“We want to make sure that we don’t leverage high-interest debt like personal loans and credit cards and home equity loans, because that will ultimately put us in a more difficult financial situation.” – Ben Lex in today’s Tip 1763
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Transcript
Scott Ingram: You’re listening to the Daily Sales Tips podcast and I’m your host, Scott Ingram. Today’s tip comes from Ben Lex. Ben is a fee-only fiduciary advisor, which means he does not sell products or make commissions. He’s passionate about helping sales professionals across the US manage their variable income and plan for a successful retirement. Here he is:
Ben Lex: We’re back with another tip for sales professional, not sales tip today. But as we’ve discussed before, sales is so closely tied to personal finance. And if your personal finance is in a good place, it’s going to allow you to be a more proficient and more successful sales professional and actually go out there and earn more. One of the other things that we run into so frequently with sales professionals is sales professionals have a lovely habit of taking on debt and buying the things they want, buying the things they need, and typically leveraging different types of debt, from credit cards to personal loans and everywhere in between. And so I want to address this because cleaning some of this up and getting a better financial picture will allow you to be more successful and ultimately go on and earn more as a sales professional.
And so what areas do we see this happening in? We see this happening with credit cards and just loading up the credit cards and buying what you want and what you need. Sales is a space where you’re constantly keeping up with the guy next to you. It’s a highly competitive field. And so we tend to be highly competitive in the things that we like to buy and the houses that we live in and the cars that we drive. And we could go on and on in that. And ultimately, it’s not the most wise decision financially to do that. And so when we talk about taking on a necessary debt, sales professionals are in a really unique position because while you have the debt and we want to try to clean that up, you also typically have a very large shovel. And what do I mean by that? A large shovel typically will just refer to the fact that you can have a large income. Sales professionals have a lot of control in how much they make. At the end of the day, a sales professional can give themselves their own raise. If you want to go make more money, great. You can go out and sell more, sell bigger projects, you name it, and you can go work for that extra income.
And so it can become a lot easier to pay off this debt. And it’s just not a situation we want you in the first place. But if you find yourself there, it’s okay. We can get out of it. And so I cannot state the importance of this enough is to not only avoid the debt in the first place, especially high-interest debt. So high-interest debt would be anything that’s over seven or eight %, right? Most federal student loans will fall under that threshold. Most private student loans will fall over that threshold. Most personal loans, home equity loans will fall over that threshold. Car loans these days can be anywhere right around that threshold. They can be lower, they can be higher. I’ve seen everything. And then credit card loans and personal loans are also above that.
And so how do we go about this? A lot of this is going to depend on how much debt you have and how much interest is on those loans. And so typically, the recommendation would be to pay off the highest interest first. And so that might be a credit card. You might have a credit card with $5,000 that you carry a balance on each month. And so typically, the recommendation is going to be to get to that debt first, pay it off quickly, and so you can move on to your other debts.
I’m not anti-debt. I’ll also say that. Home loan, there’s a place for them. Car loans, I’m not opposed to car loans in their proper place. If it’s a short car loan of less than three years, and it takes up less than 8% of your income on a monthly basis to pay that car loan, I’m okay with that. The other stipulation I always like to think about with that is you should be investing more than your car loan. If you ever have a car loan of $500, and it’s on a less than three-year loan, you can afford it. It’s a small percentage of your income. That’s totally fine as long as you’re putting more than $500 into investing in retirement each and every month. Those are some general rule of thumbs to think about to help clean up your situation, again, it is okay to finance at times. It is okay to leverage a loan to buy a car or something that you need. But we want to make sure that we don’t leverage high-interest debt like personal loans and credit cards and home equity loans, because that will ultimately put us in a more difficult financial situation. We’re going to be really needy when we start talking to customers and needing those sales.
Scott Ingram: For links to connect with Ben, just click over to DailySales.Tips/1763. Once you’ve done that, be sure to come back for another great sales tip. Thanks for listening!