Uncommon Financial Advice For The Digital Marketer

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A topic not covered much in digital marketing for freelancers, affiliates, consultants, contractors and first time business owners is money.

This post is mainly for digital marketers that are making the leap into their own business for the first time, or those that are beginning affiliates.

I know many will read this and disagree with my advice, but I feel that the lessons I learned from running my own business has taught me some very valuable financial advice that only comes from first-hand experience.

Have An Emergency Fund

If you are starting out as a contractor or affiliate, you more than likely worked full time or never had a job in your life. Either way, tough times are coming and they will make or break you.

I didn’t have an emergency fund when I started out on my own. I wish I would have had one to help free up cash flow and to also ride out the tough times I encountered.

When I had financial problems, I would just put it on my credit card with no thought to it. That mistake ultimately hurt my cash flow since that was less money I could spend on campaigns that were also funded by the same credit cards.

I currently have an emergency fund of $1000 in a safe at my house. It is only to be used in urgent emergencies when I need to have cash right now.

Having this fund allowed me to stop using my credit cards for small emergencies, which allowed me more cash flow for my business.

Pay Off All Personal Credit Card Debt

Investing back into yourself pays huge dividends.

When I had credit card debt, I had this nagging feeling in the back of my mind that I had to struggle and hustle every day just to make sure I made my payments every month.

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Many times when my business would get paid, I was forced to pay myself personally so I would have money to cover my personal credit card debt. Each time I paid myself from the business, I would also have to set aside an extra 30-40% for taxes since I now incurred income personally.

If I needed $7k personally ( for bills, debts, etc ), I would need to take out an additional $3k ( so a total of $10k ) from the business to cover the taxes of me needing the initial $7k.

  • That’s 30-40% less overall I now have for my business.
  • That’s 30-40% less I have to invest in campaigns, tools, or supplies.
  • That’s 30-40% less that helps me expand and grow my business.
  • That’s 30-40% that simply goes to the government!

The fact I needed to pay myself just to make these payments on my credit cards forced me to pay in taxes.

Paying off your credit card debt will not only free and un-clutter your mind, it will give you more leverage in your business when needed.

Average indebted household credit card debt is upwards of $16,000.

Start A Savings Plan

This is different and separate than your emergency fund. A savings plan helps pays those bills you can’t live without.

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Bigger life issues will come up when the going gets tough. Maybe your wife gets laid off of work or you lose a few clients and campaigns along your journey.

Having 6 months of living expenses ( What you absolutely have to pay. I’m not talking about your Netflix or cell phone bill here ) will help ensure that you can get by for several months while not cutting back on your business.

The emergency fund simply helps you in cases of unexpected emergency, like when my A/C unit went out last summer.

This savings plans helps you pay your routine and necessary bills. Do you see the difference?

Do not keep this money at home like you do your emergency fund. Keep this money in a money market account ( that has check writing privileges ) or a high-interest checking account.

Live On Last Month’s Paycheck

Hate living paycheck to paycheck? Hate trying to time paying your bills based on when you get that invoice paid or that ACH deposit?

Figure out what it costs for you to live normally for 1 month. Include your Netflix and cell phone bill and all other needed and un-needed expenses.

Now save up that amount and put it in the bank in your checking account as this will be your monthly buffer.

By living on last month’s income, you always have a solid buffer in place for paying bills on time and not stressing out about “when you get paid” from clients and networks.

You can also successfully automate your finances with this method by having your bank send out checks to your utility company and landlord every month and by also setting up automatic payments to credit card companies as needed since you always have this buffer in place.

Save For Taxes As You Get Paid

This is probably the hardest thing for the new consultant or affiliate to do.

When my business gets paid, I pay myself a salary from that money. When this happens I generate income for myself and I owe taxes.

If my business collects a $10k invoice and I pay myself the full amount, I have to take 30% of that money ( in this case $3k ) and put that into a separate savings account for taxes. This leaves me with $7k personally to spend as I see fit.

By saving for my taxes when I get paid, I ensure I do not have a surprise tax bill every quarter or every April that I didn’t plan for.

If you have a payroll system set up ( I do not ), then most of this is taken care of for you. If not, you will need to save for taxes the moment you generate income. Do it as you get paid and not later on when you think, “I can just make more money”.

These days I generally try to NOT pay myself personally so I can reinvest into my business as much as possible since the $3k I had to pay in taxes could have went to something like a virtual assistant or new software.

