S Corp vs. LLC: Which Is Best for Your Business?

S Corp vs. LLC: Which Is Best for Your Business? – SmartAsset

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So you own a business and you’re looking to incorporate. Two of the most popular business structure are the S Corp and the LLC. Which is best for your business can depend on many factors, such as what you do for a living, your tax situation and more. We’ll walk through the key characteristics of the two, and how to decide between them.

Why Incorporation Is Important

In most cases, the best reason to incorporate is liability. When you create a corporation, you separate your personal assets from your company’s assets. If someone wants to collect a debt or, at worst, file a lawsuit, they can only do so against the company and any assets in that company’s name. In turn, your personal savings remain protected. Both LLCs and S corporations can effectively protect your home life from a downturn in your professional world.

What Is An LLC?

A limited liability company, or LLC, is a type of corporate entity. It’s one of the most basic business types, and chiefly serves to separate the assets of the business owner(s) from the business itself.

If you opt to create an LLC, you will have created an entity that exists entirely separate from yourself. Clients will do business with this entity, which will have its own assets, debts and liabilities. If someone collects a debt or sues the LLC, they cannot pass that debt on to you.

What Is An S Corporation?

An S corporation is a tax status that allows a company to pass all profits directly through to its owner(s). This allows a small business to distribute profit-based income without double taxation.

Under the standard corporate form, known as a C corporation, a company first pays its corporate income tax. It then pays its owners and workers, who in turn pay personal income tax on that salary. This works well when a company functions entirely separately from the people who own and operate it.

However, in many small businesses, owners will take the profits entirely as their personal income. This creates a problem of double taxation, because in this case a business owner’s corporate income tax and personal income tax are one and the same. An S corporation allows the company’s owners to pay taxes only once via their personal income tax forms.

S Corp vs. LLC: Similarities and Differences

It is important to note that, because one is a corporate form and the other a tax status, LLCs and S corporations can, and do, overlap. To be clear, an LLC can file for S corporation tax status. Conversely, if you have S corporation tax status, you can also incorporate as an LLC. These forms do share a number of similar features, though, including:

  • Asset Protection – Both S corps and LLCs protect your personal assets from debt, bankruptcy, legal liability and other possible losses incurred by the corporation.
  • Double Taxation – All corporate profits pass along to the owners of LLCs and S corps without incurring corporate income taxes. This helps you avoid being taxed twice.
  • Multiple Members – LLCs and S corps can each have anywhere from one to multiple members, though an S corporation caps out at 100 shareholders. Further, only U.S. citizens and legal residents can be members of an S corporation.

In practice, one of the largest differences between LLCs and S corporations lies in how they assign payment. Under a default LLC operating as a sole proprietorship/general partnership, profits and expenses pass entirely through to the taxes of the individuals involved. Each participant both deducts business expenses and claims all profits on their personal income taxes. The LLC itself does not have any tax filings.

Under an S corporation, the members assign themselves a salary that the company pays out of its operating budget. This income must be reasonable for their position and industry. Then, after the company pays all expenses, it passes along any additional profits as a distribution to its members.

Here’s an example that illustrates these differences. Sue is a freelance programmer. She currently has an LLC that she operates. Last year she made $100,000 in income and had $10,000 in business expenses. Here’s how her tax situation plays out under the two statuses:

  • Sole Proprietorship LLC – Sue would claim $100,000 of personal income on her income taxes. She would reduce her taxable income by the $10,000 in expenses she incurred, leaving her with $90,000 in taxable personal income.
  • S corporation LLC – Sue has determined that a reasonable salary is $75,000. She would report that $75,000 as earned income. Her corporation would then pay the $10,000 in expenses and pass the remaining $15,000 as a profit distribution to Sue, who would report and pay taxes on it as corporate profit income.

Operating requirements for a multi-member S corporation are also significantly more complex than they are for an LLC. An S corporation must adopt bylaws which meet IRS guidelines and must have a corporate governing body that includes a board of directors and officers.

How Taxes Affect S Corps and LLCs

Most Americans pay a FICA tax of 7.65% of their income under $132,900, encompassing contributions to both Social Security and Medicare. Their employer pays the same 7.65% on their behalf. The self-employed, however, pay both sides of this tax, creating what’s known as the “self-employment tax.” This combines the aforementioned rates to the tune of a 15.3% tax on all self-employment income beneath the $132,900 limit.

The self-employment tax applies to all pass-through income as well. It does not apply to corporate profit distributions, though. The profit distributions will likely be taxed as ordinary income, while you may be able to classify them at the lower dividend income rate. In the end, you will not pay any payroll taxes on them.

S corporation members do not pay self-employment taxes on their profit distributions either. As a result, these members usually try to minimize the income portion of their earnings in favor of profit distributions. This is entirely valid as long as your income remains within a reasonable range. If you attempt to reduce your income too much, you will likely trigger an audit.

Continuing our previous example, Sue’s LLC earned $100,000 and spent $10,000 in business expenses last year. Under the S corporation form, Sue would save herself more than $2,000 in payroll taxes. Here’s how things would shake out:

  • Sole Proprietorship – Sue will claim the $100,000 of income and the $10,000 of expenses herself. This will lead to her having $90,000 of taxable income. She will pay the 15.3% self-employment tax on all of it, leading to $13,770 in self-employment taxes.
  • S Corporation – Sue takes a salary of $75,000. Her LLC will pay $10,000 in expenses and send her $15,000 as a corporate profit distribution. Sue and her LLC will pay the full combined 15.3% tax on her salary earnings, coming to $11,475. She will pay no payroll taxes on her profit distribution.

Bottom Line

In most cases, if you do business as an individual or a partnership, you should consider forming an LLC. This corporate form is inexpensive and highly flexible. Unless you anticipate major growth involving external shareholders and outside investment in the future, an LLC is a good way to protect your personal assets.

For an individual operator, the choice to elect S corporation tax status is largely a matter of accounting. If you would save a meaningful amount of money in self-employment taxes, it is likely worth electing S corporation status.

For a partnership, consider the operating requirements of an S corporation carefully. Would it significantly affect your business to adhere to bylaws and corporate governance? Do you have few enough members, and will you likely keep that membership group small? If so, once again, consider whether an S corporation would create enough tax savings to justify the costs of filing and paperwork.

