How I Blew $5,000+/Month in Online Income (And Why You Should Care)

How I Blew $5,000+/Month in Online Income (And Why You Should Care)

Welcome to the un-official “Personal Finance Week” here at Common Sense Marketing!

Okay, so I have to admit that I wasn’t all that excited about Tuesday’s “How to Save Money on Your Affiliate Marketing Business” post.  For some reason, it didn’t seem to *pop* for me and I didn’t think it was going to do that well in terms of traffic or comments.

And yet, it seems to have struck a chord with a lot of people.  It’s had some really great feedback, and some very thoughtful comments from people who have had the same experiences I have.

I think that’s because saving money and being financially responsible isn’t something that we really talk a lot about when it comes to affiliate marketing.  We should, but sometimes it seems like we’d all prefer to remain blissfully ignorant of the fact that most “gurus” aren’t as well off as they’d like us believe, or that most of the tools and products sold today just won’t come through on their promises of making you rich.

So today I want to talk to you about the other side of the personal finance coin – not just managing your spending, but how to manage the income you do earn from your online businesses responsibly.

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The truth is, if you work your butt off and focus on continually improving yourself and your skills, you’re probably going to make some money online at some point.  I can’t say how much you’ll make (and honestly, it’s probably not going to be the hundreds of thousands of dollars each month that IM sales letters promise you), but I can say that there are tons of different ways to make money online and that if you’re diligent about moving forward with your business, you’ll probably run into at least one of them.

And what I can tell you is my own personal story (yes, this is another one of those – “do as I say, not as I do” – kinds of posts).

As most of you know, I started online in 2007 and quickly ran through just about every online business model that’s out there.  Eventually, I started gaining traction with freelance writing and affiliate marketing, and by the middle of 2009, I was earning between $5,000-$6,000/month online.  Certainly not enough to call me “rich”, but combined with the take-home pay from my day job, it was a pretty good living for someone who was just a few years out of college.

But here’s the thing – I have absolutely nothing to show from that time.

After about six months, the writing contract that represented the bulk of my online income ended unexpectedly when the company I was writing for closed up shop, and I wound up selling off many of my affiliate marketing sites to help pay for my wedding and my first home.  But for someone who was earning pretty good money online, I still had:

*Student loans, that should have been paid off with some of that money…

*Credit card debt that I incurred when I was younger and stupider (that *definitely* should have been paid off with that income)…

*Almost no emergency savings to protect myself from abrupt changes in income (like the end of my major writing contract)…

So where did the money go?  I’m honestly not sure.  I know my husband and I went out to eat more, and that we bought more clothing, more groceries and more gifts for others.  But we didn’t travel extensively, we didn’t buy new cars or expensive electronics, and we sure as heck didn’t save any of it.  Our spending rose to match our income levels, but I’m still utterly at a loss as to what we spent it on.

Yes, it’s hugely embarrassing to admit that – to myself, and to all of you who are reading this.  But like the lessons I learned about spending too much on marketing products, I truly believe that having my income reduced drastically and being forced to learn to live within my means was one of the most valuable lessons I’ll ever learn.

Today, my husband and I are on a much more stable financial ground.  We’re still paying off debt (and probably will be for awhile), but now we’ve got some savings tucked away and we’re much more aware of where our money goes each month.  We’ve also got a plan in place for how we’ll handle increases in my online income (here’s a hint – it isn’t buying a bunch of new clothes or electronics… 🙂 )

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Now, this is the part of the article where the “Don’t be that guy” lesson happens.

Earning money online is an amazing feeling.  There’s nothing like the thrill you get from seeing that “You’ve Received a Payment!” notice from Paypal in your inbox, or from watching a project you’ve worked your ass off on take off and start to make sales.

But losing that income wasn’t the hardest part of the process for me – knowing that I’d been so irresponsible with such large amounts of money was a thousand times worse.

So excuse me for a second while I go all Suze Orman on you, but you need to have a budget in place and you need to be very clear about how you’ll spend any income you bring in through your affiliate marketing business.

