There is only one statistic that lives rent-free in my head.
Read that again.
Twenty percent of Americans earning six-figures are not saving money month-to-month.
If you’re living in San Francisco, New York, or D.C. right now, this might not be a surprise. They are called “high cost of living” cities for a reason. Until last year, rent prices were only going up. Add childcare, healthcare, and/or student loan payments to that, and $100k of pre-tax dollars start slipping through your hands like the finest grains of sand.
If you’re anything like me, you didn’t get into sales to struggle with money. While several costs are unavoidable, budgeting can help you spot easy ways to save. Even better, it shows you where you’re money is going and can even make you a better salesperson.
Has this ever happened? You get a paycheck, pay your bills, put a healthy 15% towards savings or investing, and then...poof. The rest is gone without so much as a goodbye.
Zero-based budgeting will always be my favorite method for taking control of personal finances because it avoids the phenomenon of elusive spending. There’s no feeling of “where did my money go?” because every dollar is accounted for - ideally before it even reaches your bank account.
With this strategy, you create categories for spending and assign values for each. Categories might include:
- Rent or mortgage
- Utilities, WiFi, cell phone
- Health insurance, car payments, debt payoffs, retirement, investment
- Dining, entertainment, clothing, donations, gifts, emergency funds, and anything else you can reasonably predict
If any particular category gets drained before the next paycheck, it must be funded by moving cash away from another one.
Zero-based budgeting is often cast aside for being too time-consuming, but even one or two months of intentional spending has lasting effects. I guarantee that there will be at least one category that surprises you. Either because you accidentally underfund it or because you have so much leftover.
Because each category has a set amount, it forces you to prioritize what matters to you. You’ll end up asking yourself questions like, “Do I really want to move money out of my niece’s birthday fund to buy myself a hamburger?”
How having a budget can make you better at sales
Selling is unique because it has a measurable effect. Closing a deal most likely has a direct outcome vis-a-vis compensation. Often, this leads to one of two situations.
The first is feeling like you have too little money. As the adage goes, the hardest time to make a sale is when you need one. A little fire under the tush never hurt anyone, but constant money stress takes its toll eventually. Desperation does not a better salesperson make.
In this case, a budget is necessary to gain a sense of control. Having everything laid out helps identify costs that can be cut down and provides a clearer picture of baseline needs. It’s easy to feel like the only goal is to optimize earnings. But sometimes, recognizing that a sale isn’t life or death allows you to find the right energy to genuinely engage at work (which ends up being a better strategy anyway).
The second feeling is on the opposite end of the spectrum - feeling like you have enough or too much money. It’s a great problem to have, but it poses a considerable danger to your motivation. If the next few hundred or thousand dollars look a lot like the hundreds or thousands before them, money loses its luster. That’s where genuinely understanding your budget kicks in.
Money has to mean something to you. If it doesn’t (and you don’t find a different motivator), any job in any field will start to look like a rat race. A zero-based budget means every dollar has a purpose. It’s not just another drop in the bucket. It’s a step closer to a goal. Whether that’s a down payment on a house or a much-needed vacation, understanding where your money is going can be an excellent motivator for staying on top of your game.
How to make a budget for 2021
While zero-based budgeting is the most powerful way to budget, it isn’t the only way. It isn’t even necessarily the best way. The “best” budget is a budget that works for you. Cheesy, right? But it’s true. No matter what anyone says, if you can’t follow through with a budget or if it makes you feel even more stressed about money, then there is no point.
Budgets should accomplish two goals. First, it should put you squarely outside of the “paycheck to paycheck” category. Second, it should make money management feel easier.
Here are some other budgeting styles to look into:
With this style, 50% of your income goes to needs, 30% to wants, and 20% to savings. The percentages can be toggled to fit your goals and lifestyle, but the general principle remains. This works well if you are pursuing a traditional retirement (age 65) and like to leave room for your lifestyle to expand as your income increases.
Anti Budget (aka Pay Yourself First)
This is for the “set it and forget it” folks. Here, you calculate how much you need to save for future expenses - such as retirement and emergencies - and automatically deposit it into separate accounts. Anything leftover in your checking account is fair game. With this budget, the more you make in a given month, the more you’re able to spend.
Three Bucket Budget
This method splits money into three general categories: necessities, short-term wants, and long-term goals. It’s a little like zero-based budgeting because every dollar will fall into one of these three categories, but it doesn’t take as much time to plan. Perfect if you crave organization but don’t have the time to sit down with your money every month.
Making a budget that works for you
There’s no such thing as a perfect budget because there’s no such thing as a perfect person. Give yourself time to test out the budgeting styles mentioned above and create a strategy that works for your personality, lifestyle, and goals. Also, recognize that you will likely lose track of the budget at some point, and your goals may change over time.
Regardless, understanding why and how to budget will elevate your relationship with money by giving you purpose and control.