There. I said it.
So does eating spinach. But sometimes we need to do things we don’t love, to get what we want.
Budgeting, or as I like to call it, a Spending Plan, can help you do exactly that. But just like a diet, it only works when it’s something you can stick to long term.
Sales professionals face a unique challenge in that often our compensation varies from one month to the next. Unfortunately, most of our bills are not variable. So how do we design a spending plan in a world of monthly fixed expenses, when our compensation is not on that same schedule?
Not only that, but how do we LEVEL UP when the big bonus hits.
Top Ten Ways For Sales Professionals To Take Their Finances The Next Level
Step 1 - Start with the basics.
Figure out how much you spend each month. Not just the mortgage, the car, or utilities. Those are easy. The biggest culprits I see that blowup sales professionals’ spending plans are dining out, shopping, travel, and personal care. Think about how much you’ve spent on those categories over the past year and now include those in your monthly plan.
If you don't know what those numbers are, we may have just gotten to the root of the problem. One suggestion that could and should help you find the answer is to review credit card statements for the past 6 to 12 months and classify your spending. Doing so should give you a much better handle on what you need to craft a credible budget.
Step 2 – Determine your income
Next, we want to figure out a number for your annual income. What I often recommend is take a look at your income AFTER taxes from the previous year. Now multiply that by 80% and divide by 12. You now have a conservative monthly income number that you can hit unless the worst-case scenario happens.
Step 3 – Direct all income to a savings account.
More than likely, your annual income number is higher than your spending. Again, the challenge is how to manage those months when they trade places. I recommend having a savings account where you put all your income. This includes your salary, bonus or commission, and even proceeds from the sale of equity compensation. Everything you earn goes directly into this account.
Step 4 – Set up a monthly paycheck
Take the figure from Step 2. Give yourself a monthly paycheck by transferring that amount from your savings account to the account you use to pay the bills.
Boom! You’ve now turned your annual income into a steady, consistent paycheck that you can count on every month.
Step 5 – Reward Yourself!
As sales professionals, it’s in our DNA to expect a reward for working hard. When a deal closes or you've crushed your sales goals, you want to celebrate! So by all means, make sure to enjoy it. If your reward is a $5,000 trip to Hawaii, that needs to be a part of your spending plan. Just make sure you don’t blow it all here. Save some for the next critical step.
Step 6 – Level Up Strategy
When that bonus does hit, this can be a HUGE opportunity for you to make significant gains in your financial life. Often this is over what you’ve already included in your spending plan. Now it becomes a question of goals and priorities. Was your top priority to retire early, get the bigger house, or the college tuition? Circle back to your list of goals. These are the ultimate guidepost to help you decide where those funds should go.
I don't consider myself a runner, but I’ve run a few marathons. When training for a marathon, it’s a lot of basic road work. Most weekday training runs are distances many people could go out and do right now. The big gains come on weekend runs of 10, 12, and 16 miles. That’s when the breakthroughs happen. But unless you have been conditioning from the short distance runs throughout the week, you won’t have what it takes to break through those plateaus and do a big stretch run on the weekend.
The same holds for the level up strategy. The critical piece is that you’ve got to have the basics down first. Unless you have done steps 1 - 5, you can’t take advantage of step 6. It only works when you’ve built a monthly spending plan.
In the next segment of our series, we'll discuss the importance of not just having a rainy DAY fund, but a rainy SEASON fund.