When the poop hits the fan, sometimes you gotta go back to basics. I spent some time this past weekend hitting the numbers and crunching the budget to make things work again the way they always should have. It was time to get back to living on just my salary and forget my commission, that’s just gravy.
Huh? You must be daft!
Nope, I haven’t lost the last few brain cells I have; I just went back to reality after realizing the ups and downs of my spending this year. It was time to experiment again, and I love experimenting to see what works and what doesn’t. So, this experiment involved going back to the beginning and making a budget that would have me surviving on my salary only, no sales commission. The hard truth is that my commission can fluctuate dramatically depending on client circumstances, large deals or lack of large deals. As I went through the motions, I began to wonder to myself, have I ever actually taken the time to figure out how much of my commission I get after taxes? After several moments pondering, I realized I never did this very important exercise. I was leaving part of my income and budget up to the whim of the commission gods.
Not a fantastic idea.
Now you can call me daft.
How is it I could get this far and not know what my after tax commission was? Better yet, what was my average after tax commission for budgeting purposes?
What motivated me to this experiment?
Clothing. Or, my excessive clothing spend year to date.
The area I have always been budgetarily challenged in has been fashion. I won’t deny it, I love clothing. I care immensely about the way I present myself to the world, and believe that one should make an effort not to look like a slob when out of doors.
Say what?! Mr. Taxman gets to keep how much?
After crunching numbers in excel, I realized that after taxes, a fantastic $1800 commission ends up being only $1005 after the taxman gets it. For the entire year, my average after tax commission was $820, which is very different from the much bigger before tax number I see on each statement.
Rethinking my budget
I believe that your budget should be a living, breathing, ever changing thing. If something doesn’t work, change it; conversely, like they say, if it ain’t broke, don’t fix it! In this case, it was broke and needed some fixin’. Can you tell that AMC’s Hell on Wheels is back? LOL.
I started fixing my budget by determining what my after tax base salary plus expense check* was, forget the bonuses and commission. Once I had that, I asked myself – what is the bare minimum I need to pay all my bills and survive? This started with all the bills, car payment, 10% savings and debt repayment. Once that was figured, I brought back things like a bottle of wine here and there, a minimal Starbucks spend, extra savings and a couple hundred extra bucks for debt repayment.
*I consider the expense check a part of my salary. It is for mandatory items that I am always reimbursed for as part of my employment.
I was shocked that the numbers were working.
Without divulging any numbers, I concluded that I could live quite comfortably on my salary only. The extra $800 a month from my commission now becomes a bonus debt payment, or money to spend on clothing, travel or extra savings.
Why don’t you put it all to debt repayment?
Some would argue that every extra penny I have should go to debt repayment and that’s fine; that’s their opinion. To each their own. My experience over the past year has been that if I do something like that, I experience severe debt fatigue and go on a massive shopping spree. It may work for you but it doesn’t work for ME. Do what works for you and your personality. Besides, I am already budgeting for a $900 debt payment instead of the standard $722 the bank requires each month.
See, I am a smart cookie after all 🙂 I’m just tired of stressing myself out when I put too much towards debt and have to re-work everything else.