Tips for Managing Your Finances

  • In-depth budgeting is a worthwhile strategy to adopt if you’re looking to improve your long-term finances. It may, however, be difficult to build a budget if you have little to no experience doing so. To get some help, stop by SmartAsset’s budget calculator.
  • Many financial advisors specialize in financial and tax planning for business owners. You can find a financial advisor today using SmartAsset’s financial advisor matching tool. Simply fill out our short questionnaire and you’ll be matched with up to three fiduciary advisors in your area.

Photo credit: ©iStock.com/andresr, ©iStock.com/PattanaphongKhuankaew,©iStock.com/alfexe

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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5 Considerations Before Becoming a Digital Nomad in the U.S.

Where would you live if you could work from anywhere? The idea of geographic independence had remained just that for many workers — an idea — until the pandemic offered an opportunity to try it in action. Many U.S. workers found themselves working from home in 2020, which actually turned out to be “work from anywhere,” giving them a firsthand taste of digital nomadism.

Now, as more companies promise ongoing flexible remote-working opportunities in 2021 and beyond, some employees are weighing the benefits, complexities and uncertainties of giving up a permanent home for good.

Yet there’s far more to becoming a digital nomad than packing your stuff into storage. From taxes to transportation, here are five factors to keep in mind before hitting the road as a U.S.-based nomad.

1. Taxes

While domestic nomads don’t have to worry about overseas tax rules, they must still navigate the complex web of state income taxes. Since each state has its own independent rules, this can get overwhelming in a hurry.

“The general idea for freelancers is that states want to tax people based on where their butt is, doing work,” explains Adam Nubern, the founder of Nuventure CPA, which specializes in digital nomad taxation. “So if your butt is in Arizona doing work, then Arizona is more often than not going to want to tax you.”

Freelancers and others who earn self-employment income must either navigate these rules on their own or hire a professional to do so for them. And full-time employees earning W-2 income face another challenge: Pitching nomadism to their employers.

“Set expectations that your employer will not want to do this,” Nubern says. “They may have to file in each state you will be in. The complexity, especially for a small employer, can be a massive knowledge and compliance hurdle.”

For example, if you spend a tax year in six different states, your employer could be expected to file returns in each, navigating the reciprocal tax agreements between them. Some states even lack these agreements, so “they will not give a dollar-for-dollar tax credit for the amount you pay to the other state,” according to Nubern. In other words: You could get taxed twice.

2. Quality of life

Geographic independence is about much more than byzantine tax codes, of course. The big appeal of becoming a digital nomad is that it allows you to work where you want rather than live where you work. What makes for a high quality of life differs from person to person, but it’s important to start thinking about what matters most to you.

“I personally love staying in places that have great hiking and nature, right outside of the major U.S. cities,” says Julia Lipton, founder of venture capital fund Awesome People Ventures, who is approaching her four-year mark as a nomad. She cites Sausalito and Encinitas in California; Beacon, New York; and the Oregon coast as examples of beautiful locales not far from urban cores.

Consider listing several locations and scoring each across several criteria, including (based on your preferences):

  • Public transit.

  • Walkability.

  • Arts and culture.

And keep in mind that the stakes are much lower as a digital nomad. If you don’t enjoy a particular destination, you can always move on.

3. Cost of living

Geographic independence can, in theory, significantly reduce your cost of living. That’s why the “Silicon Valley exodus” has seen tech workers fleeing the expensive Bay Area for greener, more affordable pastures.

Yet for digital nomads, estimating the real cost of living requires more than simply adding up the cost in a particular area and dividing it by the time spent there. That’s because nomadism incurs additional costs, including:

  • Transportation within and between destinations.

  • Higher short-term lodging costs.

  • Higher food costs (if you eat out more).

Plus, unlike internationally traveling digital nomads who can leverage extremely low costs in other countries, U.S.-based nomads confront bigger financial hurdles.

“When I first started doing this, I was living in places like Thailand where for $500, I could live in a hut on the beach,” Lipton says. “In the U.S., especially because I like to be near my friends in expensive cities, it’s harder to make the math work.”

Cost-of-living calculators are helpful for determining the relative priciness of potential destinations (Hawaii is really expensive, as it turns out), but don’t capture the cost of moving around. One way to mitigate these costs is to move less: Stay in each destination for several months or seasons, rather than several weeks.

Another factor to consider: Some employers offer salaries based on location. So if you decide to move from the Bay Area to, say, Detroit, you could get a pay cut that offsets cost-of-living savings. Make sure you understand these policies before packing up.

4. Lodging

Whether hopping between cities or between national parks, finding good, affordable housing poses one of the biggest challenges to domestic digital nomads. There’s no one solution to solving the housing riddle, but some potential strategies include:

  • Long-term vacation rentals.

  • Traditional sublets.

  • Housesitting and swapping.

  • RV or van life.

These approaches are not mutually exclusive, and many nomads cycle among housing opportunities. Getting creative, combining strategies and thinking outside the box is the best way to avoid overpaying.

“I try to keep my monthly rent below $2,000. This means I have to be crafty and try to sublet local markets or make deals with people off of Airbnb,” Lipton says.

5. Transportation

Getting around is obviously a big part of being a nomad, and it’s worth considering different strategies for how to handle it. Indeed, the means of transportation will determine where you can reasonably go.

For example, you could fly between cities, and then either rent a car or rely on public transportation at your destination. This maximizes flexibility in terms of where and when you travel, but limits the range of potential home bases to major cities. Or, you could drive between destinations, which solves the problem of getting around once you’re there, but will be difficult if you’re traveling far or trying to park in dense urban centers.

Again, it all comes down to preference.

“I travel by plane and pick places where I don’t need a car,” Lipton says. “Exploring by foot is one of my favorite activities, so I try to optimize for that.“

If you’re looking to escape into nature, you’ll want to have a vehicle (and find a way to get reliable internet service from the road). And keep in mind that you can mix and match these strategies as you go — there’s no need to lock yourself into a particular strategy until you find what works.

