I do not normally write about blogging here. For me, writing about blogging is like singing a song about the songs one sings rather than singing a song about something inspiring in itself. Nevertheless, this is a blog in which I write about my experiences with money, and blogging has played an increasing role in my finances over the past few years.
After blogging or adding chronological updates to websites since 1994, it wasn’t until January 2005 I received my first check as a result of this writing. Granted I didn’t start Consumerism Commentary until July 2003 and I didn’t add advertising until November 2004, that’s a long time to have a hobby without any consideration of income. In fact, I could stretch my history back to 1989 with my first experience building on-line communities.
Even after that first check in January 2005, income from blogging was slow. I gradually added new projects like the Carnival of Personal Finance, helped form the MoneyBlogNetwork, created pfblogs.org, and offered to host a number of personal finance blogs by other offers for free. January 2007 was the first month in which my income from these activities surpassed my income from my “real” job.
Invariably, one of the most common questions I receive from friends and readers is about leaving my day job. When will I take the plunge by quitting my nine-to-five obligations and dedicating that time to an endeavor that seems to be providing a better payoff? The idea first crossed my mind as a remote possibility in January 2007 and as a serious option in January 2008 when my income from this “hobby” was consistently twice my salary.
The benefits are numerous.
- I would not be tied to any particular location. Without having to report to an office every day, I would have the freedom to work from home, my girlfriend’s house, a public library, or a hotel in Arizona. Additionally, I could live anywhere in the world with a reliable connection to the internet, saving money on living expenses. If I so desired, I could even take the extreme route and live out of my car.
- I would be my own boss. Rather than being subject to the whim of a large multinational corporations and the seemingly endless levels of authority between the CEO and myself (currently at six or so), I make the decisions about which projects to pursue and how much time and effort to devote. I’ll still need to answer to the government when it is time to pay taxes, however.
- I could devote more time to my projects. By leaving my primary job I would have more time on my hands to work with. With more time, I would be able to focus on improving the quality of everything I do now as well as working on new projects.
If those were the only points to consider, I would have quit my job to focus on my writing months ago. Here is the other side to the story.
- There’s not much of a business plan. A good portion of income from this side business is from advertising. It’s rather short on products that consumers can use other than information. I don’t see this as a sound strategy for the long term. People who study this particular industry believe even in the short term, such as this year, on-line advertising could experience a decline.
- Income is too reliant upon Google. Even though only a small portion of income comes directly from Google, most other income sources rely on Google indirectly. The search engine delivers visitors who search for certain topics to Consumerism Commentary or other websites I manage. As I experienced first-hand about a year ago, one small change in Google’s algorithms or opinions could ruin the business model. If only regular readers visit Consumerism Commentary, advertising mostly fails.
- It’s not wise to voluntarily give up five figures of annual income. It’s hard to turn away from a consistent, relatively stable check every two weeks, including low-cost health and disability benefits, a 401(k) matching contribution and discounted stock purchase plan. I also work with interesting people, and it’s nice to spend my time in an environment that is friendly and not too saturated with a sense of urgency. But if even 25% of my total income is stable as long as I perform as expected, I have a foundation to rely on when the other 75% could be inconsistent.
There are straightforward arguments against most of these drawbacks. With more time to devote to my projects after quitting my day job, I could come up with a more diversified business plan. That might include the typical “financial guru” fare like presenting speeches and writing a book. Neither of these excite me for a variety of reasons, the least of which is that I am quite critical of people who are “gurus.” I am more interested in building communities and would like to find more way to accomplish that.
I could also argue that the time I would receive back from my employer could be used to earn more income than I would be giving up by leaving that job, but that’s not a foregone conclusion.
If I am going to take a risk by leaving the corporate world and possibly revealing my identity, it’s better to do so now before I have more obligations and people other than myself who rely on my income. And it is true that I could reenter the traditional workforce if necessary if my plans for self-sufficiency fail. With all this to consider, I will stick with indecision until I decide to make a decision or until my company decides to make that decision for me.
I work for a small Interactive Agency of twenty-four people. This is a company that managed to survive the dot-com bust and, like any company, has good times and bad times. Our president always makes every effort to keep great people, even if it means cutting her own salary. I consider myself lucky to have found a place there, not only because I love my work, but for the atmosphere and common sense of purpose.
