Guest blog post by Summer Smith of Family Finances
Launching a blog is a whirlwind. There are always a million things that need to be done, and it's easy to overlook something like good financial practices. If you're serious about monetizing your blog, don't make these financial mistakes. Start on the right track, and you’ll be so grateful you built yourself a strong financial foundation for your new business.
Guest blog post by Summer Smith of Family Finances
1. Not Tracking your Income
If you are making money from blogging, you need to track your income meticulously. This includes affiliate sales, product sales, even product credit for using an affiliate link. That is all income. If you're wondering what counts as blogging income, Sara F. Hawkins has a great post about it here.
Tracking your income is important for a number of reasons. It helps you see the big picture of how you are making money. This gives you a point of reference when trying to decide what kind of content to generate. Most importantly, it gets you ready for tax season. More on that later!
For tracking purposes, you can purchase budgeting software, or you can track your income in a spreadsheet program like Excel or Google Sheets. Any time you make a sale or get affiliate credit, make sure you take note of the date, the amount, and the source.
2. Not Using Affiliate Links
Many new bloggers have the idea that a certain amount of reach is required before you qualify for affiliate programs and in many cases, this is true. However, there are tons of affiliate programs that don't care what your reach is. Amazon affiliates is a good example of this as anyone can sign up as an affiliate.
While it's important to have posts that are directly targeted towards selling products, make sure that you also have affiliate links for products or services you mention in passing. You want to be ready for any opportunity to make a sale.
Other opportunities to advertise that don't result in direct payment include services like Airbnb, where you get credit towards a future stay for anyone who signs up through your link. I use an online shopping kickback program called Swagbucks, and you better believe I include my affiliate link every time I mention it on my blog!
It's easy to think that the small sales don't matter, or that you need to start by launching your own product right away to make the big bucks. The reality is that no sale is too small and no opportunity should be wasted.
3. Not Planning for Taxes
This is probably the biggest financial mistake any blogger can make. Blog income is taxable, just like any other income. Here in the United States, if you make over $1,000 per year, you may owe taxes. Traditional employees have taxes taken out of each salary payment, but bloggers don't always have a salary and certainly don't have taxes automatically deducted. If the IRS discovers that you failed to report income or withheld information when you filed your taxes, the consequences can be serious.
As a blogger, you may also owe self-employment taxes and estimated taxes. Estimated taxes are due quarterly (April 15, June 15, September 15, and January 15). In addition to making these payments, it’s wise to set a little extra aside in case you underestimated the amount due. You don't want to get a huge tax bill and have no way to pay it! Other tax issues to consider are sales tax for any products you sell and issuing forms to any contractors or affiliates who worked for you.
Don't worry; taxes aren't all bad news -you can deduct expenses that are necessary for your business. Paying for WordPress or hosting? That’s a deduction! Paying for Tailwind or buying a blogging course? Deduction! Buying advertising on Facebook or Pinterest? You got it - deduction! Even electronics or office furniture that are directly necessary for your business can be deducted from your blogging income. In-home offices may also entitle you to other deductions on household expenses like rent.
If you're starting to feel anxious about taxes, don't stress. Someone already thought of that. There is a great ebook available for you by Sarah Kornak, a former accountant and blogger who knows what she's doing. You can also get more information from this helpful article.
For further advice, and to find out more about the tax regulations that apply in your country, you should contact your accountant.
4. Not Investing in your Business
Once you start making sales, you might want to treat yourself for all your hard work - and you should! But stick to a small splurge, rather than a shopping spree. If your blog is making money, it's more important than ever to treat it like a business. If you want your business to grow, you have to invest in it financially. Once you have money coming in, turn it around and reinvest it into your blog. There isn't an arbitrary percentage that you should be reinvesting, but some portion of your income should go back into your blog if you really want to grow it. Some of the best ways to invest in your blog include:
Upgrading your Hosting
Make sure that your site can keep up with your growing traffic. Blogging Apprentice is hosted with SquareSpace, but we can also recommend SiteGround as a hosting service that will grow with your business.
Taking a Blogging Course
Increasing your own skills makes you a better "asset" to your blog. Blogging Apprentice is currently working with The Farmish Collective to offer an all-encompassing blogging course. Keep an eye on this website (or subscribe to the newsletter) to be kept up to date!
At a certain point, a blog becomes too large for one person to handle. You may need to reinvest by hiring a graphic designer or web developer to upgrade your WordPress theme. If your blog income has really taken off, hiring another writer or a virtual assistant can help increase your throughput and audience.
Investing in Scheduling Tools
5. Not Saving for Slow Months
Even experienced bloggers get tripped up here! The holiday season can be a huge time for promos and affiliate sales, however, January and February are notoriously slow. If your blog is your main source of income, you need to be able to make ends meet in the bad months as well as the good. To do this, you need to have a baseline of what your average income from your blog is. If you plug all your numbers in and find out your average monthly income for the past year has been $3,000, make that your baseline. Obviously the goal is to continue to grow, but you should hope for the best and plan for the worst!
Let's say that during the summer months, you make approximately $3,000 per month. Come Fall, you start making some amazing numbers and hit $5,000 in November and $7,000 in December! It may be tempting to spend that money or to invest it all in your business, but you need to put at least 20% into savings.
In January, your numbers might drop, and you only make $1,000. Yikes! How will you pay the bills? If you haven't set money aside from your big months, you're going to struggle through the slow ones. Get it?
A Final Word
Blogging for money can seem like a simple business model, but any experienced blogger can tell you that managing finances is hard! Avoid these financial mistakes, and your blog will be on track for success and ready to grow.
About the author
Summer started blogging at the age of 14. After years of personal blogging, she launched Family Finances, where she writes about frugality and growing wealth as a family. For more helpful money tips, you can follower her on Pinterest here!