The bottom line

Location flexibility has suddenly become the new normal. Untethered to a specific office or city, many are considering uprooting themselves for good and traveling the country as digital nomads. This lifestyle affords many perks, as well as some potentially unforeseen financial consequences.

It’s all about finding the right balance of high quality of life with low cost of living while juggling tax rules and transportation options. It’s a challenge to get it all right, but part of the beauty of being a nomad is that you can take chances. If something doesn’t work: Move!

How to Maximize Your Rewards

You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2021, including those best for:

Source: nerdwallet.com

Deducting Health Insurance Premiums When You’re Self-Employed

  • Health Insurance

In this day and age, health insurance is something that we all need to have but have different ways of getting it. Health insurance is expensive. If you work for a company that offers insurance, you won’t have to worry about deducting it from your taxes, but if you have been paying out-of-pocket for your health insurance and living on a self-employed income, you might be able to deduct the total dollar amount from your taxes. There are specific criteria you will have to meet in order to be able to make this deduction. In this article, we will discuss what the self-employed health insurance is and how you can deduct your monthly health insurance premiums. 

Find the Right Health Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

What is the self-employed health insurance deduction?

Because it doesn’t require itemizing, the self-employed health insurance deduction is considered an “above the line” deduction. If you are able to claim it, doing so lowers your adjusted gross income (AGI). 

This tax deduction gives self-employed people an opportunity to deduct the following medical expenses:

  • Medical insurance.
  • Dental insurance.
  • Qualified long-term care insurance. 

One benefit of this tax deduction is that it’s not only useful for your own health insurance expenses. If you are paying for health insurance for dependents, children or your spouse, you may also deduct these premiums at the end of the tax year. 

How to claim the deduction if you are self-employed

If you are self-employed such as a freelancer or an independent contractor, you can deduct any health insurance premiums that you paid for yourself, your dependents, and your spouse. If you are a farmer, you would report your income on Schedule F and if you are another kind of sole proprietor, you would report on Schedule C. You may also be able to take this deduction if you are an active member of an LLC that is treated as a partnership, as long as you are taking in self-employed income. This same rule of thumb goes for those who are employed by S-corporations and own 2% or more of the company’s stock. Self-employed people who also pay supplemental Medicare premiums, such as those for Part B coverage can also deduct these. 

You won’t be able to take the deduction if:

  • You or your spouse were eligible for health insurance coverage through an employer and declined benefits. If you have a full-time job and are running your own business on the side, this could be a situation you face. Alternatively, perhaps your spouse works a regular full-time employer and had the option to add you to a health insurance plan through their job. 
  • Your self-employment income cannot be less than your insurance premiums. In other words, you must have earned an amount of taxable income that is equal to or greater than the amount you spent in healthcare premiums. For example, if your business was to earn $15,000 last year, but you spent $20,000 in health insurance premiums, you would only be able to deduct $15,000. If your business lost money, then you won’t be able to deduct at all. 

One of the major differences between the health insurance tax deduction and other tax deductions for self-employed people is that it’s not taken on a business return or a Schedule C. It is considered an income adjustment, in which case, you must claim it on Schedule 1 that is attached to your Form 1040 federal income tax return. 

Final Thoughts

Self-employed people, such as freelancers, independent contractors and small-business owners, might have the opportunity to deduct their health insurance premiums from their taxes. As long as your business made a profit for the previous tax year and you were not eligible for a group health insurance plan, you should be able to take this deduction. If you’re not sure whether or not you meet the criteria, you may seek advice from a tax professional. You will need to fill out all of the necessary forms to qualify for a deduction. To make this process as seamless as possible, it’s important to keep track of all your business records.

Source: pocketyourdollars.com

15 Lessons From Regular People Who Achieved Financial Independence

To gain financial independence for retirement, use the lessons of those who have retired early.

total financial independence

The Big Takeaways…

    • Financial independence can be achieved, but it’s about combining lifestyle ambitions with reasonable financial strategies.
    • Financial independence comes with some sacrifice, so it’s important to consider the consequences before committing yourself to an early retirement.

Most people struggle and worry about being able to retire in their mid to late 60s. At that point, you are expected to have hundreds of thousands (maybe even millions) of dollars in your retirement accounts, get additional money from Social Security, and also get some government assistance with healthcare insurance. Even then, retiring securely can feel impossibly hard. What you really want is total financial independence – forever.

Maybe you are already retired and have a dreadful feeling that you simply don’t have enough.

Many people have been there, done that, and retired. Some even have a passion to teach others how they did it via their writings in books, blogs, and online courses.

This past week, I read through hundreds of articles from dozens of blogs to discover 15 of the top lessons from regular people who have achieved total financial independence.

If you save 50% on an item, that sounds pretty impressive. But if that item was a bottle of $1 shampoo, you really only kept 50 cents in your pocket.

J.D. Roth from Get Rich Slowly explains that if you want to retire early, you’ve got to focus on your high-cost items. Namely, your:

  • Home
  • Car
  • Food

The average person will spend over $2,000 a month on these categories alone. If you want to retire or retire early, the solution is simple: spend less. And, you can do it easily by focusing all your efforts on reducing the big dogs – home, car, and food expenses.

Need more inspiration? Here are 8 ways to save BIG. Or, listen to the podcast interview with J.D. Roth.

When do you want to retire? In 5, 15, 25 years? The math behind how much you need to save to achieve these targets is shockingly simple. Just ask Mr. Money Mustache – an engineer that retired when he was only 30.

Even though the math is supposedly simple, MMM made it even simpler by putting together a target savings rate table.

If you currently have zero and want to retire in:

  • 5 years, you’ll need to save 80% of your income
  • 15 years, save 55% of your income
  • 25 years, put away 35% of your income

Most of you have already been working for a few decades, so these numbers might not mean as much as it does for those that are just starting out (especially if you haven’t been putting 80% of your income away all your life). So, what numbers are relevant for you?

If you have consistently put away:

  • 10% of your income, you’ll likely have to work for 51 years before you retire
  • 15% of your income, your time in the workforce is 43 years
  • 20% of your income, you’ll probably have enough money to retire after 37 years in the workforce

Want to retire sooner? Simple. Just up your savings rate.