Now, I consider myself even luckier. Yesterday, instead of twenty-four people, there were twenty-six. We simply don’t have enough work in process to keep going the way we were, so the management team had to find $60,000 a month to cut out of our operating costs. We had to let go of two project coordinators, ’cause we simply didn’t have enough to keep them busy.
Less drastic, but more personal, is the 10% salary cut that will affect everyone else for the foreseeable future. This will bring my before-tax salary of $80k to around $72k. I’m not going to complain about this. $72,000 a year is a lot of money, especially considering I don’t work under hazardous conditions, or with unruly children, and I don’t have to take steroids to stay competitive.
However, this will require my wife and I to tweak our budget somewhat. $72,000 is a huge salary for someone with no debts; unfortunately I am not that someone. It was that extra $8,000 that was enabling me to make so much progress toward finally erasing my credit card debt that began in 1997. As of today, the balance is down to $3,522. My first instinct for modifying the budget is to say, “Okay, let’s just ignore that credit card until things get better.” I know that’s not wise. The last finance charge on the card was about $37, and if I start making just the minimum payments each month, that number will just get bigger and bigger. It’s a complete waste of money.
But there are other considerations, too. My wife and I have things we want to do this year. In fact, we’ve already paid more than $1,000 to go to a conference in California, but we haven’t arranged any plane tickets or figured out where we’re going to stay for the vacation days when we’re not at the conference itself. And then there’s the pet sitter, the meals in nice restaurants, etc.
Or maybe this is the kick in the pants that I need in order to spend more time working on my freelance work. Given the different ways that a salary and freelance work are taxed, in order to make up the difference, I’d need to earn about $1,000 a month (putting half away for taxes the next April). I don’t imagine that’s going to happen anytime soon, but it does give me something to work toward. Flexo is always happy to have me write more for this site, and there’s a side business in Web Analytics that I’ve been flirting with. My two pro bono clients (I wanted to practice) have been thrilled with my work so far, so maybe it’s time I start courting paying clients.
As I said, I can’t really complain about my cut in salary. If it weren’t for the two car loans from 2006 and my history of dumb materialism, my wife and I would have quite a bit saved up. I have faith we’ll get to a point of having a three-month buffer, but it won’t be this year.
A reporter from the Washington Post is looking to hear from Consumerism Commentary readers who are coping with wage deceleration or stagnation. If you have had to make changes to your lifestyle due to wages or salaries that haven’t been rising as quickly as expenses, you are a perfect candidate for this article in progress. The reporter would like to talk to you about the effect of your stagnant income on your ability to save or pay for a child’s education, or any other kind of adjustment you are experiencing.
If this description fits your experience, please leave a comment here or send me an email (flexo at Consumerism Commentary dot com), describing your situation. I will put you in touch with the reporter.
In my life so far, I’ve had three major chances to negotiate a starting salary. The first was with a cash-strapped non-profit organization that had enough problems keeping its payroll account funded every other week. The second was with a company in the financial industry, a segment of that industry that is known for being cheap in the salary department, particularly for an operational position rather than a business unit. The third was with the same company in a different location.
In all cases, I didn’t have a lot of room to maneuver. And rather than spending my time outside the office looking for new opportunities, I’m spending my time working for myself. It would be nice never to need to negotiate a salary for myself again; and in fact, it’s possible I’ll be on the other side of the negotiating table.
But I liked one of the ideas offered by Liz Ryan at Business Week for dealing with a hiring manager whose offer is lower than one feels they deserve.
Go back to the hiring manager and say: “Thanks so much for the offer. The job seems terrific, and I’m thrilled to be moving along in the process. We’ve had some kind of miscommunication along the way, clearly. I’m focusing on opportunities in the $XX range, and the offer I’ve received is obviously way below that number. If you’re set on this type of salary range, I’m not your hire, but it may make sense to talk about having me consult with you as you get your new plans under way and your new hire up to speed.”
At first, I didn’t see this as an option applying to any of my situations, but maybe it would have. And maybe this is not a bad idea for winding down my day job to begin focusing on my own projects full-time.
