Assess Your Current Cash Flow
According to financial planners and seasoned sales professionals, the first step toward stabilizing your finances is to create an objective picture of them.
“Do a cash-flow projection which shows ups and downs by month,” says Sestina. “Keep this on a spreadsheet or Quicken, and record your sales and expenses there. The cash-flow sheet has a positive influence because it’s a goal sheet. When salespeople put it down in writing, they usually meet their goals; it’s a psychological thing.”
Developing a useful projection means spending time tracking actual outlays, being sure not to omit anything substantial. “I give them a spreadsheet and ask them to itemize monthly expenses,” says Stevens. “Lots of folks haven’t even done that.”
A consultation with an accountant can assure you that you’re creating a financial analysis sufficient to serve as the foundation for a sound plan.
Create a Financial Plan, Not a Fantasy
The next step is to create a spending and savings plan that will enable you to cover current expenses, save for a house down payment, retirement and other major goals, while weathering the downs and ups of life on commission.
“When your income is sporadic, consider making two budgets, one with your accustomed level of spending, and one no-frills baseline budget,” says Sally Herigstad, a CPA and author of Help! I Can’t Pay My Bills. “When the money comes in more slowly than expected, you can cut back to the baseline budget and know you’ll make it.”
Some experts suggest saving a set percentage of each commission check, regardless of whether you’re having a good quarter. To do that, you’ll need a buffer of perhaps several months’ expenses in your spending account, to get you through the lows.
Get External Support for Your Plan
Very few of us are consistent enough savers to make such a plan work without outside help. So it pays to save through an automated transaction, whether direct deposit or a transfer to a savings, investment or retirement account.
“With each check, set aside a predetermined percentage based on your budget, for savings and investment,” says Brad Stroh, co-CEO of Bills.com in San Mateo, California. “Some financial institutions let you arrange automatic transfers from your checking account to a savings account.”
But don’t count on anyone else to oversee your financial arrangements -- including tax liabilities, which often catch salespeople unawares.
“In my second year as a sales rep, I made great strides but failed to realize that my employer was deducting based on the tax withholding rate of my previous year’s income [which was significantly lower]", says Corey Donovan, vice president of business development at Vibrant Technologies in Minnetonka, Minnesota. “I was shocked to find that I owed several thousand dollars come April 15.”
Look at the Larger Picture
Alas, setting a steady course for your finances and sales career doesn’t ensure success. “If even your baseline budget exceeds your average income over a period, it’s time to make some hard decisions,” says Herigstad.
All your determined planning and disciplined action may ultimately lead you to target a more lucrative sales position or industry. “Sometimes people realize the potential isn’t there in their current job for what they want to do financially, so they look for a new job,” says Sestina.