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Earlier today, I posted the first part of my monthly financial reporting, my April 2008 balance sheet. Publishing these reports online helps keep me accountable for my decisions and forces me to take a look at my progress each month.
After a great February and a good March, April was not quite as impressive. In fact, this is my lowest net income since last April. My net income for the month was significantly lower due to two specific reasons. I’ll explain more following the data. The chart is hard to read within the post, but if you click on the image, a larger table with legible numbers will open in a new window or tab.
Answers to Frequently Asked Questions.
The report is made with Intuit Quicken and Microsoft Excel. Here’s an income and expense report Excel template.
Explanation and Details.
My salary has stabilized after two months in which a raise, a bonus, and a promotion left my paycheck increasing each period. I expect to receive $3,846 every month for the rest of the year except one which will contain three paychecks. I don’t expect any changes to this number unless I decide to leave my position.
Business income has dropped significantly due to the elimination of text link ads on Consumerism Commentary. I’m giving up several thousand dollars in order to help ensure longer term growth. Google feels text link ads unfairly take advantage of the search engine’s algorithms for delivering relevant search results. Most of my business income is currently directly or indirectly reliant on Google in some form, so I’m doing my best to build websites in such a way that they will continue to be ranked highly.
I mentioned last month that traffic from Google to Consumerism Commentary precipitously dropped in March. The traffic levels seem to have returned to normal over the past few weeks, but the experience has reminded me that if I do what to turn blogging into a viable business, I have to find a plan that doesn’t rely so much on traffic from Google.
Other than the large tax bill and entertainment expenses this month, my expenses were fairly low in April. The tax bill should be obvious. I paid estimated taxes during 2007, but just enough to avoid an underpayment penalty. I spent money for a new camera lens this month, an upgrade to the lens that came with the original purchase.
I’m also spending more money for purely business-related expenses lately. When I have a chance, I will reorganize business expense categories. I’ve been using Quicken’s default categories which don’t reflect my expenses very well.
May will be an important month. At the beginning of the year, I set a deadline for me to decide whether I could consider becoming a full-time blogger by the end of June. Even with the income decrease this month, I still earned more from my internet endeavors than from my day job. But if I’m not earning significantly more than I can’t justify giving up my benefits and security. As I’ve mentioned, working for myself full-time will only be viable if I can increase non-advertising income.
May 2nd, 2008 at 11:25 am
Which lens did you get?
May 2nd, 2008 at 11:36 am
Him: It’s a Canon EF-S 17-85mm f/4-5.6 IS USM SLR lens. My next purchase might be the Canon EF 70-300mm f/4.5-5.6 DO IS USM lens, but I’m not quite sure if I can justify that expense yet.
May 2nd, 2008 at 11:49 am
That’s a $3k per month drop because Google got their panties in a bunch – YIKES!. Takes a strong hand to give that up, with the hope for long term growth.
I sure hope that it works out for you, as it’s a really tough pill to swallow. That’s $36k per year.
May 2nd, 2008 at 12:12 pm
MDJ dropped their do follow text links a while back also. Although the income is currently less, I think it will work out for the better in the long term.
May 2nd, 2008 at 2:55 pm
Curiosity about successfully monetizing blogs leads me to an observation. I notice that your cashflow statement accounts for business income, but not for an expense like employees. Do Sasha and Smithee get a cut of the ad revenue from Google? If so, how is that reflected in your financials?
May 2nd, 2008 at 3:09 pm
Tom: They do (plus some). I think the amounts are mapped to a Misc Business expense but I’m usually on a one or two month delay in reporting it. When I re-map all my business expense categories this month, it will make more sense in my copy of Quicken, but on the reports published online all business expenses will roll up to one line.
May 2nd, 2008 at 5:12 pm
For some reason, I’m behind every April, and I don’t know if it’s from tax time or getting out of the holiday danger zone and thinking I’m in the clear.
