People often start their blogs as a hobby with some hope of earning some extra money on the side. In those cases, people often don’t think about their blog as a business.
The money doesn’t come fast and easy. When it does come in, it starts as a trickle and builds up. It’s easy to take that money for granted and lose track of your income and expenses.
After all, do you always keep track of that $1.23 that you made on a small affiliate sale?
In addition, financial planning doesn’t come naturally to most people. I know that I always had trouble building up my own savings account. Part of that pressure to improve my financial situation is what drove me to learn about making money online.
Of course, earning more money is only part of the equation. You need to be able to control your expenses and stick to a budget to improve your financial situation. The key is to think of your blog as a business. It IS a business.
Like any brick and mortar store, you are selling a product. It’s easy to forget with blogging because you can’t touch and feel your product. With a blog, you are selling information. If your information is good, people will consume your information and keep coming back. Eventually, this leads to profit.
As a business, you need to track your income and expenses. This allows you to track your actual profitability and if you are earning money it will simplify your work come tax time.
Finally, you want to plan ahead for your blog’s success!
Here are a couple of tips to keep in mind as you operate your blogging business:
Create a Budget
The good thing about blogging is that the overhead is extremely low. If you are brand new and testing the waters, you can start blogging completely for free. However, at some point, you want to have the control that self hosting provides and you will start to incur some operating expenses as you grow your blog.
When that time comes, you want to have in mind a monthly budget. I try and keep my expenses low. My hosting cost through hostgator is only $8.95 a month. I could even lower that significantly if I paid for several months in advance.
I don’t often need to spend money on other things besides hosting. When I do, I make sure to discipline myself to save the money up before spending it.
All in all, the cost of running my blog averages out to less than $15 a month.
Keep a Separate Account for Your Blogging Income and Expenses
This is basically a business account for your blog. You don’t need to do an official business account at a bank. I simply set up a separate paypal account just for my blog.
In the beginning it’s easy to mix your personal bank accounts with your blogging. However, this can lead to a bookkeeping nightmare. Remember, at some point you’ll have to track your income and expenses and pay taxes if you are earning a profit.
There’s no way around it in the beginning.
However, at some point you want to set up a separate account and use that account for your blog.
That way all your income and expenses can be tracked with that account.
I’ve set up my hosting to be paid out of the same account that I deposit all my earning. In most cases, my affiliate earnings are paid directly to that account. At the end of the day, I know that whatever I have in that account is my profit.
Pay Your Bills Electronically
As much as possible, it’s best to pay your bills electronically. This way you have an electronic trail of your expenses. Also, if you set up automatic payments, you’ll never be late.
This is particularly important once you start making a profit with your blog. At some point, you will need to manage your tax situation. Remember, you are now a business. You will have to deal with paying income taxes at the end of the year. If you are keeping close track of your finances electronically, you can easily find ways to offset your income with some business expenses.
Get Professional Help
Blogging is a unique business in that you have multiple streams of income. Money is flowing in from all different sources. At the same time, you can have all kinds of business expenses.
Business expenses can include things like your internet service, your hosting service, buying e-books for research, software purchase for your blog, advertising costs, etc…
If you are successful at what you are doing, you will need some professional help at some point to keep track of everything.
This is when a good accountant will come in handy.
Final Thoughts
Accounting is one of those things that often doesn’t come naturally to a lot of people. Doing all of this financial planning may seem like a lot of bother in the beginning when you are setting up your first blog. However, it’s important to plan ahead and plan for your success.
All in all, earning too much money is a problem any one of us would like to have.
So, why not plan ahead for the time when you become wildly profitable?
To your success!
Richard is a full time professional, husband, father and blogger juggling all the responsibilities of life and running a blog. Richard enjoys writing about life and online money matters.
Financial planning is essential when one considers to start a business (like e.g. a blog which can turn into big business when all is done in a professional manner). Studies show that about 75% of the first year bankruptcies are caused by bad, poor or even the total lack on monetary funds.
If you want to grow bigger in future, write a business plan. That is extremely helpful, this also for your financial planning.
I furthermore fully underwrite the statements and advices given by Richard.