finances

Financial Terms Every Serious Blogger Should Know

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Who knew that blogging would someday become a legitimate career choice? And that a blog could be classified as a real business? Ten years ago, blogging was considered something cat lovers did in their spare time, and now it’s a bonafide business venture.

As a small business accountant during those ten years, I’ve seen it all. But the biggest thing I’ve noticed is the upswing in the amount of online ventures, such as blogging.

It’s not just a hobby that makes a little money, it’s a main source of income for many entrepreneurs — myself included. Unfortunately, there not a lot of expert advice available for organizing the financial part of running an online business.

Becoming Your Own Expert

We all know if you want any type of business to succeed, you’ve got to treat it like one! But with the lack of expertise available, we’re left to be our own financial experts — or at least have enough knowledge to stand behind our business.

It’s hard enough to tell friends and family that you’re a blogger, much less to find an accountant or financial advisor who can understand what your business does.

Even the IRS is so outdated they don’t have proper schedules and forms for income received through online ventures. So it’s up to us to research the right financial terms — and decisions — for our unconventional businesses.

Quarterly Estimated Taxes (QET’s)

The IRS requires that taxes be paid on income as it’s earned, which is why a traditional employer withholds taxes from earnings each paycheck.

But when you have your own business, you’re responsible to pay your own taxes on a quarterly basis. Otherwise you’ll get slapped with fees, if you expect to owe more than $1,000 in taxes at the end of the year. And let’s face it, no one likes to pay extra fees to the IRS.

Whether you run an LLC business of one, are a sole-proprietor, have an ecommerce business or sell digital products, it’s all the same to the IRS. But it’s important that you file QET’s on time, in order to minimize your audit risk.

Self-Employment Tax

As a business owner, you may not fully realize that on top of paying the normal Federal Income tax rate, you’re also responsible for your own Medicare and Social Security tax. When you work for an employer, they pay ½ of this tax, leaving you to pay the other half.

But with the privileges of being your own boss also comes the tax burden of having to pay the entire 15.3% of Self-Employment tax (SE tax). Add that to your effective tax rate and you could end up owing a lot of tax at the end of the year.

As a small business, you’re working with a tight budget, so start putting a simple plan in place now, so you don’t to get slammed with a large tax bill. For instance, I set up a separate savings account labeled “taxes”, where I set aside 30% of each month’s earnings, to be paid out each quarter.

This not only makes it easier to pay taxes once the time comes, but helps, your often irregular budget, prepare for the QET’s that need to be paid each quarter.

Ordinary Income Versus Capital Gains

Income earned from a blog or website is often confused as investment income or even passive income. However, as any blogger will tell you, it’s far from a passive source of income, as we put in enormous amounts of time and energy into making it successful.

It’s also not considered investment income — which is generated from buying and selling other investments or assets, and is taxed in a different way than ordinary income.

There are many different types of investments that produce investment income, like stock market investing, savings accounts, and purchasing other tangible assets like art or collectibles. None of which can be used to categorize income from monetizing your blog.

However, you can get a bit of a tax break if prove that your blog is a business asset. Then it could be classified as a capital gain, versus just ordinary income.

On the other hand, if you’re in the business of buying, restoring and flipping websites, then the profits are considered ordinary income. It’s really all about intent, how long you’ve owned the website and the amount of investment you’ve poured into it that determines what kind of taxes you’ll pay once it’s sold.

Classifying Blogging Income

Classifying your blogging income correctly and keeping good records is vital for any solopreneur. Until the IRS and accounting methods catch up to the ever-changing pace of the online world, it’s your job to educate yourself on the right methods for organizing your business finances.

We all aim to pay our fair share of taxes (and no more) while making a decent income for ourselves and our families. The good news however, is that this industry is still relatively new, which means we can forge our own financial path and make our own rules — within reason of course!

With all the time, effort and money you put into your blog, you need to understand these financial terms, so you can make your business a success and pay the least amount of taxes.

Do you treat your blog like a business? How do you handle the financial part of it?

Doing NMX 2014 on a Tight Budget

Author: elkecarvosso6

NMX is a show that will pay for itself if you use your time in Vegas to network and learn as much as possible. I’ve made several business deals, built valuable relationships with a-listers, found new readers for my blog, and more at past NMX/BlogWorld events. In my mind, there are very few good reasons to miss this event if you’re serious about your online content or business.

Still, one of the most common excuses I hear is this:

I’m on a tight budget this year. I’d like to be there, but NMX is just not financially possible for me.

