As a headhunter, you might be enjoying the high life right now. When placements are rolling in and fees are stacking up, it feels incredible. After all, you’re skilled, respected, and your work speaks for itself. But what happens when the market shifts? Clients pause hiring, budgets tighten, and suddenly those once-guaranteed placement fees become less frequent.

Here’s the reality: high earnings in recruiting, like in many industries, are often temporary. You’re on top one day and working overtime to make up the difference the next. It’s easy to fall into the trap of lifestyle creep, letting personal spending rise along with your income. Maybe you’re used to quarterly luxury vacations, a new car every few years, or just the convenience of a higher-cost lifestyle. But when income ebbs, those high expenses don’t suddenly adjust themselves.

Hedonistic creep makes it very easy to adjust to new levels of enjoyment. If last night’s dinner was gourmet, boxed mac and cheese will feel less satisfying tonight. Yet, we can adjust down, like a dieter suddenly finding Death by Chocolate Cheesecake to be too rich. We just need a new normal.

When the Market Moves Against You

Let’s say you’re billing 500K per year when business is good, with a comfortable margin for savings and expenses. But what if the industry slows down, or a key client shifts hiring priorities? A recruiter’s income is inherently linked to client demand, and when the demand isn’t there, the income follows suit. The result? Monthly spending that once felt manageable can quickly become a weight on your shoulders, eating through your savings and adding stress.

Consider research showing that high-income earners often experience sharper, more enduring drops in earnings after a setback compared to lower-income earners. This plays out in recruiting too. Securing the same volume of high-value placements in a down market can take longer and may even come at reduced fees. All while expenses remain at their peak.

The Hidden Risk of a High Burn Rate

The real issue here isn’t necessarily income; it’s how our income is structured. When it’s flowing steadily, the high-income lifestyle can feel reasonable. But if your burn rate (spending) is set based on an assumption the money will always be there, you’re playing a risky game. Say you’re earning $500K annually and spending $200K on living and business expenses, stashing the remaining $75K into savings. It looks solid on paper, but if you hit a dry spell, even a slight dip in earnings can turn your savings cushion into a lifeline, diminishing fast.

Imagine a year when your income drops to $300K. After taxes, you’re left with less than you were spending before. Despite still having a strong income, you’re suddenly in a deficit. Even if you hustle to fill that gap, the added stress and unpredictability can make it a long-term challenge.

Guarding Against Income Volatility

Building wealth and security in recruiting doesn’t just mean making big commissions; it’s about structuring a lifestyle you can sustain even if things slow down. Here’s how:

1.   Diversify Income Streams: While placements may be your bread and butter, consider ways to add stability. Maybe it’s consulting, offering career coaching, or building passive revenue streams to stabilize your business income.
2.   Set Spending Below Peak Income: Make sure your personal and business spending aligns with a conservative income forecast. If you’re earning $500K now, try structuring your expenses based on a lower baseline. This creates a buffer, so a tough quarter doesn’t throw everything off balance.
3.   Plan for Dips: Down periods are part of the business cycle, and preparing for them can keep you afloat. Establishing a rainy-day fund for your business and personal life gives you breathing room if key placements are delayed or if clients pause hiring. We’re going to see a big surge in hiring right now, and then an anticipated recession in 18 – 24 months, depending on whether or not election promises are implemented or not.

When High Income Meets Flexibility

Just like with our candidates, keeping financial flexibility is key. It’s tempting to enjoy the perks that come with a high commission, but linking spending to that high watermark limits your adaptability. Set yourself up so that even if your income dips, you won’t need to scramble to maintain your lifestyle or cover your business expenses.

The recruiting business has ups and downs. But by managing expenses wisely, diversifying income, and building a financial cushion, you position yourself to thrive long-term, regardless of the market’s temperature. Financial resilience is your best asset—no matter how lucrative things may look today.