Having no credit card debt, a $1000 emergency fund, 6 months of savings, and living off last month’s income helps me pay less in taxes overall since I can now use my business money to reinvest back into my business 100%.

Who’s Funding Your Retirement?

If you are out on your own now, what are you doing for retirement?

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Once you have built up a nice moat for your financial needs ( see above ), you have to start thinking about the future.

As an employee, your employer might have been matching contributions in your retirement plan. However, you are on your own now and you don’t really want to still be doing this in your 50′s and 60′s.

Funding your retirement is critical early in your career. Make sure you exhaust all possible options for retirement so you can one day actually have something to fall back on.

Roll over any existing retirement plans you may have or start a new Simple 401k or Roth. Keep it simple and invest in passive index funds and rebalance the account every 6 months when needed.

Put back 10-20%

A lot of you may be thinking, “this sounds nice, but how do I actually implement everything I just read?”.

As you pay yourself, take 10-20% and put it into the steps above. Learn to live on whats left of the rest.

This 10-20% that you put back is what funds your emergency fund. It is also what helps:

  • Pay your credit card debt.
  • Fund your 3-6 months of savings.
  • Start living off last month’s paycheck.
  • Planning for your retirement.

This practice helps you learn to live on less which helps get you away from living “paycheck to paycheck” and will ultimately be your buffer ( via an emergency fund, 6 months of savings, paying off credit debt, etc ) to free yourself to continue to work in your business when life gets in the way.

Review Expenses At Least Every 3 Months

I couldn’t tell you how many times I subscribed to a service or software and then later forgot to cancel it.

Many times I come up with a new idea or have a client where I need a new tool or service to help me execute on my needs. Many months later I might realize that my Paypal or bank account has more money going out than in, only to realize I am paying for services and tools I no longer use or need.

I have probably lost 10′s of thousands of dollars every single year to this habit.

I now have a calendar and phone reminder to check my bank statements every 3 months for recurring expenses that I no longer need and cancel them.

Doing my own bookkeeping also helps me catch these issues before they get out of hand.

Bonus: Cheap. Fast. Good.

When you buy services and tools from others, remember that you can only “pick two” from the above.

Fast and cheap, but not good. Fast and good, but not cheap. Cheap and good, but not fast.

I don’t care what anyone says about the new digital economy and outsourced labor, the above still holds true today.

Determine what your project needs really are and be prepared for this “pick two” outcome when purchasing services online.

If you need something “good”, it won’t be fast or cheap. If you need something “cheap”, it won’t be fast or good.

Know what you’re buying and what you truly need in every business transaction so you are not let down ( and neither is your client ). Also, price yourself according to this idea for your clients needs as well.

In Conclusion

Wouldn’t it suck if you finally took the leap to get out of the “rat race” only to have to rejoin it months later?

What if it happened due to preventable financial blunders like not having some extra money when your wife loses her job or if your car breaks downs and needs a couple of new 02 sensors?

When starting out on your own, it’s easy to take whatever money you make and instantly blow it on bills and material things you don’t really need. It’s extremely hard to be disciplined enough to pay your own taxes, save for a rainy day, and prepare for your future when no one else is reminding you ( your employer ) to do it.

Also, the ideas above are NOT just for you to follow personally. Your business should also be following the ideas above as well.

There is no reason why your business can not have it’s own emergency fund and it’s own savings plan. There is no reason why it should not put back 10-20% for growth and investing.

HEY YOU.
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Hi! I'm Jason Brown and I’m a 36 year old digital marketing intrapreneur living in beautiful Louisville, Kentucky. I've been involved with the Internet since 1996 and have personally made millions online with my creative marketing tactics and persistence. I blog about marketing, money, and motivation. Thanks for stopping by!

2 comments

  1. Niko   •  

    I totally agree with the idea that people need
    1. An emergency fund. You mentioned $1,000. I would say it depends on the person, if they have family etc
    2. 6 months worth of expenses. This is huge!

    It also helps tremendously to not have car payments, credit card payments etc. Those things add up quick.

  2. Andy Black   •  

    Nice post Jason. Every person I know who went from permanent employment to a “contract” role ended up suffering from “contractor-itis” – they saw lots of money coming into their business and thought they were suddenly loaded. They then spent what came in, forgetting to set aside for the impending tax bills. It took me years before I finally got disciplined enough to set aside the PAYE and VAT *every* time I got paid. It’s made a world of difference.

    The other tips are great too. I’ll implement them straight away!

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