How much cash should a tech sales professional hold?
In tech sales, your commission can vary hugely. Every quarter, different results. It's exactly why the amount of cash you hold matters more for you than others.
The amount of cash you hold should be enough to let you sleep at night, and not so much that your mattress feels too firm.
Okay, nobody keeps cash in the house these days, and you shouldn't either (see our blog on where to actually hold your cash savings).
What we're really talking about is how much should sit in cash.
A multiple of your ‘noodle budget’; plus
Known expenses above income within 5 years
That’s the formula for a perfect cash savings pot.
Your 'Noodle Budget'
Your noodle budget is your minimum monthly expenditure. The amount you’d need to survive if you simply ate pot noodles.
We usually recommend a minimum of 3 months of your noodle budget in cash. For tech sales professionals, we'd start higher than that, at 6 months. Here's why:
Base salary alone often doesn't cover your total outgoings, commission does the rest, and commission moves. A strong quarter can be followed by a reset territory, a missed number, or a company-wide hiring freeze that has nothing to do with your performance.
Tech companies also restructure and lay off fast. Notice periods are often short, and unvested equity isn't a safety net you can spend. 6 months gives you a proper comfortable buffer.
Here’s how to calculate your noodle budget in tech sales and the first part of your cash need.
Check your bank statement for the past month and add up all your 100% necessary living expenses (mortgage/rent, water, energy, council tax etc.). If you can’t decide whether it’s essential, it probably isn’t.
Add in food expenses based on the cost of a pot noodle. On average, we find the minimum food cost is £168 for each member of your household per month.
Add the numbers calculated in (i) and (ii) together and you have your monthly ‘noodle budget’
Multiply by 6 depending on your preference and income security
Expenses above income within 5 years
Known expenses within the next 5 years that cost more than your normal income can cover, should be held in cash, or have a dedicated cash savings plan attached to them.
Never invest money you need within 5 years, unless you're genuinely willing to delay or scale back the spending if markets are down when you need it. Investments carry risk, and you may have less than planned when the money is needed.
For example, say you're planning a new kitchen in 3 years and want to put part of a recent RSU vest toward it. If the date is fixed and the budget isn't flexible, that money belongs in cash. If you could push the date or spend less if needed, investing it becomes an option.
Summary of cash savings
The amount of cash you hold is dependent on your objectives, risk profile and financial circumstances. This is different for every household and you should consider taking financial advice to find an accurate number.
The aim of this blog is to at least provide a starting point for the amount of cash you should hold: 6 times your noodle budget, plus all known expenses over the next 5 years.
Simple, not easy.
Risk warnings
None of the information in this communication should be seen as a recommendation and you should seek independent financial advice. Investments carry risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount invested.