Try different scenarios in the top rated NewRetirement retirement planning calculator.

When most people retire, they assume they’ll never work another day in their lives, and, if they have to, they consider themselves a failure in retirement.

Jonathan Clements, from HumbleDollar, disagrees.

According to Jonathan, “Working a few days each week could greatly ease any financial strain, while adding richness to your retirement.”

So if you have to (or want to) work in retirement, don’t sweat it. There are countless others that do the same.

Explore 14 reasons retirement jobs are the best and listen to our interview with him on the NewRetirement podcast where Clements discusses money, behavior, and happiness.

Before putting together a complex assortment of facts and figures, Darrow Kirkpatrick (retired at 50 years old) champions the idea of keeping things simple.

“The best way to get a useful model going is to input a small number of initial assumptions, then calculate and check the results carefully, year by year. Once you are certain those initial numbers are behaving as expected, you can begin adding more data, more financial events, and refining your model.”

He compares retirement planning to constructing a puzzle. You don’t try to put all the pieces together at once. You start with a corner, add a piece, add another, and then slowly put together the entire puzzle one piece at a time. The same should be true with your retirement planning.

Instead of putting all your numbers into a complex tool right off the bat, put in only a few, confirm the number, and then go back and model in other likely scenarios. In the end, you’ll be much more confident in your number and you’ll understand it completely.

This approach is fully supported by the NewRetirement retirement planning calculator. Users start by inputting a relatively simple set of data – estimates are okay. You can view results and start building a more complete plan. Or, simply run different scenarios and keep your information updated over time, making adjustments as necessary.

When was the last time you updated your numbers? We recommend quarterly at least. Want ideas for scenarios to run? Try these.

There are tons of people today that have absolutely no idea how much they spend from month to month. And, not only do they not know the amount that they’re spending, they probably couldn’t even tell you where half of it is going.

If you have absolutely no idea where your money is going today, you have little chance of grasping where it will go ten to thirty years from now.

In Darrow Kirkpatrick’s book, “Retiring Sooner,” he discusses several ways to assess your living expenses quickly and easily. So if you’re one of the people who doesn’t know where your money is going, take some notes from DK and get a handle on your spend today so that you can have a blissful, easy retirement.

When you think of regrets in retirement, you might only consider the regret of retiring too early and running out of money, but that’s not the only outcome you should fear.

Physician on FIRE (retired at age 39) warns us also of retiring too late.

If you run all the scenarios in all of the models and you’re safe in every one, then you waited far too long to retire. You’re not going to:

  • Get cancer
  • Have Alzheimer’s
  • Get into a car accident
  • Experience 3 stock market crashes
  • Lose your pension, and
  • Get sued

If all of those things happened to you, it honestly doesn’t matter if you can cover all the expenses. Your life is going to be difficult regardless.

The point of modeling is to protect yourself against the likely fears, not every one. Wait too long to retire, and you’re going to regret it for the rest of your life. Sure, your kids might enjoy the millions that you’ll never be able to spend, but I bet they’d much rather have your time instead.

The Wealthy Accountant, Keith “Taxguy,” is certainly a guy you want to listen to. He’s worth over $12 million and hasn’t held a conventional job since he was 22 years old…

He says it plain and simple:

“When you are in debt the clock works against you. Every morning when you wake—weekends, holidays, sick days, birthdays and work days—you are already behind. The mortgage, credit card, car loan, et cetera, all tacked on interest the second after midnight. Long before you rolled out of bed and poured your first cup of coffee you need to work to pay the interest before you have money for food, clothing, shelter or entertainment.”

The takeaway is that debt is just adding to your expenses. Pay your debt off as fast as possible and invest heavily once they’re gone. It’s easy to do once you don’t have a payment in the world.

Most people go to the bank and ask the question, “How much will you lend me?” The bank tells them the maximum that they’d be comfortable forking over, then the borrowers go out and find the best house for that amount of money.

Without realizing it, these folks just became house poor. Hopefully, they really love the house, because they won’t have enough money to do anything outside of those four walls for many years to come.

Passive Income MD gives us a great rule of thumb when it comes to getting a mortgage – never exceed 3 times your annual income.

If you are currently in over your head, downsize. You won’t regret minimizing your debt down the road.

You hear this all the time, but are you actually doing it? Are you putting the maximum amount allowed into your 401(k) each year? Joe Udo, from Retire by 40, admits that he didn’t max it out every year, but he only missed his first couple when he relented to his high-performance, stock chasing mentality got the better of him.

By maxing out his retirement nearly every year, he was able to build up a $640,000 nest egg before his 40th birthday. Not too shabby.

If you still haven’t started to max out your contributions, it’s better late than never. Do nothing and you’ll have way more regrets than if you get started today.

If you’re over age 50, be sure to use catch up contributions (whether or not your employer offers a program or not).

In 2012, Justin, from Root of Good, earned $140,000 and paid just $600 in taxes. In 2013, he did even better. He earned $150,000 and paid $150.

“We didn’t go anything sneaky or illegal,” Justin explained. He and his wife simply invested in all the tax-advantaged accounts:

  • 401(k)s
  • Traditional IRAs
  • Health Savings Accounts
  • 457
  • And a 529 College Savings Account

That, and they paid for childcare with a Flexible Spending Account through his wife’s work.

His motto is to keep things simple, but also to keep the government’s hands off his money. If you can do this just half as well as Justin, you’ll be well on your way to total financial independence.

“Saving a high percentage of income is only half the battle. You can’t just put fat stacks of cash under your mattress and expect to get rich.” – Go Curry Cracker

If you can earn 10% a year, it takes approximately seven years for your money to double. In another seven years, it would double again. Wait another seven, and it doubles again.

You’ve actually got $800,000. ($100,000 becomes $200,000 which doubles to $400,000, and then doubles one more time to make $800,000). If you could hold off another seven years, you could have yourself a cool $1.6 million. Not too shabby when you consider that you only had $100,000 28 years ago. That’s the power of compounding.

Put that money under your mattress and you’d have just $100,000. That is, unless you had a house fire.