It isn’t enough to say, “Oh, once I start making some money online, I’ll think about tackling my credit cards…” because once that money is finally in your hands, there’s going to be a ton of temptation to spend it on other things.  Decide right now what your financial priorities are, and come up with a concrete plan for how you’ll allocate your internet income towards these goals.

If you’re totally lost when it comes to personal finance, I highly recommend these resources:

*Get Rich Slowly – JD is a personal finance genius, and his site is a wealth of information on how to apply financial principles to real life.  Check it out now!

*The Simple Dollar – Another great resource that’s full of personal finance tips.

*Mint.com – There are a few sites like this, but I prefer Mint to handle my day-to-day finances.  Basically, it allows you to import transactions from all of your accounts and look at them in one place.  I’m sure that if I had something like this running back in 2009, I would have noticed that I was spending ridiculous amounts of money on things I didn’t need.

If you have any other resources to share, please feel free to leave them in the comments below.  I’d also love to hear whether or not you’ve got a plan in place to manage your internet income responsibly.

Thanks, as always, for reading – I promise we’ll be back to actual marketing advice this weekend 🙂

Image: RambergMediaImages

25 Responses to How I Blew $5,000+/Month in Online Income (And Why You Should Care)

  1. Ben says:

    This is a good point. Essentially, if you don’t manage your money well, making more money won’t improve your situation in the long run.

    • Sarah says:

      Exactly. How many people do you know that make good money from their jobs, but are still drowning in debt?

      Being “rich” is about making smart choices, and no matter where you are in your business journey, it’s never too early to start putting those principles into place.

  2. Jon says:

    Sarah,

    That must sting a little bit looking back. BUT, you are a wiser woman now! So, once you rock it out in the next chapter of your journey you’ll know the pitfalls to avoid.

    Congrats for building up your business to such a respectable level. Many people never see one thin dime from their online efforts. You dominated.

    Get Rich Slowly is great! My budget is my best friend; my friends think I’m cheap but I sleep soundly at night.

    Thanks for the great share, Sarah. I like this financial angle even though it isn’t your cup of writing tea.

    Jon

    • Sarah says:

      Haha – yeah, it stings. There’s definitely a part of me that wonders, “What if I hadn’t been so stupid with money…?”

      But no use getting hung up on that when there are so many exciting things going on this year! 🙂

  3. Jon says:

    P.S. The articles that grow legs never seem to be the ones we expect.

  4. Jk Allen says:

    We live and we learn Miss Sarah. At 24 years old, just over a year out of college (2004) my income increased x3 in the matter of a month. And what did I do – spend 3 times more money! I don’t have a lot t show for it today, but I did purchase the house I still own and a few other things not worth mentioning. The most rich of the experience were the lessons that guide me today.

    I think we sometimes need those experiences. We hear from, but living them gives us the full perspective. Unfortunately some people loose it all. Fortunately our blessings called for a different outcome.

    Thanks for sharing!

    • Sarah says:

      Hahaha – What is it about being 24 that leads you to bad financial decisions?! 🙂

      I agree 100% that I’ve learned more from these experiences than I ever would have from reading financial advice. And I feel very lucky to have had this “wakeup call” early on – I know plenty of people don’t get that shock until they’re much further into debt/overspending than I was.

      I guess the best we can do is to try to be better each day, and be grateful for the opportunity to try again 🙂

  5. Awesome post! I know I have a lot of debt from being young and dumb. My main focus is to pay all of that debt off with any extra income I get. I have a plan in place and I don’t go out as much to help save. Reading this post is inspiring. It makes me want to save every penny I find!

    This is actually my first time on your site. I like it a lot and was forwarded here by Pat Flyyn. I’ll be back here more often. Cheers!

    • Sarah says:

      Randy – Thanks for stopping by! It sounds like you’ve got a great plan in place for managing money – I’m sure that’ll serve your business well going forward.

