I’ve been a budget-junky ever since my parents made me divide my coins into 3 cups (Give, Save, Spend) when I was a toddler… through my elementary years of writing checks and recording them in a paper ledger (I got a checking account in third grade)… into working years of using Microsoft Money and now YNAB to manage my personal budget.
So, it’s probably no surprise that when I decided to jump into starting my own direct-sales business through Rodan + Fields that I would be sure to be on the budget wagon from Day 1.
I had already been using YNAB for my personal budget for a year and found the principles applied well to my new small business. Here is how I used the 4 Rules to make sure I’m seeing financial success in my Rodan + Fields business (besides all the personal satisfaction that comes from helping people discover great skincare that works for them.)
Rule One: Give Every Dollar a Job
When you get that first paycheck, it’s tempting to spend it all on something fun since it’s “extra” income, but you really need to have a plan of where those dollars should be spent. Here’s my breakdown with the example of a $200 check (your approximate check if you reach 600 PSQV through PC sales and reach Executive Consultant level)
- Giving 10%: $20
- Taxes 20%: $40
- Fixed expenses (Pulse subscription) = $25
- Variable Business Expenses 10%: $20
- Personal Product: $95
- Profit Income: $0
Let’s try it with a higher income check (usually attained through both personal sales and commission from your down line)
- Giving 10%: $100
- Taxes 20%: $200
- Fixed Expenses: $25
- Variable Business Expenses 10%: $100
- Personal Product: $150
- Profit Income: $425
Here’s a little more explanation about each category in case you’re new or just curious:
- Giving: Obviously a personal choice, but I choose to tithe 10% of my income. I encourage you to find a percentage you’re comfortable with and give it somewhere that is meaningful to you, whether it be to your church, to sponsor a child, to your local food pantry, the R+F Prescription for Change foundation, or even let your customers decide what charities they want their sponsor to support.
- Taxes: When you get a paycheck from a regular employer, whatever taxes have already been set aside and paid to the government for you, based on your W2 withholding. This is NOT the same for the commission check you receive from RF Pay Day. It’s up to YOU to save money to pay your taxes at the end of the year. Keeping track of business expenses can significantly reduce how much you owe, but my best advice is to discuss with your tax adviser and make a plan. I’m being conservative and setting it aside as I go, hoping to not owe near this much in April and give it back to MYSELF to spend at the end of the year.
- Fixed Expenses: The optional, but encouraged Pulse website costs $24.95/month and you want to be a month ahead–set aside $25 of this month’s income to pay for next month’s expense. If you’re choosing to pay for your cell phone or internet out of your business income, this is a good place for that too.
- Variable Expenses: Think about all the costs that pop up each month to help grow your sales: samples, postage, packaging materials, invitations/food/rental for a BBL or consultant event, rebates or sales for your customers, etc. It might take some money to start making money, but you don’t want to overspend on sales and samples, leaving you with no money at the end of the month.
- Personal Product: To reach 100 QV each month and qualify for commissions, you’ll get 20 QV from Pulse and will need to achieve 80QV in product. This can generally cost over $100 when you add tax and shipping. If you find yourself short in this budget or not in need of personal product, consider doing a bulk sales or ordering for family off your CRP. For instance, sell 2 eye creams or 3 mineral peptides + brush, or 4 Essentials and a lip balm. Try to keep it as close to 80 QV as possible.
- Profit Income: This is what I personally would feel comfortable “spending” on things outside my R+F business. Use THIS to meet your personal financial goals such as paying down debt, saving for college or retirement, or funding a family vacation.
Budgeting is not about limiting your spending, it’s about getting your money to do what you want it to do.
Rule 2: Embrace Your True Expenses
This is mostly covered in Step 1 since your monthly expenses are part of your budget, but consider this if you want to buy more personal product than what your budget allows (such as a regimen bundle which saves you $ in the long run, but costs much more than $80). You may need to save up for 2 months to pay for that and find other ways to fill your 100 QV, such as retail sales or selling bulk-order products.
I also make myself think about each individual order needing to be a money-maker. You may decide it’s worth it for long-term gain but if you’re just starting out, don’t get caught giving away too much. So, don’t offer a $50 product free on ANY PC order because if someone only spends $80, you’ll be losing money. Don’t off to reimburse a Preferred Customer’s $19.95 enrollment fee if they buy one time and return it. Don’t offer $100 back on a $695 kit that you only make $90 commission on.
Another tip is if you are offering a big incentive, limit it to what you can afford. Don’t offer to give out 5 Eye Creams if you don’t have the cash this month to buy them–you don’t want to get in the habit of borrowing from next month’s potential check. Use only the money you’ve already earned.
Math is hard, but being broke is harder. Do the math.
Rule 3: Roll with the Punches
This is meant to encourage you to adjust your budget throughout the month if needed. This could happen if you make a retail sale and decide to adjust your personal product sales since you now don’t need as much to reach 100 QV. Or you might decide that a $20 entry fee into a flash sale is a good investment (it was for me) or you want to take some personal profit to buy more samples or pay for postage. Just don’t let your accounts go negative–the borrowed money has to come from somewhere and if it’s not in your R+F budget, it will have to come from your family budget. Under no circumstances do I encourage buying on credit card if you don’t have the funds to pay for it today.
Don’t Borrow from your future, make the sacrifice today.
Rule 4: Age your Money (previously known as Live on Last Month’s income)
Don’t spend money that you THINK you’ll earn this month/receive on PayDay next month. Only spend money you have already earned. For me, this applies to kits too. I used personal savings to pay for my kit (I didn’t float it on a credit card thinking I’d make it back the next month). I did sell several regimens out of my kit right away just to get some cash flow going and invested into next month’s expenses. But if I were trying to pay back a credit card for my kit expenses, I wouldn’t have had much to invest in my business in the beginning.
This rule applies to regular paydays too. If I had a great May, I get that paycheck on June 12 and use it to pay for JULY expenses. It obviously takes a little bit to get in this cycle, but at the very least, try to have your June 12 paycheck pay for expenses that occur after June 12 (move your CRP, don’t offer rebates or buy samples until you get paid).
Only spend money you’ve already earned and received.
Those are YNAB’s 4 Rules that apply to not only personal budgets, but your Rodan + Fields business as well. It works for many other direct sales or small businesses too. Some direct sales companies require you to buy inventory before selling it so your budget will look a little different but the same principles apply. I personally love not having to front money for inventory so I can truly apply last month’s commission to next month’s expenses instead of having to pay off last month’s wholesale purchases.
(An annual subscription after the free trial is $50 but it will push your renewal date out one month. Full disclosure: I also get 1 month free if you use my link, but it’s the only way YOU get 1 month free, so win-win)
Interested in learning more about starting our own Rodan + Fields business?
- My website to explore the business: courtneyboone.myrandf.biz
- My website to shop for products: courtneyboone.myrandf.com
- (But message me on facebook for ways to get 10% off and free shipping)
- Join my Rodan + Fields Courtney Boone facebook group.
*The Rodan + Fields Income used in my illustration was just an example and does not indicate or guarantee your income as an Independent Consultant. Read the full Rodan + Fields Income Disclosure Statement for more details.
Please ask questions in the comments or message me through my facebook group! Part of the reason I joined Rodan + Fields was to help others achieve financial independence and financial literacy is one of my passions. I’d love to help you out or hook you up with other budgeting resources!