Throughout my 17-year sales career, I have both worked with and managed countless salespeople. The one thing we all have in common is that our income is not fixed. One month will be different than the next; one year can be great while another may be dismal. In an effort to prevent others from lacking money management strategies in this arena as I did early on in my career, I have outlined a few basic suggestions for setting yourself up for financial success.
Make sure to keep track of the money that you earn.
The first step in managing your money is to know how much you are actually earning. I have worked with countless salespeople who don't track how much they've earned on a particular sale after the transaction is finalized. The information is easily accessible by your manager and if they are hesitant about giving you that information, I suggest you find another place to work that will!
You are only going to take home about 50% of what you earn so learn to live on that.
This is the biggest mistake I see rookie, and even some veteran, salespeople make. They forget to factor in taxes, bonuses, draw, insurance, etc. If you think you have made $3800 for the month but only get a $1,900 check, it will definitely throw off your budget!
Every month may not be as good as this one.
Just because you had a good month doesn't mean that the next one will be. Too many salespeople get themselves in trouble by spending as if every month will be the same, which leads me to my next point...
Most businesses are cyclical so learn your business cycle.
If you are not prepared for the "slower season", you may be in for a rude awakening if your income plummets by as much as 50%. For example if you sell boats, you are pretty much assured to have a better summer selling season than in the winter.
Contrary to what your manager may tell you, do not incur any unnecessary debt.
Some managers prefer that their salespeople have debts to cover because they feel it will make them work hard. I understand this philosophy to a degree; I have seen on many occasions where a salesperson with a mortgage and children will work harder because they "have to". On the contrary, when a salesperson is riddled in debt, they may have trouble projecting the positive energy needed to service the client.
Set up a budget.
Just like a salaried person, you need to set up a budget. Start by tracking at least 12 months of income to determine your average monthly income. From there, make sure to subtract about 50% (refer to item #2) and then proceed with the following based on net income:
Set aside at least 10% for savings.
Allocate 70% for living expenses - housing, food, transportation, clothing, etc.
The remaining 20% is for discretionary expenses i.e. entertainment and the unexpected.
Prepare for a slower month.
Instead of getting that new electronic device when you have an exceptionally good month, take some of that extra money and set it aside for when the slower time(s) come. When you've budgeted for an average income of $3,800/month and you have 1 month where you earn $5,400, take at least 25% of that extra income and set it aside for a "rainy day".
These suggestions also apply to the entrepreneur and small business owner since their income fluctuates as well. If you are already following the above mentioned guidelines, then I want to congratulate you! You are ahead of many of your colleagues. For those of you who would like to do better at managing your income, reference this list regularly. You may also contact me directly for a free consultation if you want a more 1-on-1 approach.