As Bill Bernstein said in his NewRetirement podcast interview:

“I’m going to sound kind of insensitive and cruel, I suppose, but when someone tells you that [that they are not invested and are holding cash], what they’re effectively telling you is that they’re extremely undisciplined. And they can’t execute a strategy and that’s the kind of person who probably does need an advisor. If you sold out in 2007 or 2008 and you’ve been in cash ever since, you’ve got a very seriously flawed process and you’re probably managing your own money.”

You have got to be invested in order to get ahead.

If you retire at age 60, you could easily have 30 years or more of retirement life ahead of you. When you were 30, could you have predicted you’d be where you are at age 60?

Of course not.

The same is true for your retirement years, “And that’s okay!” explains Steve from Think, Save, Retire (retired at age 35). You can do all the planning and forecasting your want, but you’ll never be able to predict what will happen to you personally, professionally, relationship-wise, or financially over the next 30 or more years.

In early retirement, Steve thought he was going to:

  • Exercise more
  • Blog more
  • And read more

He doesn’t, and for good reason. All reasons he hadn’t thought of when he handed in his two weeks’ notice.

Be ready to be flexible and able to make updates to your overall financial plan.

Sam at Financial Samurai is a smart guy. After all, he worked as an investment banker for Goldman Sachs for 13 years. Very few have those credentials on their resume.

After all that experience and knowledge of the markets, his advice to achieve early retirement is not a stock tip and not even a sector analysis. His advice:

Keep it simple.

Spend less, earn more, and invest all you can. That’s it. There’s power in that message, especially considering the source.

ESI Money retired in his early 50s and has practiced exactly what he’s preaching today. His message:

“Invest for growth and then income.”

What does that mean? He goes on to explain and outlines the following:

  1. Max out your 401(k) and invest in index funds (growth)
  2. Invest in rental properties (a combination of growth and income)
  3. Consider person to person (P2P) investing (income)

Also, option three could include annuities – another tool that helps build up a consistent income for your retirement years.

Why growth, then income? Simple. You first want to get your nest egg going and grow your investments quickly out of the gate so you can capitalize on compound interest. Then, in order to retire early, it’s best if you invest in multiple income sources that can float you until you hit the magic age of 59 ½, when you can start withdrawing from your retirement accounts without penalty.

Try out his formula in your own plan with the retirement planning calculator.

Even if you hate your job and have a “countdown to retirement” clock on your desk at work, you’ll still likely have difficulty when you finally give them the old heave-ho.

Jacob, from Early Retirement Extreme, likens it to a long-term marriage. A break-up from your long-time spouse is sure to be difficult. You think the escape will be nothing but sunshine and rainbows, but it’s not always that easy.

The same is true of your job. Expect it.

Better yet, set up a future for yourself in other areas – self-employment, volunteering, or starting that part-time gig we mentioned above. When you’ve already moved on to the next thing mentally, letting go of the old boat anchor becomes that much easier to do.

As with almost anything, you dive into something expecting to find the hidden secret or the magical takeaway and the results are quite obvious and underwhelming.

This analysis was no different.

If you want to retire well and retire early, you should simply live modestly, get rid of all your debts, earn a solid income, forecast what you need (but be flexible) and invest heavily. That’s really all there is to it. Dig any deeper and you’re just wasting your time.

The most valuable information here were the items that hardly anyone talks about:

  • Being willing to work after retirement
  • Having an understanding that even the best-laid plans are futile – you’re never going to predict exactly what will happen over a 30-year span. It’s impossible.
  • Retirement is not all unicorns and angelic choirs. It’s just the next challenge in life worth conquering.

Go in with the right mindset, understand what happiness truly means for you, and never stop working toward the goals that will take you there.

We hope the NewRetirement retirement planning calculator can help you.

Source: newretirement.com

What Is A Blog, How Do Blogs Make Money, & More

What is a blog and how does it work? Can you really make money blogging? How much do bloggers make?

Over the years, I have received many questions about blogging. People want to know what is a blog, how they work, is it really a way for people to make money, and so on. 

I completely understand all of the questions. While blogging has now been around for more than a decade, it’s still a fairly new way to earn money. I still have people give me funny looks when I tell them what I do for a living.

But, I didn’t really know what a blog was when I first started mine. I had absolutely no idea what I was doing.

I didn’t know how people made money from blogs or anything else like that.

Pretty much everything I learned about blogging was through trial and error, and I made a lot of mistakes over the years, haha! Honestly, it’s because of those mistakes that I’m where I am right now.

My life has completely changed because of blogging. I was able to quit a job I didn’t love, I travel full-time, and I can retire pretty much whenever I want. 

It’s funny to think about how far I’ve come, especially since I had no idea what blogs even were.

Back then, I also never realized that you could learn how to earn money blogging. I don’t think I even looked into it because that was never my goal when I first learned how to start a blog. I certainly never thought blogging would drastically change my future, but I’m so glad I gave it a shot.

I had so many questions when I started my blog, and I learned 99% of what I know the hard way – by making mistakes.

I know that many new bloggers probably have some of the same questions I had because I receive hundreds of emails a day from readers asking how to start a blog, how to make a living through blogging, and more.  

Today, I’m going to help you by answering some of the most common questions I receive about blogging.

Some of the questions I talk about include:

  • Is 2021 too late to start a website/blog?
  • How do I come up with a blog name?
  • What blogs make the most money?
  • How do you design a blog?
  • How many views do you need to make money blogging?
  • How many blog posts should I have before launching?
  • How do I get my blog noticed by Google?
  • How long until a blog makes money?
  • How do blogs make money?
  • How do bloggers get paid?

I know that blogging can seem scary in the beginning, but remember that most other bloggers were in the exact same place you were when they started.

Blogging, just like any other hobby or job you start, takes time to learn what you’re doing. You have to do research, read about what other people have done, and learn as you go.

For some people this can be frustrating at first, but good things always do take time.

Blogging isn’t as easy as it looks from the outside. Even the most successful bloggers still spend time learning how to do new things. I am constantly signing up for new courses and learning from other people.

Even though it takes time and can feel difficult, blogging is something you can do. You can earn money blogging so that you can work towards living the life you want. 

One of the reasons I love blogging so much is that you can do it all on your own time. You don’t have to learn everything at once. You can start your blog and grow it at your own pace.