If you’re motivated, however, I do believe that your budget should not be a hurdle. Today’s post is all about attending the show, even if you don’t think you have the money for traveling or conferences.

Step One: Buy your ticket right now.

A lot of people put off buying a ticket because they’re unsure if they can afford to attend or not. Here’s the thing: the longer you wait to decide if you can afford it, the less likely you’ll be able to afford it.

Commit. Buy your ticket right now at the early bird price. Not only will you save money on the actual price of the ticket, but you’ll also flip that switch in your brain. You’re committed to attending. No more “thinking about it.” Now you can focus on making it happen.

If you are still a little wary about buying a ticket this early, keep in mind that tickets can be transferred if you end up not being able to go. Check out our Attendee Terms & Conditions for more information.

Buying your ticket right now has another benefit – it allows you to spread out the money you spend as much as possible. In December, are you really going to be able to afford a ticket to the conference, hotel, plane ticket, etc. all at once? If you’re not a good saver, getting one of those things out of the way now allows you to think of attending NMX as more like a multi-part payment plan, where you pay for things a little at a time between now and January. In fact, that’s my next step!

Step Two: Create a payment plan for yourself.

Make a list of all the things you need to pay for in order to attend NMX. And I mean everything, from your hotel booking to your meals to the checked baggage fee. Estimate the price of each item as closely as possible.

Then, come up with a plan to pay off those things one at a time. Check things off your list one by one.

Think about your life and schedule bigger items during months when you don’t have as many other expenses. For example, if your budget is tight, you probably don’t want to buy your plane ticket the same month your child’s birthday.

But do try to put some money toward your trip every single month or even with every single paycheck. For example, maybe you only have $20 to spend this month because you had a number of other life expenses as well. Buy yourself a $20 gift card to Starbucks to use for breakfast during the trip. You can also just put the money into a special savings account, but I don’t have a ton of willpower. If you’re like me, buying gift cards to use during the trip is better than putting money into an account where it can tempt me to be used for other purchases.

Step Three: Allow your loved ones to help.

If your loved ones are anything like mine, they always ask what you want for your birthday or for Christmas. It’s a little awkward because I’m fine with just a hug and a card, but they want to give me something. Often, I end up with stuff I don’t really need.

This year, make it known that you’d rather have an investment in your business than a new sweater. If everyone pitches in with a $20 gift card to your hotel of choice or your favorite booking site, you can cross “accommodations” off your list of things to buy. You can also ask people to gift “services” for when you’re gone. For example, maybe for your birthday, your sister agrees to watch your children while you’re in Las Vegas.

It doesn’t have to always be a gift. You could trade with your loved ones as well. For example, maybe your drive your cousin to the airport for her next business trip in exchange for driving you to the airport when you leave for NMX. Or maybe your walk your neighbor’s dog while they’re on vacation this summer in exchange for the same while you’re at NMX.

Step Four: Land Some Sponsors

Easier said than done, right?

Actually, I fully believe that one of the biggest reasons some people don’t have sponsors when they attend conferences is that they don’t ask for them. If you’re proactive in finding sponsors, it might be easier than you think! It’s about more than just a blanket beg for sponsors on Twitter or your blog. That rarely works. It’s important to be strategic about it.

Start by looking for people who have sponsored or exhibited at events like NMX in the past or who are actively involved with your niche’s community by sponsoring blog posts, podcasts, giveaways, etc. They don’t have to be brands you’ve worked with in the past. It’s okay to “cold call” potential sponsors if they’re a good fit for your needs.

Next, put together some packages. What will the sponsor get in exchange for paying your way? Think about smaller packages, not just “pay for the entire trip” deals. For example, maybe you agree to wear their t-shirt during the conference one day in exchange for the price of a ticket. Or maybe your write some posts for their blog and give them ad space on your sidebar in exchange for your hotel room.

Don’t just think about what you need. A potential sponsor will say no if the deal doesn’t give them anything of value. Try to see things from the brand’s point of view. Are they going to get a good return on their investment?

Also, especially if you’re new, consider approaching more established bloggers, podcasters, and video producers who might be attending the show. Some people will happily pay to bring along an assistant for the week. You’ll get to attend and they’ll have someone to help them take notes, write posts, network, etc.

Step Five: Cut Your Costs

Lastly, think about some ways you can cut costs on your trip. Luckily, this is definitely possible in Vegas, which caters to tourists and travelers.

