Answer:

If you have never been self-employed before, the issue of taxes is the biggest threat you will face to surviving in real estate.  Again, like most of the important lessons I have learned, I learned this one the hard way.  Chances are you were not ridiculously rich when you started out in real estate.  You may have had that as your goal, but it more than likely was not your starting place.

My personal mentor in things financial, although I have never met him personally, is Dave Ramsey.  You may know him from his radio program, his books, or his excellent Financial Peace University Program.  He has a great insight into the mind of the self-employed salesperson, and the dangers that lurk therein.  As he says, “Salespeople think they can out earn their stupidity.”  That is where I found myself.  The commission checks would roll in, and there would always be bills there to be paid.  And, if there were not for some reason, there were always new and “vital” investments to make in my business… new computer, new software, marketing, car upgrade, etc.  It was very easy to convince myself that the money I had now could be used to generate even more money down the road… which was obviously its best use!  The problem was that I included payment of my taxes as one of those things I would do down the road when the money I was investing in my business today paid off.  There is a very real trap in that thinking.  There is always some new way to invest in your business.  There is always the big sale that you are working on that will get you caught up on everything.  It is easy to feel that, if you just work really, really hard for a month or so, you can get everything up to date. 

We cannot out earn our stupidity in this area of responsibility.  Unfortunately, our stupidity has a nearly infinite capability of expanding to always slightly exceed our income, whatever level it is.  If you struggle to put your taxes away out of every single check that you receive, you absolutely must get an accountant involved in your life.

I had gone from making about $40,000 a year as a Federal Employee to bringing in a consistent six figure income as a real estate agent… and it almost broke me.  I did not have the skills to deal with that kind of income, and did not have the discipline to do with it what needed to be done.  It is hard for us to admit that we are not great at everything in our lives.  There is no shame in being lousy with money… nobody is good at everything.  There is a shame in not admitting to yourself that you are lousy, and not getting the assistance that you need.