While there is no 100% guarantee that you will be able to earn a full-time living by blogging, I know many bloggers who are full-time and are very happy with it.

Content related to what is a blog:

What is a blog? And your other top questions about blogging.

 

What is a blog?

Before we begin, I want to go over what is a blog definition and some other basic blogging questions.

A blog is a website.

Google’s definition of a blog is, “a regularly updated website or web page, typically one run by an individual or small group, that is written in an informal or conversational style.”

A blog is content that is written on a website. It usually consists of articles, like the one you are reading right now.

What is a blog used for? Blogs can vary from person to person. 

You may create a blog to journal, to teach on a topic, to sell something, to tell a story, and so on. There’s no exact rules about what your blog has to be used for.

What is a blog post? Blog posts are individual entries on a blog. Blog posts usually include text, but they can also have photos, videos, infographics, and more.

An example of a blog post is what you’re reading right now. There is a title, its own URL (that’s the web address), and text where I share in depth information.

 

Is 2021 too late to start a website/blog?

No, it’s not too late, and you haven’t missed out.

The online world is still so new, and each year there are new ways to monetize and grow your blog.

For example, it wasn’t until the past few years that companies and advertisers started realizing the value of online influencers, such as bloggers, and that means even more opportunities to earn money blogging.

Before that, companies mainly wanted to advertise with celebrities, but it is shifting to bloggers and other online influencers (such as Youtubers and Instagrammers!).

The online world is a huge place and it is just going to keep growing. Every blogger earns a living in slightly different ways, and everyone has a different message and story. Plus, there are so many different ways to earn money blogging, and the options have continued to change and grow since I started blogging.

Of course, because the blogging world keeps changing, there will constantly be new things for you to learn, but that will probably always be the case for managing any kind of business.

So, if you are thinking about starting a blog, today is the day. Don’t let your fears hold you back any further! You can find my free How To Start a Blog Course here.

 

How do I come up with a blog name?

Deciding on a name for your blog is probably one of the hardest parts of blogging.

Even if you know exactly what you want to blog about and have some articles written, deciding on your blog’s name may be stopping you from actually creating your website and launching it.

I don’t remember how I came up with Making Sense of Cents, but I’m glad I did. It is still catchy, and I receive compliments on it to this day.

Coming up with a blog name shouldn’t lead to stress, so here are my tips for deciding on a blog name:

  • Make it easy. My blog name isn’t the easiest for people to spell, and even I sometimes jumble it when I’m spelling it. So, my top tip would be to make sure that your blog name is easy for people to type or spell out loud. I’ve seen blog names that are extremely long, contain words that are difficult to spell, and so on. Instead, you should make it as easy as possible for your readers to find you.
  • Think about what you’ll be writing about. Think about the topics you want to write about, who your target audience is, and more, and then jot down descriptive words that are related to each. Brainstorming like this is a good way to come up with a blog name!
  • Use a thesaurus to find similar words. If your first or second choices are taken or if you want to see if there are some catchier sounding blog names, using a thesaurus can help you with some new ideas.
  • Make it catchy. You may want to think of something funny, use alliteration, or something else to make your blog name catchy and memorable.
  • Use your name. If you don’t want something catchy and/or if you think you’re not creative enough, then just use your name. It’s super easy that way, and more and more people are starting to do this. 

See, creating a name for your blog can be easy!

 

What blogs make the most money?

There are many different types of blogs that make money, and you can monetize nearly any kind of blog.

So, how do you determine what to write about?

There is no right or wrong answer to this question. I always recommend creating a blog around a topic that you are passionate about, that you are an expert in, that you like, or something else along those lines.

This can make blogging feel fun instead of like a chore.

You can blog about several topics or you can blog about one specific thing, such as personal finance. For me, I cover a ton of different topics here on Making Sense of Cents. I talk about personal finance, life, travel, RVing, sailing, self-help, and more.

Some things that you may want to think about when choosing your blog topic include:

  • What are you passionate about? I always recommend that you start by thinking about what you love doing. Perhaps it’s a sport that you really love, crafts, cooking, managing money, travel, or something else. Whatever it is, blogging about your passion is great because that will show in your writing, and your readers will enjoy reading your posts.
  • What blogs do you enjoy reading? If you are thinking about starting a blog, I’m assuming it’s because you probably enjoy reading blogs yourself. If that’s the case, then you may want to think about which blogs you really enjoy reading and possibly blog about something similar.
  • What are you an expert in? Now, you don’t need to be an expert in your blog’s topic to earn money blogging (more on that below in the next section), but if you are an expert at something, then this could be a topic that you blog about. There are many successful “How-To” websites because people love to learn new things through blogs. And, there is probably something you could teach (everyone’s an expert at something, even if you don’t realize that yet!). Think about the questions your friends and family are always asking you about, topics that you enjoy helping others with, and so on.
  • What things do you like learning about? Like I said above, you don’t need to be an expert in a topic to blog about it. People LOVE reading blogs from people who are learning or trying new things. This is because everyone has to start somewhere, and people love following the journey and seeing how something is actually done. So, if you are learning how to earn money blogging, for example, that could be where you start your blog. You can write about all of your mistakes, talk about what you’ve learned, show how you have tried and reviewed different options, and so on.

To learn how to make money with a blog, your blog can be about anything and/or everything. It’s entirely up to you.

Below is a list of possible blog examples and blog topic ideas. The list doesn’t end here either. Choose one, all, or some. It’s all up to you.

  • Lifestyle
  • Home
  • Family
  • Finance
  • Crafts
  • DIY
  • Small business
  • Outdoor activities
  • Fitness and health
  • Food
  • Inspiration and advice
  • Animals
  • Travel
  • Games
  • Relationships
  • School
  • Electronics, and more!

That’s the beauty of having a blog – it can be about anything and you can still earn money from it.

There are a few topics I would avoid if you aren’t an expert, like blogging about legal issues, tax issues, or medical advice. You could get someone in a lot of trouble if you gave them the wrong information.

 

What is the best blogging platform to make money?

Your blog should be self-hosted if you want to earn money blogging. This is actually one of the first things you should do.

