It's time to get serious about building an emergency fund.

For the real estate professional, the last few years have been a boon. Residential prices hit new highs, condo market soaring, prices-per-foot clocking records around the country. For many, the market's fast-and-furious pace has resulted in consistent commission checks. It has also produced an unfortunate side effect: failure to financially prepare for a soft market.

But now that the market is returning to a more normal pace, real estate agents -- whether experienced or not -- need to review their financial circumstances to be certain they can handle a declining pattern of income by creating and building a strong emergency fund.

The purpose of the emergency fund is to sock away six months' worth living expenses. That's right, six. Other financial professionals may encourage a 3 to 6 month expense range in the bank, but due to a real estate agents' irregular earnings and (at times) large spending obligations -- like E&O insurance, advertising expenses, computer hardware, and others -- I suggest 6 months at a minimum.

Whatever financial situation you're in, the first step is identifying where your money is going. So pull out the checkbook. Open up the Quicken. Logon to your bank account. Your credit card account. This is where the payments diary is found. This exercise will show where you are spending your hard earned dollars. Don't forget your big, non-monthly expenses for the year either like client gifts, insurance premiums, property taxes, estimated tax payments, retirement plan contributions, anything that doesn't come in regular monthly chunks.

Next, devise a systematic way of setting aside your income. When a commission check comes in, for example, understand that 30 to 35 percent of it should be lopped off the top for Uncle Sam. Using a spreadsheet, you can take a commission check and apply ballpark percentages for the other outflows you've identified, to pinpoint a net spending amount (the money left over for you to live on). By using this spreadsheet for every closing, you can get a good view of exactly what your business expenses are and what's left over. Granted, if you are living on a lean budget it may be tough to aside money for emergencies. But if it's possible to squeeze out another $40 or $50 each month, it's worth doing. Although this might appear small, you'll be doing something good for yourself which is always beneficial.

The key to an emergency fund is to save your money consistently and then tap it only for urgent situations. Also remember that the success of any emergency fund savings plan depends far less on rates of return. Instead, it depends on a consistent pattern of putting money away and leaving it there.

Hopefully, your emergency fund is not simply in a checking or savings account at your bank. Those accounts are ideal for regular, everyday home and/or business expenses. But they are easily reachable. What you want is an account which is liquid enough that you can withdraw the money with relative ease when things are really bad, but not so easily accessible that you tap into it for a trip to the grocery store.

Saving money on your own takes discipline but, like most other things, it becomes easier over time. The peace of mind that comes from knowing you have financial resources for when times are rough can be worth the sacrifices you make now.

Published: September 19, 2007

Use of this article without permission is a violation of federal copyright laws.

Rick Salmeron, CFP®, CLU, MBA is president of The Salmeron Financial Network, practicing in Dallas. He offers financial consulting services as a Registered Representative of Commonwealth Financial Network - a member firm of FINRA/SIPC. Rick is a regular writer of articles designed to help real estate professionals with their money matters. His wife is a successful REALTOR®, and as such has a unique insight for the financial needs of the real estate agent. His articles appear in various publications including Texas Realtor, SC Realtor Magazine, Bay State Realtor, and The Dallas Morning News. He can be reached at 214-828-9576 or .