Every once in a while I like to deviate from the normal sales tips and tricks that the Sales Pro Blog is known for and give you some real world advice to help you be a better sales person. This after all is the ultimate goal here.
Today I want to help you understand the financial precipice that sales commission can lead too and how to manage your finances because of it.
The concept I am going to lay out below is based off of Dave Ramsey’s Total Money Makeover (affiliate link). Dave has been doing this for decades and my family has used his baby steps to pay off over $65,000 in debt. In fact, as of 12/27/13 we are 100% debt free. WooHoo!!!!
So how can I help you get there? Well the first step is to start using a budget. Write out, on paper, before the month begins, where every single dollar you earn will be spent.
The way I’ve done this is to include salary and commissions.
Since I’ve been lucky enough to have my past sales positions paying both a salary (or hourly) and additional commission based on sales.
What we did was live off of the salary for our basic expenses.
- Giving
- Rent
- Groceries
- Utilities
- Phone/Cable
- Gas
- Personal Care (haircuts, clothing, etc)
- etc.
We then used my commission, or any extra cash brought in that month to pay down the debt. If you already don’t have debt you are awesome and can apply that to an emergency fund and investments.
Although you might be thinking, I don’t always know what my commission is going to be this month. I have the same problem right now too. I get commission on the last paycheck of the month. It’s hard to plan out something before the month begins when you don’t know the final value until the 27th.
Well here’s my little tip to get around that issue. You use commission income from this month for next months budget.
For Example:
Lets say I make $3,000 in salary and $2,000 in commission for the month of January. This is assuming this is actually being deposited into my bank account. No need to worry about taxes for this discussion.
Well instead of guesstimating the $2,000 in the January budget, I am going to apply it to the February budget.
So for February I can accurately budget out the normal $3,000 salary and the known $2,000 commission I earned from January.
And if I make $900 in commission for February, then I would be able to use that for my March budget.
Simply push the commission into the next month so you can accurately budget out your expenses each month.
~ Johnny Bravo
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