I recommend that you start on self-hosted WordPress (this tutorial will help you start your blog the correct way). I cannot say this enough, but I do not recommend Blogger or WordPress.com (you want the self-hosted version, which is WordPress.org – confusing, I know). Buying that $10 domain name from Blogger or GoDaddy does not mean you are self-hosted either.

Unless you self-host your blog, advertisers, companies, and readers will still know you are on Blogger or free WordPress, and that can look unprofessional. Plus, your blog can be deleted at any time and for no reason if you are using a free version, which actually happened to me. Even though you may save some money in the beginning, not being self-hosted can hurt your chances of earning money through your blog.

Seriously, just trust me. Go with self-hosted WordPress, and it will significantly increase your chances of monetizing your blog.

If you want further proof, take a look at my past income reports. You can tell that my blogging income didn’t take off until I switched to WordPress. That right there is a lot of proof that being self-hosted on WordPress is the way to go!

To recap, the positives of being self-hosted on WordPress through Bluehost include:

  • Your blog will look more professional meaning you will increase your chances of making money online.
  • You will have complete control over your blog.
  • You own your blog, and it can’t be deleted for any reason.

 

How do you design a blog?

To create your blog, I recommend heading to my tutorial: How To Start A WordPress Blog On Bluehost.

After that, you will have three options when it comes to designing your blog:

  1. Designing your blog on your own
  2. Paying someone to design your blog
  3. Purchasing a premade theme (the quickest option and surprisingly affordable)

I usually recommend that a new blogger purchase a premade blog design, such as through Beautiful Dawn Designs. She provides great premade designs for just $45 and this is probably the easiest and quickest design option.

 

How much do I have to spend before I can earn money blogging?

When I first started my blog, I spent almost NOTHING on blogging expenses.

I spent less than $100 the first year and not too much more in the second year.

In fact, I probably went a few years when I was only spending about 1%-2% of my revenues on blogging expenses.

Now, some of my expenses include:

  • My computer
  • The actual blog (design, hosting, etc.)
  • Courses, guides, and ebooks
  • My email (newsletter) list
  • Virtual assistant and editor
  • Technical management
  • Transaction fees

But, you do not need to spend money on all of these things to earn money blogging.

Learn more about my expenses at My Complete List of Monthly Expenses for a Multi Million Dollar Blog.

 

How many views do you need to make money blogging?

You do not need millions of pageviews per month to earn money blogging, but if you want to increase your income, it will be important to increase your page views.

Every blog is different, and it isn’t always the blogs with the largest number of readers that make the most money. That’s because once you understand what your readers want, understand how to effectively reach out to companies for partnerships, and know how to charge the correct rate, you can make a good income online in many cases, regardless of the amount of pageviews you receive.

But, if you want to increase your pageviews, here are my tips:

  1. Publish high-quality blog posts. Readers come back to blogs with high-quality and helpful posts. I recommend that your blog posts be at least 750 words, but more wouldn’t hurt either. The majority of my blog posts are around 1,500 to 3,000 words (this one is close to 5,000 words!).
  2. Be active on Pinterest. Pinterest is one of my top traffic sources. To increase your pageviews with Pinterest, I recommend creating great images, making sure the description and title of your images are catchy, pinning regularly, and only pinning long images. I use Picmonkey to edit all of my images and Tailwind to schedule them.
  3. Be active on other social media sites. Social media lets you interact with your audience more and can help you expand your audience. Besides Pinterest, you may want to check out Facebook, Twitter, TikTok, Instagram, Snapchat, Youtube, and others.
  4. Post regularly. If you want to earn money blogging, you should publish something at least once a week. Going for weeks or months at a time without a blog post can lead to readers forgetting about you.
  5. Network with other bloggers. You should look at other bloggers as friends and colleagues, not competition. This means you may want to interact with them on social media, reach out to them via email, attend conferences, and more. Of course, be genuine and give more than you take.
  6. Guest post. Guest posting is a great way to reach a new audience and helps build partnerships with other bloggers.
  7. Make sure it’s easy to share your content. I love sharing posts on social media, but it gets frustrating when some blogs make it more difficult than it needs to be. You should always make sure it’s easy for readers to share your content. This could mean making your social media icons easy to find, having all of the info input that is needed for sharing (title, link, and your username), and so on. Also, you should make sure that when someone clicks on one of your sharing icons the title isn’t in CAPS (I’ve seen this too many times). No one wants to share a blog post when it sounds like you’re screaming at them.
  8. Create catchy headlines. The title of your post is a major factor influencing whether readers click over or not. I like to use the CoSchedule Headline Analyzer to help me with my headlines.
  9. Learn SEO. SEO (search engine optimization) is not something I could teach in such a small section, but I recommend doing your research and learning more about what it is and how it can help you.
  10. Make it easy for readers to browse. If you want more pageviews, you should make it as easy as possible for readers to read your other blog posts. Readers should be able to easily find your blog homepage, categories, tags, search bar, and so on. Also, I recommend including links for related posts in every single one of your blog posts.

 

How often should I blog?

I recommend publishing a blog post at least once a week.

This is because consistency is important when it comes to blogging.

I started out publishing short blog posts a few times a week. Now, I try to do just one long blog post each week. I find that works best for me and Making Sense of Cents.

Others may decide to blog every single day, and some may try every other day. It all depends on what you would like to do.

 

How many blog posts should I have before launching?

I recommend simply just launching your blog with one blog post. You can continue to add more as you go.

I recommend this because you won’t have a ton of readers in the beginning anyways, so just getting started is going to be your best plan of action.

Too many people overthink this question, which just delays them from actually starting their blog.

 

What is the ideal length for a blog post?

The ideal length varies. I usually recommend that a blog post be at least 750 words.

For Making Sense of Cents, my blog posts are almost always at least 2,000 words, and I have written some huge whoppers (like this one) that are around 5,000 words too.

The ideal length for your article will depend on your niche, and the topic that you are writing about.

 

How do I get my blog noticed by Google?

For your blog to be found on Google search results, you’ll want to learn about Search Engine Optimization (SEO).

You can sign up for The SEO Starter Pack (FREE Video Training) – Level up your SEO knowledge in just 60 minutes with this FREE 6-day video training.

 

How long until a blog makes money?