May 2nd, 2008 at 8:09 pm
This is obvious, but you probably want to run it by Sasha and Smithee before you explicitly list each month how much money they’re getting :).
I’m impressed as always, Flexo. Keep up the good work.
May 4th, 2008 at 6:30 pm
I’m hoping that your numbers in the ‘charity’ column are a mistake. As much as you should think about saving, saving, saving, you need to also think about giving, giving, giving. There is a lot of need in this world for those who haven’t been dealt a great hand in life.
My advise, pick some worthwhile charities and try to plan to give 10% of your GROSS income to them. A wise man once told me, if you continually give, you will continually have.
It seems to always have worked out that way for me.
Think of others! That is my consumerism commentary!
May 4th, 2008 at 6:49 pm
Jim: I give my time and money to organizations whose missions are important to me. My schedule for doing so may not provide me the opportunity to have a YTD amount to show for it until later in the year. Check the archives to read about my charitable giving. Thanks for the advice.
May 4th, 2008 at 11:22 pm
I would highly recommend monthly charitable giving vs. a Dec. 31st tax-deduction mentality towards charity. It’s kind of like a pay-yourself-first concept, except it’s for those who really need it.
There are countless charities now that not only accept recurring monthly donations, but actually prefer it as it provides them a much more consistent cash-flow throughout the year.
A great tool I would recommend is networkforgood.org. It allows you to donate to thousands of different charities at the click of a button but also allows you to keep track of all your donations for tax time. In addition to your treasures, there are tons of listings for volunteering your time
May 5th, 2008 at 9:40 am
Thanks for the recommendation. I appreciate your good intentions.
Networkforgood.org looks like it’s a great resource, but they don’t immediately list the portion of each donation that goes to their own organization. I’d rather deal directly with charitable organizations than introduce yet another middle-man organization into my giving. The convenience may be good for some, and it’s important to make giving as convenient as possible, but I would prefer that as much as my funds go towards charitable missions as possible rather than towards administrative fees and middle-men.
May 5th, 2008 at 9:08 pm
networkforgood.org is a non-profit itself. They exists to help facilitate charitable giving. They charge 4.75% to cover the transaction costs. They are very upfront about the fees they charge to cover the cost of getting your money to your charity. Donating directly to a charity still comes with costs. Staff/processing costs the charity needs to pay to do the same thing.
At least with the networkforgood.org, you know what those costs are up front. You can even choose to donate additional funds (tax-deductible btw) to cover processing costs. The nice thing about networkforgood.org is that you get to pass on only the information you want to the charity of your choice. You can donate anonymously, only by name/email, or the full out disclosure. This limits the junk mail if you’re afraid of getting bombarded with more mail from your charity than the amount you donated.
Here’s some good info on them from charity navigator:
http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=484#77
As for giving throughout the year, need has no timetable. There are always people who are hungry, sick, need assistance. Not just on Dec. 31st.
May 6th, 2008 at 9:58 am
Jim –
I think if you’d go back and read about the business income, you’d see that there is some variance that could wreak havoc on calculating charitable contributions on a recurring basis.
There was a $3000 swing in business income this month alone. If all income above was from a consistent salary, I’m sure it would be much easier to do what you propose – in fact it would be of greater benefit, because it would be easier to calculate the effect on taxes, etc. I’m sure it is not the easiest to look back at such a variance all year long, and determine charitable giving in one lump sum.
Also, giving is not all about dollars on a balance sheet. I’ve worked with a lot of non-profits who will tell you they get twice the value from time and talent as they do financial contributions.
For example:
Financially, I could choose to give $100/month to a specific non-profit. An expense I could budget, commit to, and not think about anymore.
However, I know this specific non-profit is in need of the same services I perform as a function of my regular job, and if they hire the services out as they used to do, they pay a rate of $50 per hour (discounted for their non-profit status).