      I love Pat’s site, and I’m still on a total “fan girl” high that he posted a link to my site there! Just checked out your site as well, and any IM site that lists beer bongs in the header gets my approval 🙂

  6. Kesha Brown says:

    Yes, I love the “you’ve received a payment” from any sources! 🙂

    I used to be that “nickel and dimer, record every expense” chick but that really helped me understand where I was spending money. I quickly saw that my entertainment expense bucket was getting larger and larger so had to step back! LOL

    Now that I’m more into a spending routine, I’ve become a little more lax and have found my “financial management rhythm” so to speak.

    I tell people it’s very important to properly manage your money regardless of how much or how little you have. It’s what will eventually determine our financial success. TTYL!

    • Sarah says:

      Kesha – Thanks for commenting!

      I agree – the actions and habits we put into place now (no matter how much or how little we’re earning) is what determines how successful we’ll be financially. Good for you for being so on to of things 🙂

  7. Hi Sarah… Although it’s a bitter pill to swallow, just be grateful that you learned this lesson fairly early on in your business life. I have definitely been there and done that. It got so bad that I had to move back home with my parents. Talk about embarrassed!

    Nowadays I pay my bills 3-6 months ahead of time. At one point I paid my rent for an entire year up front because I couldn’t stand the thought of ever losing my home again. I keep an emergency fund, and I absolutely live below my means.

    I also lived abroad for a long time, which was a serious money saver for me. It was actually cheaper for me to live outside of the US, and I had the time of my life. That’s a money saving plan I can stick with for the rest of my life! 🙂

    Dahlia

    • Sarah says:

      Dahlia – You’re right, learning lessons like these sucks. But I’m doing my best to be sure they’re ones I don’t repeat 🙂

      Where did you live overseas? Sounds like a great way to save money!

      • My ex-husband and I lived all over the place… Rome, Paris, Buenos Aires, Morocco, Bangkok, Vancouver, etc. We always got apartments in the ‘regular’ part of town, not with all the other expats. That’s what made it less expensive. We never paid $500-$800, a month, (except for Rome and Paris), and we always got our apartment once we arrived because then would could look in the local publications.

        Right now I’m eyeballing Hawaii or Korea. My daughter says Hawaii because she wants to surf. I want Korea. We’re flipping a coin!

        Dahlia

        • Sarah says:

          Oooh – Morocco’s on my list of places to visit someday. I’m a sometimes-professional belly dancer, and I know it’d be a blast 🙂

          But both Korea and Hawaii sound like great options as well!

  8. Diana says:

    Hi Sarah,

    This is a great post which reminds me of advice which I have heard before “It’s not how much you make, it’s how much you save”.

    I admit I am not good with finances but fortunately my husband is extremely careful. We have in the past kept a daily expense log for everything, including the $0.80 chocolate bar!

    We log everything to see where we are spending most of our money and how much we are saving each month. From this log, we can decide where to cut back if possible. I know some people who are afraid to look at their bank statement because of all the debt they have.

    I believe that when you keep a daily log of expenses, you learn to see how the “numbers” can help you rather than see them as something negative. Also, it helps to reduce that impulse purchase. You actually think twice because it would need to go down on a log.

    Thanks for sharing this 🙂

    • Sarah says:

      Diana – Thanks for your comment!

      You’re right that logging expenses is hugely important in figuring out where your money is going and where you can make changes. I love Mint for doing that – there’s a lot of graphs and tools you can use to set budgets and see how your spending in different categories changes over time.

      Sounds like you and your husband are on the right track!

  9. Jayne Kopp says:

    Sarah, it sucks you had to learn the hard way, but at least you did.

    I too have been on both sides of the coin and I understand how easy it is to expand your living expenses when you have a higher income.

    I went from running my own offline business which was very successful and I do recall my Visa Statements being much higher than they are to day.

    I have been blessed with the opportunity of staying home to raise my children once I sold my shares in the business, so it was necessary for me to tweak my spending habits.

    There is a huge difference now because I have lower income while building this business, but all in all, I am very pleased.

    I was raise by a penny pinching mom. My dad is a little more ‘free’ with his spending though.