This is a hard question to answer, and it’s also one of the most common questions I receive.

As you can tell from my past income reports, it took me nearly a year of blogging to start earning a few hundred dollars a month from my blog. After two years of blogging, I was earning several thousands of dollars a month, which was all on the side of my day job.

I know some bloggers who were making thousands of dollars a month after just a few months of blogging. There are bloggers out there who began a year or two after me and are making hundreds of thousands of dollars a month. There are also other bloggers who aren’t making any money at all.

As you can see, blogging is not a get-rich-quick scheme and there isn’t a timeline for when you will start to earn money blogging. However, if you are serious about it, you never know what it may turn into.

It all depends on you, the effort you put into your blog, whether you have the time to learn how to monetize your blog, and more.

 

How do blogs make money?

There are several ways to earn money blogging, including:

I go in depth on each way monetization method here – How To Earn Money Blogging: Your Top Questions Answered.

 

How do bloggers get paid?

Many of you are interested in blogging, but you aren’t sure where the income actually comes from.

How does the money actually get to you?

You receive blogging income from whoever is paying you.

  • If it is affiliate marketing you are providing, then you are paid by the company that makes the product or service. When someone buys something or signs up through your link, that’s when you get.
  • If someone is paying you to place an advertisement on your website, then you get paid by the company who you are advertising for.
  • If you are publishing a sponsored post, then you are paid by the company who is sponsoring that post.
  • If you have display ads on your website, such as with Google Adsense, then you are paid by Google or by any number of other companies.

There are many companies and blogging networks out there that you can use to earn money blogging, and they usually pay you through PayPal or with a check in the mail.

 

What blogging ebooks and courses do you recommend?

It takes a lot of work to grow and build a successful blogging business!

If you want to earn money blogging, then you may want to look into buying ebooks and/or courses that will teach you about the topics that will help you become a better blogger from the very beginning. Plus, there are many blogging secrets that you just can’t find by searching the internet. So, by taking a course or reading an ebook, you will learn the exact steps to take to help you succeed.

I’m almost always taking new blogging-related courses because I know that there is always something new to learn.

Here are the ebooks and courses that I recommend for bloggers:

  • Making Sense of Affiliate Marketing. I share my exact strategy and tips in this very informative online course. If you’re a blogger, then you NEED this course. I show you exactly how to make passive income from blogging, even while you’re sleeping.
  • 21 Strategies I Used to Increase My Monthly Page Views from 17k to 400k+ in 10 Months. Lena Gott’s guide is full of great information on how to increase your blog’s page views. If you are feeling stuck or if you are a new blogger, check out this resource! Lena went from 17,000 monthly page views to 400,000 and shares all of her best tips in this guide.
  • Making Sense of Sponsored Posts. I launched this course with my sister, Alexis of Fitnancials, in 2018 to help bloggers earn money through sponsored posts. Between the two of us, we earn around $20,000-$30,000 a month from sponsored posts. We teach finding sponsorship deals, maintaining partnerships, and how to always make sure that you are helping your readers.
  • My favorite Pinterest course is Pinterest Traffic Avalanche. This course shows you how to get free traffic from Pinterest to your blog. You’ll learn about Pinterest SEO, how to set up Rich Pins, how to create viral content, how to make Pinterest images, all about group boards, and many other valuable Pinterest strategies.
  • If you want to learn about Facebook ads, I recommend reading How One Blogger Grew His Blog to Over 2 Million Visitors In A Year.

The blogging ebooks and courses above will help you to create a successful blog. They will show you how to master Facebook, get crazy traffic from Pinterest, grow your blogging income, and more.

 

If blogging is so great, then why doesn’t everyone do it?

I hear questions like this pretty often. I also get a lot of people asking me, “If it’s so easy, why don’t you just start multiple blogs and make even more money?”

Blogging is not printing money.

It’s not a scam, and it’s not a get-rich-quick scheme.

Learning how to earn money blogging is work, and just like with all jobs – not everyone wants what you want.

And, for every successful blog out there, there are probably hundreds of bloggers who will never earn money blogging. While you can earn money blogging, not all bloggers will.

It would be like saying that 100% of people who start a business will see success. That is just never going to happen – businesses fail, business owners have a change of heart, and others just don’t find it enjoyable.

I know I am always talking about the positives of blogging, but I also like to mention how it’s not the easiest.

After all, if blogging was easy, then everyone would do it and everyone would make thousands of dollars a month.

But as you know, that’s not the case.

Not everyone is going to earn money blogging because it is WORK! Most new bloggers quit just a few months in. A few months is not enough time to see if your blog will be successful. It took me six months before I started to earn money blogging, and I only earned $100. Now, I have made over $5,000,000 from my blog over the years.

It’s funny/weird to think about what life would be like if I would have quit back then.

Just like you, I went from asking “what is a blog?” to where I am now. And, I’m constantly learning new things about blogging and that is one of the reasons why I enjoy it so much.

Once you realize that blogging is hard, you will be ahead of 99% of everyone else in the game. Don’t assume, like most people do, that blogging is easy money.

Starting a blog can be difficult. But, all bloggers start at the same point.

I remember being so lost when I first started my blog. I had to learn everything the hard way – it sure was difficult at times.

But, I have always really enjoyed blogging. I think that is so important when it comes to this type of business – you either need to have passion in your blog and/or passion in what your blog allows you to do in your free time (such as travel or spending more time with your family).

 

Have other blogging questions?

Don’t fret!

I have other blog posts similar to this one where I have answered many other blogging questions.

Please head to How To Earn Money Blogging: Your Top Questions Answered for answers to questions such as:

  • How does a blogger network with other bloggers?
  • What processes do you have with new blog posts?
  • In what ways can I start making money from a blog?
  • What is affiliate marketing?
  • What are sponsored posts?
  • What is display advertising?
  • Can I create my own product to sell on my blog?
  • Do you have to pay taxes on blogging income?
  • Where do you get your photos from?
  • Why do I need an email list for my blog?
  • How do you think of ideas for new blog posts?

I was going to include all of those questions here but that would have made this blog post well over 10,000 words!

What other questions do you have about blogging?

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Source: makingsenseofcents.com