Are you a sales development rep drawing up leads and reeling in new customers day in and day out? Are you an account executive who is managing new client relationships? Or are you a customer success manager whose goal is to maintain the customers that keep your business afloat?
You could be sitting on any of the highest or lowest rungs on the ladder of positions in a sales organization, making vastly different salaries and commissions. However, what SDRs, AEs, and CSMs all have in common as they move up from operations to leadership is the need to manage their income.
Take the comparison between a sales development representative and an account executive as an example. Our research shows that SDRs will average around $50-55,000 in a single year, while AEs and other higher-ups would make closer to an average of $60-80,000, depending on base salaries. Though employees in these two positions can bring home vastly different incomes, each needs to equally learn the best ways to spend, save, and maximize their money as it increases regardless of the number of zeros in their earnings at year-end.
If you’re watching your salary increase and your wealth grow from tech sales, read on to find out the steps you should take to ensure you’re being financially savvy and making your money grow.
Tend to your credit score
It’s no secret that a higher salary gives you more of a foundation for building your financial health. But what does it mean exactly to be in good financial health? Surely, having a lot of money in the bank does not constitute being financially sound. When you think about it, good salesmen who get a little taste of a bigger income might actually be more inclined to spend it irresponsibly. So, how can you measure your fiscal wellbeing? A good place to start is your credit score.
Your credit score is a numerical value from 0-850 given to you by a credit company that is determined not only by the amount of outstanding debt that you have but also by how well you pay off that debt. In other words, how much debt do you have and do you pay your bills on time and in the correct amounts? Experts deem a good credit score to be around 670 and higher, and 67% of people have a score in this range.
Why does a credit score matter? Well, the higher your score, the more opportunities you’ll have access to. For example, if you want to apply for a mortgage, this score will come into play. For conventional loans, you will need a credit score of about 620 to be considered for approval. But, a lower score doesn’t rule out your home purchase altogether. Requirements for FHA loans, on the other hand, include a credit score between 500-580 depending on your desired down payment.
If your credit score is less than ideal, don’t worry– credit scores can be improved with smart financial practices. Allocating your extra income toward consolidating debt will eliminate some of your obligations while making routine payments on time and in the minimum amount or more can bump up your score. It’s also key to avoid committing to more debt until you can successfully eliminate some of those credit card or loan balances to prevent defaulting.
Pay down some debt
Obviously, credit health and debt have a strong and dependent relationship. While you might not be familiar with your credit score, it’s safe to say that you’re all too familiar with the amount of debt you’re carrying. The weight of outstanding debt wreaks havoc on the majority of the population, so it’s essential that you learn the best ways to manage it while balancing your sales income.
Here are some statistics to give you an idea of debts’ recent impact on people in the US:
- Millennials at the beginning of their sales career (under the age of 35) carry in a whopping average of $67,000 in debt per person.
- The two largest sources of debt for those under the age of 35 are credit card debt and student debt, respectively.
- Assuming that the average sales rep is about forty years old, research shows that adults aged between 35-44 are tied to $133,100 in outstanding debt on average.
It’s evident that salesmen are not immune to the effects of student loans, credit card debt, or even simple poor budgeting. So how can you tell if debt is a problem for you? One way you can measure your financial health in regards to debt is your debt-to-income ratio (DTI). This number divides your monthly expenses by your total income to determine whether you are safely allocating your money to needs, wants, and savings.
For example, to get approved for a mortgage, you need to have a DTI of less than 43%. In other words, if your monthly sales income is $3,000, you would need less than $1,290 in obligations each month to maintain a DTI under 43%. Keep in mind that in an ideal world, this percentage would be closer to 30% if possible, so that you don’t find yourself owing more than you can handle in monthly payments.
To start your debt consolidation, cut back on any unnecessary expenditures and temporarily commit to a minimal-spend lifestyle. Take any leftover cash from reduced expenses and pay down as many loans as you can. One less credit card or student loan payment can vastly improve your lifestyle. Not to mention that doing so can recoup a credit score that has plummeted due to poor habits. It’s also helpful to utilize a pay raise, bonus, or extra commission to knock down some of that debt.
Take advantage of retirement funds
Who doesn’t love earning money without doing a thing? This is essentially what it’s like to put money into your 401k. However, studies show that a third of Americans have less than $5,000 in their retirement fund. As if that isn’t hard enough to believe, 21% of Americans have nothing contributed to their 401k at all. For those who want to live a comfortable, jobless lifestyle when they reach retirement age, they’re in for a rude awakening if they aren’t taking full advantage of this resource.