Do some research to find the best food deals. Some casinos have super affordable options.
Share a cab to the hotel with other NMXers who have flights arriving at the same time.
Watch for Vegas flight and hotel deals – most booking sites run them from time to time.
Consider driving instead of flying if you live within a few hundred miles (and if gas/parking is less expensive).
Pack just a carry-on instead of checking a bag.
Arrive early on the morning of the first day or leave after the keynote on the last day to avoid extra nights at the hotel.
Pack some snacks instead of paying for overpriced (and often unhealthy) food at kiosks or vending machines.

Get creative. I once went to Disney with less than $100 (after buying tickets) in my pocket for an entire week. If you put your mind to things, you can travel on a very tight budget.

Bonus Step: Plan to Make Your Money Back

The great thing about NMX is that you will see a return on your investment if you’re smart about things. Go into the show fully prepared (tips on that here). Make sure you make it to the sessions that will best help you grow and make more money, and have a plan for networking and visiting the show floor. That way the cost of NMX will be more than justified.

A Note About Insurance – A Blogging Tool You Might be Missing

Author: elkecarvosso6

As many of you may know, I’m a freelance writer in addition to blogging here at at my own site. Over the past few weeks, I’ve been working with an interesting client covering the topic of insurance. It’s actually surprised me how little I knew about insurance before signing on to help this client, and it made me think twice about one type of insurance in particular – renters insurance. As we move into the new year and many of you resolve to make blogging your business, rather than just a side hobby, I wanted to mention here some of the things I’ve learned…because if I need to be more vigilant about purchasing insurance to protect my blog, maybe you do as well.

First and foremost, I didn’t realize that my landlord’s insurance didn’t cover any of my crap. And I have a lot of crap. Enough to make minimalists shudder at the thought. Even if you don’t have a lot of crap, though, the items you do own have nothing to do with you landlord’s policy (in most cases – never say never). Of course, if you own your own home, this doesn’t really apply – your homeowners insurance should cover your items too. But if you’re a renter, you can’t rely on your landlord to purchase insurance. Knock on wood, if something horrible happens, your items will be lost. The end.

Why is that important for bloggers? Well, if you have a typically 9-to-5 job, your home going up in flames, a break in, or a pipe bursting may destroy everything you own, but you can still go in to work the next day to make money and replace your possessions. Not so much if you’re a blogger. You can’t blog without the proper tools, which means, at the very least, a computer. If you don’t have the money in your bank account to purchase a new one right away, you can’t “go into the office,” which means you aren’t making money…and you can see how that can become a ridiculous vicious cycle.For the cost of just a few bucks a month, your tushie is covered.

Something else I didn’t realize – many renters insurance policies also cover you when you travel in case your items are lost or stolen. It depends on the policy of course, but if a pickpocket gets your phone or you leave your laptop somewhere and it’s suddenly gone, you might be covered. That’s actually a huge relief to me. I’m paranoid about my stuff getting stolen or lost when I’m at events like BlogWorld. Not that any of you would swipe my bag when I’m not looking – but Vegas is a big city and not everyone there is nice.

I hope you’ll at least consider checking out the renters insurance policies available in your area. I know this isn’t the sexiest of posts, but if there’s one thing I love about my job it’s getting to learn new and interesting things about the world – and this is important. I’m actually covered now, and it cost me less than $120 a year. That’s less than $10 a month. It’s totally worth the peace of mind.

You can read more about renters insurance at RentersInsurance.org if I’ve inspired you to check out this kind of insurance. I sincerely hope I have. Sometimes we live online so much that we forget about “real life” things like insurance, but it’s important too!

I’d love to hear from some other renters out there – do you have this type of insurance? Have you ever had to put in a claim? Do you think it’s worth the money?

The Financial Vacuum (Or, How I Almost Had to Cancel My BlogWorld Trip)

Author: elkecarvosso6

It’s hard for me to admit when I’ve made a bone-headed mistake. For me, that means my life is hard several times every day, but recently I’ve made a bone-headed mistake to top all bone-headed mistakes.

Actually, it was a mistake I’ve been making over the course of several months. I call the mistake Allison’s Financial Vacuum or, more appropriately perhaps, how I almost had to cancel my BlogWorld trip.

Let me start at the beginning.

Back when I started blogging in oh..2005? 2006? (I can’t even remember at this point)…I did it for clients as a way to make money as a freelance writer. I’m still doing that today here at BlogWorld and also at a few other client-owned blogs, but I run my own sites as well. As purely a client-paid blogger back in the dark ages, as I like to call them, I made some horrible decisions by taking jobs that didn’t pay well. I was treated like crap, scammed out of money, and given bad blogging advice. I was also just graduating from college, so my “living in the real world” expenses were adding up pretty quickly. Point is, I didn’t have much money, and my bank account was dwindling every day.

