People either love or hate Randy Gage. Either way, the guy has some real MLM savvy, and wrote a very educational article in Networking Times recently about how to evaluate your MLM check.
It’s always exciting to get money in the mail, and when the MLM check is a big one (or bigger than you’ve had before), it can be tempting to splurge. Don’t. According to Randy Gage, that’s what gets a lot of otherwise successful MLMers into trouble. When we start earning big checks, we don’t know how to handle our newfound wealth.
See Your Check for What It Is
Building wealth, according to Randy, means not jumping the gun when you get that big check in the mail. Here are four great lessons I learned from Randy on how to build wealth wisely.
1. Realize Your Check is a Gross Amount
Your monthly check represents your gross earnings for your efforts. Like the owner of any business, you can’t pay yourself on the gross earnings. You get paid on the net profit, which equals your gross earnings minus expenses. Expenses might include office overhead (phone, computer, internet), promotional materials, advertising, travel, business meals, gas, and other vehicle expenses. You also have to subtract any money you want to invest back into your business to expand it. After that, the remaining amount is what you get paid. Sometimes that’s half your gross, or less, but that’s the real value of your check.
2. You Still Have to Pay Taxes
No matter how you have set up your business-sole proprietorship, LLC, or S-corporation-you will have to pay taxes on your commission check. Figure out what you have to pay in taxes and set that amount aside monthly. Include federal, state, and sales taxes, along with annual licensing fees. You may or may not have to write a check to the government monthly, but the bill will eventually have to be paid, so be prepared.
3. Don’t Buy a Cadillac Right Away
There’s always the temptation to “sell the dream” by buying all the accoutrements of wealth. You might think that when your prospects see you with the Rolex, the Cadillac, the fancy golf clubs, they’ll work that much harder and grow that much faster. Guess what? That won’t really motivate your group fast enough to justify the expense. Ask yourself, how many people will have to build how much faster to pay for this new car?
4. Don’t Quit Your Job Too Soon
Many people quit their day job as soon as their commission check equals their take-home pay from their regular job. That’s no good because if you quit when the two checks are equal, you’ll still be living the same lifestyle as you’ve always had. Instead, keep your day job and invest your commission check in your business. Build your business so that when you do quit your day job your MLM business will already be mature and producing a nice income for you.
Yeah, I know, what a bummer right? It’s so much more fun to splurge when that first big check comes in. But having experienced the vagaries of the elastic commission check before, I can tell you this is sound advice. These tips will also help you build a solid financial foundation regardless of whether the economy is up or down.
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Photo credit: Pink Cadillac in a Green Field
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