your mindset:
Do you like money?
Is money your friend or your enemy?
Is money evil?
Is money good for the good it can do?
Is money available in abundance?
Is money hard to find?
Does money grow on trees?
If you have an abundance mindset around money then budgeting becomes a lot more fun & simple.
If you’re like most people though, you’ve got some money demons from the past that are still lingering and creating limiting beliefs.
That’s okay. Awareness is the key first step to changing those beliefs. So audit your mindset often.
Once you’re in a good space mentally to have this conversation with yourself, then you can get into the numbers. Basic numbers really, it’s nothing to be scared of.
Here’s our ideal budgeting structure for both businesses and our household. Yes our households deserve a budget too, just like our businesses.
Business Budgeting Basics
1. Have a budget plan. If you’re a realtor then utilize the budget model in the Millionaire Real Estate Agent book. You’re plan should start with the end in mind and work your way backwards.
How much do you intend on earning (income/revenue) this year?
How much do you foresee your cost of sales being?
How much do you intend to spend on operating expenses.
What profit do you intend to earn?
What does this look like on a monthly/weekly basis?
2. Track your spending daily/weekly. You could do this yourself, hire a bookkeeper, or a bookkeeping software like Quickbooks.
3. Review these numbers using a Profit & Loss Statement monthly. Review these by the end of the first week of the following month. You could do this more often, but at bare minimum you need to do this monthly.
4. Review the numbers using a system like KRONC. KRONC stands for:
Keep
Replace
Offset
Negotiate
Cut
5. Review each line item using the KRONC system, asking yourself for each item the following question?
Should I Keep/Replace/Offset/Negotiate/Cut this expense this month?
When you run through this list every month, you will find ways to keep your expenses in line and not get overinflated.
Every business gets overinflated on expenses when a business is flourishing. This is not a matter of if, it’s a when.
If you don’t develop habits around KRONCing your expense list every month, then your expenses will get out of hand and you’ll be stuck making some very difficult decisions.
Get ahead of the inevitable and KRONC your expenses monthly.
Household Budget Basics
1. Have a budget plan. Ask yourself the same question you would ask your business.
How much do you intend on earning (income/revenue) this year?
How much do you foresee your cost of sales being?
How much do you intend to spend on operating expenses.
What profit do you intend to earn?
What does this look like on a monthly basis?
2. Track your spending daily/weekly. You could do this yourself, hire a bookkeeper, use a bookkeeping software like Quickbooks, or one of the many budgeting apps that exist today. Personally, I like plain old excel for this.
3. The weekly meeting. Schedule a weekly household financial meeting. This meeting should include spouses and possibly even kids. I don’t have kids so I don’t intend on giving advice here, but having your kids understand finances a little more is certainly not a bad thing.
This meeting is the secret sauce to your household budget. It gets everyone on the same page and openly discussing finances. Something most households shy away from, which does not serve them well financially.
4. Utilize the KRONC method here also.
Networthing
Okay, “networthing” is not a real word, so don’t bother googling it.
Networthing involves calculating your net worth, and reviewing it regularly. By regularly I mean at least annually. Quarterly or semi-annually would be better.
I generally will do this semi-annually unless I know there’s been some big changes.
Your Net Worth = Total Value of Your Assets – Total Value of Your Liabilities
I’ve always found Networthing to be far more fun than budgeting.
It’s more about growth and building something vs auditing and cutting stuff.
Both are equally important. Setting goals in for each are essential to build and retain wealth.
Perhaps you have heard of the Harvard Business School study of goals in which only 3% of the graduating class had specific written goals for their futures.
Twenty years later that 3% was found to be earning an astounding 10 times that of the group that had no clear goals.
Budgeting and Networthing are the activities to set and track your financial goals.
For years I tried to operate primarily by Networthing and it did bring me financial success.
But that success occurred during an 8 year run of generally positive economic growth.
Some of my habits needed the reality checks of 2020 and 2022.
Budgeting using the KRONC system has saved my business(s) at times these past few years.
It’s probably also saved my household.
I hope these tips help you on your financial journey.
Until next week! ✌🏻
– Sandy Mackay