One thing that I note is very rarely brought up is FIRE for people with a less defined yearly static pay. I currently work in Sales at a technology company and my base last year came out to less than 1/6th of my total take home pay. My months fluctuated wildly anywhere from $1,200 to $27,000 in commissions. This is the type of sales that people say they wouldn’t have the strength or willpower to do and I have managed to stay on top for the past three years straight.
I never see much guidance for these types of situations. I don’t know if I am doing the most optimal thing by doing it the way I am but I figured I would share my top tips for when your pay is dramatically variable.
If you don’t have the luxury of standardized and reliable paychecks, organization is going to be your biggest friend. The more organized and aware you are of your money and it’s locations and accessibility, the better you will be. For years I was disorganized and did not have my house in order, just assuming I had the appropriate safety nets and systems in place. I was fortunate to not run into many issues, but now that I have been zealously tracking my financials for the past few months, I can tell you the peace of mind is invaluable. Writing down even the most obvious things such as daily transactions allows you to mentally have more grounding when it comes to the ins and outs of your cash flow. Knowing how much you have available at what levels of liquidity can give a sense of peace that takes a lot of the sting out of the variable nature of the pay.
Live on Last Month
This is the standard advice given by most of the members of the cult of YNAB. Live on last month’s income. If you can get ahead of your finances to the point where your budget is accurately in line with your income, there will be no difficulties with bills as you have a majority of you daily living accounted for. This is an even more important budgetary mindset for sales than most as the extreme variance in pay can cause constant issues. Once you get to this point you can blame any difficulties on your own lack of self control with discretionary spending.
This is a rule in life in general but unless you are extremely confident in your pay, keeping your life low key is going to be one of the biggest headache savers. Though sales jobs do tend to make more money than the average salaried person, the pay is tied to an organization and its policies which you generally have little control over. I say this only as I know many a sales person that is doing fantastic with their current resources, and then the well dries up and they are left with a fragment of what they had not two months back. The life is fickle, and unless you have a long history of reliable payouts, you better guess well what sort of mortgage you would be comfortable with.
Most every single financial transaction I do in a month is done on one of my credit cards. I tend to clear them off in full every month, purely using it as a rewards benefit for spending. This has allowed me to keep my utilization low and leave me with an 820 credit score and more credit facilities than I have use for. This also allows you to have every transaction tracked for your future perusal and analysis. The more important usage of credit cards for variable pay structure workers is for when you do have that one month that sinks you. Sometimes the sales just are not going your way, and even if you’re not living any special way your hourly just won’t cut it. This is when you can leave whatever balance is needed until next month to take care of. Some key rules here in that you need to be sure to pay as much as you can this month, paying the minimum puts you in a psychological hole. And you also need to be sure you plan to clear it in the next month or two as otherwise the debt will affect your selling !
Ride the Happy Middle
A guy at my work hit a random stroke of luck on his first full month. He managed to get his hands on two major deals that slipped past more experienced hands and set a new record interning for first 30 days on the phone. Instead of being modest and grateful, he has continued to spout off at all opportunities proclaiming himself the second coming of the lord. New Rolex before the check had cleared, this person forgot that not 30 days prior a friend had saved him from working at a Sprint kiosk selling phones for the next five years. Things took an immediate downturn as they do with beginners luck, and he is muddling through the rest of his first year. You will have some amazing highs and some ridiculous lows in this type of career, the ones that last will learn to ride the happy medium. Not becoming too excited with victory nor too chastened with defeat, finding peace and happiness with consistency will calm the non stop roller coaster of emotion.
Bank Each K
For commission it is extremely difficult to set a definite savings rate as it is very important to be flexible. Forcing yourself to put away more than you can handle is foolhardy and causes undue anxiety. I have had much greater success with living modestly and saving as much as possible with the main mental rule of throwing every spare round thousand into my account. I never have more than $999 sitting in my checking. Anytime you have extra money in your account, you start to notice the dumb things your co-workers spend their money on. New watches, cars, ugly mating prospects. Instead of being reminded of all the spare money each time you see your account, just transfer every dime away. Once it is in your taxable brokerage account you will generally have the self respect not to take it out for a frivolous purchase. What’s better is that you can practice stealth wealth by bemoaning how poor you are and having the empty account to back it up with a humorous view. Most all my bills are paid by the day commission lands, and little to no transactions occur in my actual cash account so the likelihood of having an overdraft is slim. If you constantly leave yourself cash poor, you will see massive gains compounding below deck, and future you can spend to their hearts content.