Employer 401k match programs are an even more important justification for taking a little out of your paycheck each month. This process means that a company will match a certain percentage of your contribution. In this case, a salesman who makes $60,000 a year and contributes 5% of their income would accumulate $3,000 at the end of the year toward their 401k. Oftentimes, companies will offer to match up to 50% of your contributions, meaning you’d be able to bring in $4,500 instead.
Hearing how much money you can earn by putting it away makes neglecting to contribute sound rather naive. Research shows that employees are leaving about $24 billion dollars on the table every year for reasons all across the board. Such a small fraction of your paycheck means you won’t have much to sacrifice, so do some digging into your company’s retirement program if you haven’t already.
Especially if you’re in an entry-level sales position, you’ll understandably need a bit of guidance when it comes to knowing how much of your paycheck to commit. Many financial experts will say you should commit 10-15% of your income, but as many professionals in the workforce struggle with debt in their first several years of work, contributions this large may not be realistic. Your employer can recommend a minimum contribution that will utilize its match program and allow for practical budgeting regarding your circumstances.
You can also do some research on your own using a retirement calculator. It can predict how much you’ll need based on your desired retirement age, lifestyle, and current rate of savings.
If you have the means, speak with a financial advisor to get a better idea of how to go about saving for retirement.
A lot of times, if people don’t see a tangible reason to save their money, they won’t feel obligated to build up a savings account, or even have one in the first place. But, there are countless reasons to constantly work toward growing your savings account, as anything can happen. Layoffs, pay cuts, medical emergencies. Maybe your car breaks down and it requires a major repair.
In fact, research shows that the top reason people save their money is for future travel. This would include the hefty costs of plane tickets, hotel fares, and other travel expenses. The second-most cited reason for saving was for emergencies, while the remaining three rationales were retirement, buying a house, and buying a car, respectively. If traveling isn’t one of your top priorities in life, then an emergency fund could be the next most essential reason to start saving. Especially in these times of financial uncertainty where job security is threatened and money is tight, an emergency fund is that much more critical.
However, non-savers are not representative of the entire US population, and shouldn’t take the spotlight away from those with good financial sense. The average US household has just over $16,000 in their savings account. Whether or not this is a sufficient amount for you, however, can be evaluated based on your lifestyle and spending habits.
This is why it’s so important to start putting away as much of your income as you can. Any amount, big or small, can add up and help you create a nest egg for you and your family. Wondering how much you should put away? Well, it varies from person to person. To put it into perspective, in 2019, Americans were saving about 8% of every paycheck.
Many financial experts recommend following the 50-30-20 rule, popularized by Senator Elizabeth Warren. It follows a framework that encourages you to dedicate 50% of your expenses to needs, bills, or any other financial obligations you have. Then, 30% of your spending goes to your wants, like going out to dinner, a concert, or a game. The remaining 20% would then be allocated to your savings. If you have the willpower and capability, push yourself to exceed that 20% to develop an even bigger safety net that could save your family in the face of a crisis.
Saving money is easier said than done, and there’s a good chance that your current spending habits could make for a difficult transition to the 50-30-20 method. If so, you’ll benefit from making some small adjustments to your lifestyle to create healthier spending habits.
One simple effort you can make today that can encourage smarter money habits is to utilize one of many popular budgeting apps. These online apps provide instant access to your statements, showing you your transactions in real-time. Not only will you be able to see how much you’re spending and on what, but you can also identify problem areas in your spending choices. Online banking services, in general, offer lower overhead fees. Therefore, if budgeting apps aren’t working for you, having access to your finances through your bank’s mobile app is a great place to start.
Cutting your spending is another surefire way to allow more room for saving. Though obvious as it may seem, poor spending is typically a major money problem for individuals and families. Minimizing the number of services you use or bundling them can knock hundreds off of your balance sheet. Or, cutting back on your energy usage can show a significant decrease in your utility bill at the end of the month.
Speak with an expert who can take a hard look at your finances and guide you toward a more structured budget that can facilitate better financial health. As you move up in the ranks from sales rep to account executive, you will start bringing in more and more money. And you know what they say– more money means more problems, so it’s crucial that you know the smartest methods for managing your money.