Variable income, whether you’re a commercial real estate broker or other professional with commission income can be a challenge. You work as hard as you can to earn a commission, but sometimes that is delayed, whether it’s due to a landlord, seller, or decisions by your client.
And while all these variables are going on–mostly outside of your control–you still have business and family expenses to cover, month after month after month. No income? Sorry, you still have expenses.
So, how to deal variable income? This is where the Pseudo Salary comes in.
Pseudo Salary Helps with Variable Income and Commission Income
The basic concept of the Pseudo Salary is that you accumulate your commission income or bonus income in an account, then release it to your household on a regular monthly basis, based on your family’s regular monthly needs. You calibrate your monthly withdrawals to your average monthly needs.
So, in months with high commission income, you bring the money into your income account and you pay out a planned amount to your family account. For example, if your monthly family need is $6,000 and you earn $10,000 in a month, you move $6,000 to your family checking account and you keep $4,000 in your business account. You pay yourself a “salary” of $6,000 because that’s what your family needs. You have a family budget based on that, so your family is not hurting because you earned $10,00 but “only brought home” $6,000.
When your income is high, that’s fantastic. Keep it in your income account and pay out what your family needs. When your income is low, that’s part of the life you have chosen in commercial real estate. But you have built up an income account so that you can still provide what your family needs.
How Can I Deal With It?
What we’ve said so far is a simplified version of what you need to enact. At Dominion Financial Advisors, we help you craft a financial plan that is unique to you. Schedule a complimentary consultation to get the ball rolling.