When I started blogging I did everything I could to avoid looking at any numbers other than page views. For months I was “too busy” or I “forgot” to update my income and expenses report, so it just didn’t get done.
This is a very common mistake that a lot of new bloggers make and it’s usually for one (or both) of 2 reasons:
- You know that in the very beginning you’re likely not making as much as you’re spending or you’re just making a few dollars, so you stick your head in the sand to avoid the topic of money altogether.
- You have a mindset issue around money, so you stick your head in the sand and avoid the topic of money altogether. This could also show up in other areas of life if you let your partner handle all the money stuff in your personal life, too.
In reality, knowing where your money is going, where it’s coming from, and how the incoming and outgoing funds balance out is essential.
This is yet another instance where knowledge is power.
Tracking your income. Let’s say you have 3 streams of income on your blog; ads, affiliate income, and an ebook. Keeping track of your income from each source not only gives you a nice self-esteem boost because you can see the numbers grow, but it allows you to more actively promote things that are making you money.
If your ebook had a few more or fewer sales in a particular month, you can explore why and update your marketing strategy. Maybe you put a widget in your sidebar promoting the ebook and it resulted in more sales. Great! See if there’s another place you can link to your ebook on your site to give it more exposure.
If you notice your ad income drop because traffic dropped, you can find out why. Maybe you didn’t email your list every week or you didn’t share as much on social media as the month before, so you need to get back to it. Or maybe you find that it’s part of a trend that your traffic drops for a month or two each year, and then you know not to freak out about it next year.
Tracking your expenses. Even if you’re on board with tracking your income, you might still hesitate to look at what you’re spending. This, too, is very common. We like to see what we’re making, but thinking about what we’re spending… pass. But income is just part of the profit equation. In order to know what you’re blog is actually generating for you and your family, you’ve got to track your expenses, too.
For example, if you decided to invest in LeadPages to create gorgeous popups and a beautiful sales funnel, are you getting a return on that investment? Are more people signing up for your freebie, or are more people going through your funnel and purchasing your product? This may take a few months to know for sure, but if you’re not seeing a return after 6 months, that’s money you don’t need to be spending.
Conversely, if you’re building your blog with the bare minimum of support and are only paying for your domain and hosting, you might find that your income is stagnating because you don’t have a quality email service provider and you aren’t as present on social media (because you have that pesky job) and need to consider a scheduler to help you grow.
There are plenty of programs available to help you track your income and expenses, and if you’re looking for a good one, I recommend QuickBooks Self-Employed (click here to save 55% on your first 3 months). You can connect your bank accounts and credit cards so the program will track your incoming and outgoing funds automatically. You just need to categorize each expense. A tool like this also makes tax time easier because they’ll create a schedule K-1 form for you.
If you are looking to save as much money as possible, or would prefer to track your finances yourself (like me), here’s how I do it.
Use an Excel Spreadsheet
Yes, Google has sheets, but I’m old school and I like Excel. Not sorry.
If you want a downloadable copy of my spreadsheet, click here, or you can create it yourself.
Column A is your income and expense items (leave an empty box in the top row). Then columns B-M are the months, and column N is a year-end total.
Organize your income and expenses by category, with each item listed under its category. I suggest using the categories from the IRA Schedule K-1 form to make tax time easier.
Income. Create a row for each stream of income.
Software Subscriptions. In this category you’ll find your domain and hosting, email service provider, premium theme subscription, podcast host, social media scheduler, etc.
Advertising & Marketing. Here is any money you spend on ads, paying influencers to promote you, or any other marketing materials, like hiring someone to design a logo. You can also create a miscellaneous item here for those one-time expenditures.
Legal & Professional Fees. In this category you can put any legal expenses, like templates or the services of an attorney. You can also include any professional memberships you pay for as well as any courses or trainings you take.
Contract Labor. This includes anyone you hire (other than an attorney) on an hourly basis. A virtual assistant is a common expense in this category, along with graphic designers, social media managers, etc. You may also want a row for miscellaneous contract labor if you hire per job rather than on an ongoing basis.
Travel Expenses. Conferences, speaking gigs, and the related expenses are most common here. Also, if you see clients face-to-face, you can track gas and other costs, like a cup of coffee if you meet them at a café, networking events, etc.
Utilize Formulas and Formatting
Excel offers the option of setting specific cells (or a whole sheet) to be formatted a specific way, such as all numbers entered are translated as dollars. While it’s not necessary, it does make things a bit easier and I find that seeing the numbers with dollar signs next to them helps me feel more like it’s really money we’re talking about.
I also color code things to make it easier to read, and merge cells to make header rows for the categories. Again, not required, but it makes me feel better.
One tool you will want to use is the formula feature. At the bottom of each category I use the SUM formula. Then at the bottom of the month I take the month’s income and subtract (or add the negative) each category’s subtotal to get the total profit or loss for the month
In the year-end column add up each month’s cell so you can see how much you made from each income stream and spent on each program, tool, service, or contractor for the year.
Gather Your Numbers
Once your spreadsheet is set up, it should only take 30-60 minutes a month to update it with your info.
Go to PayPal, Stripe, or whatever payment processor you use and determine your income by stream.
Similarly, open the accounts you use to pay business expenses (this could also be PayPal, your business credit card, etc.).
I strongly suggest you limit your business payments to specific cards or programs. This not only simplifies things when you do your monthly profit and loss, but also keeps things separate in case you’re audited or sued.
Enter all your monthly data into the spreadsheet!
When you get into the habit of looking at your income and expenses on a monthly basis you will not only have a better handle on how your business is functioning and how you can make it even more profitable, you’ll start to notice trends and be able to anticipate changes in your income.
This is a process you want to start as soon as possible. Trust me!
Next week I’ll show you how to set up your accounts to make sure you’re paying yourself every month, putting aside money for taxes, saving for large purchases, and only spending money you have.
For now, grab my FREE Income and Expense Tracker here.