    I am not sure if it’s a good thing though to be exactly like my mom. When I started investing in my online education some of the programs I joined were a healthy dollar amount. My mom would gasp… while my dad would say “well… you are a determined person… and education is important”….

    Sometimes I don’t tell my mom costs as she has a way of making me feel guilty.

    I know I’m sensible though after seeing both sides of the coin and do my best to instill these habits in my young children.

    Thanks so much for sharing. I know you will go on to do well again and this time you’ll put some aside.

    ((Yikes… sorry for the long comment… was almost like a blog post) Maybe I’ll write on something similar!

    • Sarah says:

      Haha – Go for it! Some of my best ideas are inspired by other people’s comments or blog posts.

      It’s nice that you got to see both sides of the spending coin from your parents. That will give you a good perspective to share with your children.

      Personally, I’m trying to find balance with my finances. I don’t save as much as I could, because I also want to be free to spend some money on experiences. Becoming an extreme penny pincher would prevent a lot of that, and the last thing I want to be is well off financially, but sitting home alone and miserable!

  10. Q says:

    Timely post: My Mother passed and left us 5K each. I was planning to use that for courses and finally invest in myself. But its gone…and I seriously cant think of how…time to do the accounting so I can kick myself. I did buy a few courses,,they are great and Im starting new ventures because of them but they dont add up to 5K…

    • Sarah says:

      Q – I know exactly what you mean 🙁

      But, hopefully you can use this as a lesson to be a little more cautious about overspending in the future. We’re all human, and we all make mistakes!

      Best of luck to you 🙂

  11. eric says:

    I understand how you feel about being young and dumb about money. I was a loan officer back in 2002-2004.. I was in my early 20’s

    If I would have been smart with the money I could probably be retired right now well not retired but you know way better off that I am now.

    One time I remember getting a 10k check for two weeks of work and I thought NICE… eh eh snicker snicker i am 22 what am i going to do with this money? How am i going to spend it before my next comes in. You know because at that age retirment and home ownership is not on your things to spend money on list.

    With that check I went to japan. Not so bad if it was a planned trip but it was spontanious. spontanious as in I got a travel deal email and 2 hours later i was @ the airport.

    If i would have known what i know now about money I think I would own my house and have a couple hundred k in an IRA

    woulda should coulda i know but now I know how to manage money a lot better.

    • Sarah says:

      Wow – I’m surprised at how common this kind of thing is (at least, I’m glad I’m not the only total doofus out there when it comes to money!).

      Japan sounds great, though. And now you know more about how to manage that kind of windfall in the future.

      The lessons suck to learn, but hopefully we grow from them and do better in the future 🙂

  12. Hey Sarah, I have a great personal finance resource! The Financial Intelligence section of my IEC blog! 🙂

    I absolutely get where you are coming from when you mentioned that once our income increased you didnt know where it went but what you did know is that you had nothing to show for it, which kind of goes to prove the point I made on one of my personal finance articles.

    The point was that we should not be more concerned with the big expenditures we make on things like big screen tvs, homes, cars, trips, etc because more often that not most people have common sense enough to know, or simply do not have the sustainable financial resources, to make big purchases.

    Instead, we should take a look at our daily spending habits, which are the vast majority of where our income gets eatened up. Think about how many times you (speaking generally) eat out on a daily basis, stop at starbucks, buy a snack, etc. If you find that you are spending an average $30 per day, when you add it up over the the long term the expenses become substantial.

    David Bach, personal finance coach and author calls this the Latte Factor. I recently discovered that he is actually giving away one of his Best Seller books for free. You can get your free copy at FinishRich.com!

    Enjoy!

  13. Sarah says:

    Hector – Thanks for reading, and thanks for sharing another great personal finance resource 🙂

    The “Latte Factor” is absolutely what got me into trouble (or at least, I assume that’s what did it since I don’t have any big purchases left over to show from that time in my life). Putting effort into controlling those small expenses is just as important as being mindful of larger purchases!

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