Liz Ryan offered a number of other suggestions, like accepting the job part-time (wouldn’t they use that as an excuse to lower the salary offer?), but I don’t seem them applying to most situations.
Lowball Salary Offers: A Working Guide, Liz Ryan, BusinessWeek via Yahoo Finance, March 23, 2009
Today is the deadline for American International Group (AIG) to pay $165 million in the form of bonuses to executives involved in businesses that led to collapse of the company — and the broader economy — last year. The company argues that these bonus payments were agreed to before the company required support from the government and taxpayers to stay in existence, and the government agrees. While some of the bonuses paid by AIG to its employees were reduced, these will go forward.
According to an anonymous government official quoted in the New York Times, the White House is outraged at the continuation of bonuses at taxpayer expense, yet they cannot do anything about it.
Is this too much attention on the one company? Should AIG be permitted to honor contracts drawn up under significantly different financial conditions? These bonuses supposedly help the company retain the best employees; if the employees in these divisions that led to the company’s collapse were the best employees, wouldn’t they have been able to avoid that collapse?
In March 2006, my company rewarded its employees for achieving an enterprise financial milestone by offering a company stock bonus, designed to vest on March 14, 2009. The vesting period was perhaps designed to create an incentive for employees to stay with the company. When the bonus was announced, the stock grant was worth about $2,000. At the high point last year, the value of the package approached $3,000.
If the bonus were to vest today, each employee would receive the same amount of shares, but the value would only be about $300. The value of a share of my company’s stock has declined 90% from the high. To reclaim that high, the price would need to increase by 818%. That would be 5% a year for 30 years or 3% a year for 75 years. It’s probably safe to say it will be a long time before we see last year’s prices again, if ever.
I don’t see this price changing much for the better within the next week before the grant vests. I suppose I should be happy that I still have a job, although I’m considering leaving to work for myself full-time, and I should appreciate receiving this bonus in the first place.
Management says that our company’s stock price is sympathetic to the rest of the industry and the decline is not due to internal factors.
Let’s say you are the chief executive officer of a formerly strong financial company. Either your company has faltered under your leadership or you’ve managed to steer clear of toxic assets but the slumping economy has affected you. Or perhaps you are newly hired, brought in to oversee a struggling shell of a company as it tries to regain its stature.
Either your company desperately needed the funds it has received from the Troubled Asset Relief Program (TARP) or the business was competitively forced to take the handout because you wanted your company to stay on par with your peers who were bailed out.
Now President Obama wants to limit your compensation to a measley $500,000. No fair, right?
It makes sense to limit executive pay when taxpayers have stepped in to propr up your balance sheet, whether the company needed the money or not. But it’s largely symbolic, like when CEOs declare they will reduce their salary to $1 per year. They can do that for two reasons: they’ve already made a fortune, and they’ll continue to make a fortune thanks to stock options, deferred compensation, and other perks worth millions of dollars.
Obama says the CEOs can continue to be compensated above and beyond $500,000 through company stock, restricted from sale until the TARP obligations are complete and the government has been paid. This is a great deal; financial stocks have been pummeled. They may go lower, but this built-in waiting period will almost ensure that CEOs stand to win in the long-run.
What do you think about this $500,000 “limit?”
As the economy continues to trudge along, more people are submitting claims for unemployment benefits. In the week ending January 17, more than 4,776,000 Americans received checks from the government to cover job loss, an increase of 61% over the same week last year. This number includes 588,000 individuals who filed for unemployment for the first time that week, an increase of 3,000 compared to the week ending January 10.
Has unemployment in this economic downturn affected you? I have one friend who owns a business. He has had some trouble keeping clients lately; fewer companies want to pay for his services when they need to direct money to more immediate issues. I have an additional friend who was laid off last year when a large publishing empire tightened its belt, but he is the only person I know who has lost his job due to what the media has been talking about for months.
That is, except for Dilbert. Dilbert’s boss fired him for using company resources to start a web business (watch out, bloggers), but Scott Adams’ decision to allow Dilbert to join the unemployed masses may be rooted in the general economic sentiment in this country. Recent strips have Dilbert concerned about his lack of income in a world in which bills are imminent and unforgiving.
Here are two recent strips which illustrate what many Americans are experiencing right now. Click the strips to view them full-size.
January 26
January 27
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