I figured it out. I got through it. I’m by no means rich, but the amount of debt I’ve paid off in the last three years is pretty impressive. I’ve always made pretty smart financial decisions, which I attribute to the fact that my parents had to pinch pennies when raising me. Seriously, my mom is the queen of coupon clipping and mail-in-rebates, and I bow down to her for that.

But I digress. What I’m trying to say is that I’ve made some smart financial decisions that have allowed me to stay on top of bills and pay off some of my massive debt. Part of that has to do with the fact that I run my own blogs now, as well as the fact that I no longer take crappy blogging jobs where I’m paid next to nothing.

Back in June, BlogWorld was approaching and I began to save for this trip. I wanted to be able to actually enjoy Vegas, since I’ve never been there, so I planed to spend about a week and a half in town, part of which would be at the expo. I did some restaurant and show research and even gave myself a goal of saving up enough money for some guided tours and gambling, even though neither of those are really my thing, so to speak.

Then, the Financial Vacuum happened.

Like many most all people, I found myself with unexpected bills that could not be avoided, which I talked about on my writing blog. It was like my bank account was a spaceship and someone opened the door – all my hard-earned cash for BlogWorld got sucked away into the void. I went from being super excited about the event and my mini-vacation to feeling sick to my stomach. I’m going to have to cancel. My roommate can attest to the fact that I was pacing around my house with tears in my eyes, not just because I was sad to miss the event but because I was embarrassed at my financial situation. I didn’t want to have to explain to Rick, Dave, and everyone else who makes BlogWorld happen that I was apparently too stupid to manage my finances. I didn’t want to have to cancel the interviews I’d set up, because those people were counting on me. I felt like a total failure. I still do, at least a little.

Everyone has financial bumps in the road. I understand that. The mistake I made was not in having unexpected bills arise. That’s not really a mistake; that’s just a fact of life. No, the mistake I made was in not putting away part of my blogging money every money in an emergency fund.

I have to wonder, what would have happened had I not been saving up for BlogWorld? That money would have been frittered away over the months, spent on things like an extra glass of wine while out at dinner or a new video game release that I had to have, even though I barely have time to play. It would have gone to that pair of jeans I wear once or twice a year, that fondue pot that would be super cool to pull out at the occasional dinner part, and that new set of bedsheets with a higher thread count than the just-fine bedsheets I already own.

For the first time in a long time, I was no longer having trouble paying bills…but I wasn’t putting any of my blogging money into a savings account. I’d pay my bills for the month, then pretty much drain my bank account on entertainment and the like. Yes, I could save up for BlogWorld by cutting back on some of my spending, but I should have also been saving up for a rainy day. I wasn’t. Are you?

Every month, we should all be putting away a little money that doesn’t get touched. That way, when life happens and you need the money, you don’t have to dip into other funds, like my BlogWorld fund. Or, heaven forbid, you don’t get caught with your pants down, unable to pay your bills at all because you don’t have any kind of special fund your were using to pay for something in the future.

So what’s going to happen to me? Well, I’m going to make it to BlogWorld. Some amazing people, the BlogWorld crew included, have stepped up to help cover some of the costs. I’m still worried about paying bills when I get home. This isn’t a short-term money vacuum. But, I will make it to Vegas, though just for the event, not for any kind of vacation. I foresee some sleepless nights of worry in my future, but it could be worse. It could be much worse.

More importantly, though, is that this situation has been a wake up call. I need to be more frugal. It’s possible – back in the dark ages, I got by on much less money every month, and I was fine. Just because I make more money now doesn’t mean that I have to spend it.

It’s a hard lesson for any blogger to learn. It certainly was/is a hard mistake to make. As bloggers, though, we’re not financially stable. The most popular blog in the world today could fall out of favor tomorrow. You can’t take for granted that you’ll always be able to make money with your blog, even if you make six figures. Plan for the worst, hope for the best. If you blog suddenly has to shut down tomorrow, would you have enough emergency money to survive for a few months?

I hope that something good has come of my mistake in that I’ve inspired you to be more diligent about savings. If you’ve scrimping and saving just to make ends meet right now, I get it. I’ve been there. I am there. You don’t have to save much at first. Even a few dollars is a start. Six-figure bloggers out there, though? This is for you too. All all need to be smart when it comes to financial planning. Otherwise, all the monetization work in the world won’t save you.