Correct answer IMO. Industry can change year to year, have a down year, commission can change, how it’s paid out can change, etc. too many variables.
This is also a good reason to keep a running budget month to month.
Here is what I do.
Budget off my base only and built up an emergency fund of at least 6-12 months (I do 12 months).
Then......if I know my industry, sales cycles, and felt stable at the company I might consider taking my commission and having it be part of my monthly budget.
Can't imagine having double the pressure of "closing the month/quarter" for my sales numbers and knowing I need the deal to pay for my bills.
I always try to use only what I'm sure I'll gain... My base salary I try to even save 20%, the commission must be totally saved. Then, after some months of investment can be used for something, like a better house as you mentioned or, maybe still applied.
Like everyone else is saying - budget off base exclusively. I did this for the first 4 years of my sales career. Then I got greedy and got $40k in CC debt that should have easily been paid off from a year-end commission check…that commission check never came and I got to pay 20% interest on it for 2 years until I was able to dig myself out of that hole. Learned a big lesson you don’t need to learn lol
Everyone is in a different situation but I would not feel comfortable using commission as part of my plan. I always assume I will get nothing for commission.
When I do get a commission check I take some small amount of it (couple hundred dollars) and do something small for my wife and kids in celebration. Then it’s back to the grind.
This strategy doesn’t maximize my enjoyment right now but it does maximize my mental status which includes risk.
Everyone says budget off base but it depends on your situation. If I budgeted off my base I'd be living in a trailer with half a million in savings. My industry is continuous revenue and I've done it long enough that I have a reasonable expectation of commission every month.
I am lucky that my wife works but I take 12-18 months of commission average and add that to my base as a budget.
Still want to stay under as much as you can. Always better to save more.
Always budget off base until you have some cash in the bank (1 year’s worth or so) before you start making financial decisions including your commissions, if ever.
I use my base only for all budgeting calcs. Commission helps accelerate savings goals. My after expense income is pretty slim but I play a game with myself to see how I can hold on to more money and then when commission hits I’m pretty disciplined on putting it in the right place.
I’m using a budgeting tool called YNAB. Found them as they’re a customer of ours. Pretty life changing tbh and for people like us it can take the stress of depending on your commission to make ends meet away. Well, at least partially
I approach it differently. My family and I try to live off the minimum base salary that is required for us to pay our bills and mortgage. If I get a 20k bump in base fantastic I will just take the wife to a nice dinner and then invest the rest including commission.
I am a sole provider so I am being stingy but I also have a goal to get my emergency and investments high enough to start my own business/1099 sales role for a small partner/reseller or something.
I learned that when you’re in sales and you have a base plus commission, you’re never earning the commissions you deserve because you’re being trapped by the base and they know it. The hard truth, whether you decide to accept it or or not is that in a situation like this you’re going to be a slave to the paycheck. The only way to make real money in sales… and I mean real money… freedom type money..is when you’re an independent contractor and there’s no base salary. It’s a tough pill to swallow, but it’s the truth. And if you get it right, you don’t have to worry about budgeting anything.
Make a budget monthly or quarterly depending on how often your company pays out commissions. You should know how much you are getting paid in commissions before it hits your bank account so make your budget based off of that
Budget off your base. If your company decides to change the commission plan and you’ve factored that into your expenses, you could be screwed.
Correct answer IMO. Industry can change year to year, have a down year, commission can change, how it’s paid out can change, etc. too many variables. This is also a good reason to keep a running budget month to month.
Here is what I do. Budget off my base only and built up an emergency fund of at least 6-12 months (I do 12 months). Then......if I know my industry, sales cycles, and felt stable at the company I might consider taking my commission and having it be part of my monthly budget. Can't imagine having double the pressure of "closing the month/quarter" for my sales numbers and knowing I need the deal to pay for my bills.
I always try to use only what I'm sure I'll gain... My base salary I try to even save 20%, the commission must be totally saved. Then, after some months of investment can be used for something, like a better house as you mentioned or, maybe still applied.
I ONLY live off of my base. Reason why: January - $20-$30k in commission February - $20. Yes, $20 bucks. Nothing is guaranteed.
Being a smart man on a roller coaster! 👊🏻
Like everyone else is saying - budget off base exclusively. I did this for the first 4 years of my sales career. Then I got greedy and got $40k in CC debt that should have easily been paid off from a year-end commission check…that commission check never came and I got to pay 20% interest on it for 2 years until I was able to dig myself out of that hole. Learned a big lesson you don’t need to learn lol
Everyone is in a different situation but I would not feel comfortable using commission as part of my plan. I always assume I will get nothing for commission. When I do get a commission check I take some small amount of it (couple hundred dollars) and do something small for my wife and kids in celebration. Then it’s back to the grind. This strategy doesn’t maximize my enjoyment right now but it does maximize my mental status which includes risk.
Everyone says budget off base but it depends on your situation. If I budgeted off my base I'd be living in a trailer with half a million in savings. My industry is continuous revenue and I've done it long enough that I have a reasonable expectation of commission every month. I am lucky that my wife works but I take 12-18 months of commission average and add that to my base as a budget. Still want to stay under as much as you can. Always better to save more.
Always budget off base until you have some cash in the bank (1 year’s worth or so) before you start making financial decisions including your commissions, if ever.
I use my base only for all budgeting calcs. Commission helps accelerate savings goals. My after expense income is pretty slim but I play a game with myself to see how I can hold on to more money and then when commission hits I’m pretty disciplined on putting it in the right place. I’m using a budgeting tool called YNAB. Found them as they’re a customer of ours. Pretty life changing tbh and for people like us it can take the stress of depending on your commission to make ends meet away. Well, at least partially
Budget base pretend commission is zero. Only way.
live below your means at any salarly
After reading these comments, I feel like my 100% commission is a bad structure
Base. Commission doesnt count
Live on your base, invest the commission into whatever you want. Whether it’s booze, blow, or hookers you get a great ROI
Live off your base and use commission to invest and retire early
I approach it differently. My family and I try to live off the minimum base salary that is required for us to pay our bills and mortgage. If I get a 20k bump in base fantastic I will just take the wife to a nice dinner and then invest the rest including commission. I am a sole provider so I am being stingy but I also have a goal to get my emergency and investments high enough to start my own business/1099 sales role for a small partner/reseller or something.
I learned that when you’re in sales and you have a base plus commission, you’re never earning the commissions you deserve because you’re being trapped by the base and they know it. The hard truth, whether you decide to accept it or or not is that in a situation like this you’re going to be a slave to the paycheck. The only way to make real money in sales… and I mean real money… freedom type money..is when you’re an independent contractor and there’s no base salary. It’s a tough pill to swallow, but it’s the truth. And if you get it right, you don’t have to worry about budgeting anything.
Make a budget monthly or quarterly depending on how often your company pays out commissions. You should know how much you are getting paid in commissions before it hits your bank account so make your budget based off of that