Learning to Live on Commission
For salaried workers, projecting finances can be oh-so-pleasantly straightforward:
I earn X dollars per month.
I subtract Y dollars in fixed monthly bills.
Z is the remaining amount that I’ll have to save, invest or spend on special purchases.
Most insurance agents don’t have that kind of surety. Earning on commission means your income varies from month to month and can change at any time. When “X dollars” isn’t a fixed amount, this can create an uneasy feeling and lead some to make financial commitments that become unaffordable during the lean times.
Nothing like coming up short to teach you the importance of hustling and saving, right? But how do you know how much you really need to hustle and save each month?
This is where having an income-projection system comes into play. You don’t have to be an accountant to create one. If you’re comfortable using spreadsheet software like Microsoft Excel or Apple Numbers, you can take advantage of the built-in calculation processes. But you could also make your own version of a spreadsheet with good old-fashioned pencil and paper if needed.
Begin by visualizing how your income cycles each month—most likely it goes something like this: you expect to earn, you do earn, you expect to get paid, you do get paid. If you start with that, then toss in some income sources and dates for good measure, you’ve got an income-projection system started.
How might this look as a Microsoft Excel spreadsheet?
Now copy this pattern for multiple months and then start filling in the spreadsheet with data. As you do, be cognizant of the delay between when you do work versus when you are paid for it. In other words, if you earn a $100 commission in March but won’t get that money until April, the $100 should be put under Expect to Earn in March and Expect to Receive in April.
Also, be realistic about life circumstances. If your brother is getting married at the end of May, and you told him you’d build an artisanal canoe for his wilderness honeymoon, that might cut into your ability to earn that month. With all that in mind, this is what your spreadsheet might look partway through April:
Notice how the entries have shifted around. When you hit an earnings goal, move it from Expect to Earn to Have Earned, which will help give you a visual on your progress for that month. If you earn more than you expected, that’s fantastic. Just bump up the amounts as you go. When you get paid, move it from Expect to Receive to Did Receive.
For this type of tracking to work, the key is to be consistent with your data entry. Making it a habit to update numbers whenever they change will ensure that you always have a good idea of where you stand at any given moment. Being realistic about your expected earnings is also very important. Over time, you can expect to get better at estimating this since you’ll be able to spot seasonal trends. You’ll also be better able to anticipate when a fallow time is approaching, which can help you tighten your belt before it arrives.
Feel free to customize this example in a way that works for you. For example, if you want to see how much you have remaining every month, you could add two more columns: Fixed Expenses and Amount Remaining. (See below. In this example, Amount Remaining is the Did Receive amount minus Fixed Expenses. May is currently negative because it’s only mid-April, so nothing has been paid in May yet.)
What’s valuable about tracking like this is having a window into the future. What happens if your projections tell you that you aren’t going to bring in enough money in two months? It means it’s time to hustle now to drum up new business.
An easy way to do that is to increase the number of fresh leads you’re receiving from Hometown Quotes. We generate leads in real-time from people who are online looking for an insurance quote. These high-intent shoppers are a great source of clients to build your book. Call us at 800.820.8921 to learn more.