So, which is the better investment? I can usually give this specific non-profit 8 hours per month of my time at no charge. At $50/hour, I am effectively contributing $400 per month by keeping that expense off the bottom line. They would much prefer my time than my money.
It won’t always work out this way of course, but by giving time in one area, I can give financially to another area where I can’t give time or offer a needed service. It is extending my reach of giving by doing both.
All that said, it’s very hard to get a solid idea of “giving” by looking at an income statement. We need MORE people giving – money AND time – and the effective way to do that is NOT by telling those who are giving that they are not giving enough or their giving is ill-timed.
May 6th, 2008 at 12:08 pm
Brian: I couldn’t have said it better myself. I’d also add that the 4.75% fee charged (deducted from your contribution) by an intermediary means 4.75% less for the charitable organization. 4.75% may be a “low” administrative fee, but it’s unnecessary when it could very easily and just as effectively be 0%.
Organizations like the one Jim mentioned do great things by getting more people in touch with more charities. But if you want your money to do the most good, direct contributions will always win.
May 6th, 2008 at 2:11 pm
There are costs for the charity to process your donation regardless of whether you go directly to them or not. The money doesn’t just magically end up in their checking account.
If you go to the charity’s online site and donate, then the charity pays the fee to process your credit card. If you mail the charity a check, then the charity pays someone to open your envelope, log it in to some database, probably put you on a mailing list (more postage costs later), cash your check, etc.
Either way, you are never going to get to a direct charitable contribution that costs the charity 0% to process. Whether the charity can do it for more or less than networkforgood.org is probably a case-by-case basis.
I couldn’t agree more with Brian’s comments. There is definitely a balance between sharing your treasures and sharing your time and/or talents.
May 6th, 2008 at 5:28 pm
I agree with Flexo, direct donations have an effective fee of 0%. The non-profit staff to “process” a donation still must be in place for other donations as well as those that would come from Network For Good. The donation must be logged, tracked, accounted for, even if it’s from an anonymous donor through NFG. Thus, you will continue to have current overhead, plus the 4.75% to NFG.
In December 2007, the NFG fees went from 3% to 4.75%. That’s a pretty substantial increase. I read they merged with Groundspring (a similar service) but I don’t know much more about what would warrant such a steep increase to fees. To do more advanced things, like have a custom payment page, or accept recurring monthly contributions, NPO’s must pay additional fees and charges.
I will add – NFG opens up many new avenues for donation. On the surface, it would seem to be an excellent addition to an already established direct fundraising effort, or a quick expansion for nationwide exposure (though you must pay registration to solicit donations in most states, and the web would reach every state). NFG is doing a lot of good. For an NPO without the in-house staff to setup a processing gateway on the web and all it entails, NFG seems to be a good alternative with a lot of good reviews in a quick search.
May 7th, 2008 at 11:33 pm
The majority of the fees are for processing the credit card transaction. It isn’t for NFG’s profit (Network for Good is a non-profit—did I mention that)? The flat fee for an online check ($10) is different than the credit cards. You also have employees that need a paycheck, health care benefits, a desk and pencil sharpener, etc.
The direct-donated dollars to a charity or to Network for Good is going to be socked with a discount rate, a transaction fee, interchange fees, etc. that can easily add up to a couple hundred basis points. The more dollars you pump through this system, the more negotiating power you have with banks, merchant account/gateway providers. But don’t get me wrong. Even Walmart can’t get the rates they want and you don’t get much bigger than that. The banks are the ones raking in the dough when it comes to credit card transactions. Of course, they’re also taking the risk of you not paying your bill too!
Bottom line I guess is not to be bogged down with the details. The bank will get their cash one way or the other. The bottom line is to give until it hurts. If you don’t feel the pain a little, then you’re probably not doing it hard enough. If you took your $5K and gave it to a charity of your choice maybe it would cost them $0 (pipe dream) or $250 to process it, but then they’d have some cash to do their thing. Looks like you’ve already lost twice that much just on swings in the market waiting to give it to someone.