If you have been following TFB since the beginning of the year, you probably noticed my switch of direction towards making money online topics. I actually want to lean towards a “making extra money” direction. This is why I recently talked about how I increased my income from 30K to 100k in 5 years.

My 2 main sources of income (my day job and my online business) are derived from the same asset: my brain. In fact, most of the work I do is thinking and my “product” is mostly to serve my clients. I offer financial advice and investment strategies to my clients and I write about personal finance on my blogs. What is cool about the service industry is that you can leverage your efforts in many ways. If I’m good at running blogs for example, I can take my experience from my main blog and use it to run 10 blogs.

But what if I was doing a hands on job? What if I was working in the construction field for example? Can I really lift 2 bundles of iron rods instead of 1 to work faster? Not really. So what can manual people can do to increase their income? After talking with my brother-in-law (who’s working in the construction field) on several occasions, I tried to find some ways to make extra income for all those people that find it’s not so easy to increase their pay check. So here are my thoughts on making extra income for hands on people:

Work extra hours

That’s probably the most obvious and simple idea I could find. Most people working in these types of fields are paid by the hour and often have the possibility to work extra hours (and getting paid overtime for these hours). It’s not an incredible idea as you are literally burning yourself out but it is still a good way to earn extra bucks.

Improve your efficiency

I’m a big fan of efficiency. Regardless where you work and what type of job you have, there is always space for improvement in your work environment. Since you know you job well and probably the company you are working for, as well; you could certainly make a few suggestions to management in order to improve the overall efficiency of your team. It could be through improving a process, changing a method or adding/modifying a tool that you use.

Great ideas always get rewarded. You will either get a bigger bonus or increase your chances of getting a promotion. On top of that, you will remain in your manager’s good grace (which is not bad if your company is going through a tough time and consider cutting down on the number of employees…)

Teach

You would be surprised how many professional schools, colleges and Universities are looking for people with experience in their field to teach people how to do their job. I have noticed that there is an interesting switch in their hiring process when they become very interested in adding expertise by delivering 1 or 2 courses in order to help students to make the link between theory and the real world. This can be applied by many individuals and it’s a great source of extra income. Unfortunately, this also requires more hours.

Start something else

All right, so you don’t want to work more than 40 hours a week and you won’t be getting a promotion any time soon. You are basically stuck in the classic rat race with a job that pays the bills but doesn’t make you happy. So here’s my question for you:

Why don’t you do something that would make you happy?

In your free time, consider starting your own business on the side. It doesn’t have to be a service, it doesn’t have to be on the internet (mind you, it would help!). It just needs to be linked to your passion. At the beginning of the year, I read 2 very interesting books on the idea:

The 4 Hour Workweek

Crush It

Funny enough, the first book, written by Tim Ferris, explains how to start your business in the internet world. Tim is a real wizard of efficiency and he found ways to benefit from the internet.

The second guy, Gary, made his fortune in the wine industry. He uses online marketing as well but his business was not an internet start-up, it was really a wine selling business.

I won’t lie to you, if you don’t want to use the internet at all in your business model, it could be very hard. However, if you don’t know much about technology, you can always outsource this part of the project once you get bigger. At first, you don’t need to spend thousands of dollar on your site anyways.

Leverage

If you really don’t want to get in the service world, you can always try your hand through leveraging. By borrowing to invest on the stock market or to buy land or properties, you can make a lot of money too. I’ll skip the investment topics since it is also something that requires a lot of time and financial knowledge.

However, buying a property is more accessible to everybody. All you need is good savings habit in order to build the down payment. Once you have it, you start with a small investment. When I was 20, I bought land for $28K. A year later, I sold it for 32K. Since I took a personal loan to finance the purchase, I literally made 4K out of nothing. By starting small, you can build capital and become a bigger player later on.

You’ll need to be patient

Regardless of which domain you are working, you’ll need to be patient before you see the extra income coming in. It takes time to build a business or to put aside enough capital to start earning some real extra money. If I take my personal case for an example; it took me 5 years to reach a 6 figure income and 3 years of hard labor on my blogs to build a 6 figure gross income business too. All that to say that money doesn’t come overnight!

Do you have any other tricks?

It was hard for me to find ways that you can make extra income without using the internet or the service industry. This is why I would like to hear from you about this topic. What other ideas do you have? Or examples of side business that worked for you?

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To tell or not to tell that is the question?  So you have a blog, or better, a small business on the side. Should you tell your boss about it? Most bloggers are anonymous for this reason; they don’t want their boss to make the link between the blog (or side business) and the individual working for him.

Why is that? Is it because we are afraid that our employer would spy on us because they think that we would work on our alternative source of income instead of concentrating on our day job?

Is it because we are afraid to be asked to stop our extracurricular activities?

Is it because we are afraid of being disciplined due to “inappropriate” statements found on our blogs?

All these reasons and many others are related to one simple thing: FEAR.

In all honesty, my boss knows about my online empire. She knows about the fact that I am making money online, that I blog about personal finance and that I am a shareholder of a small corporation. I’m sure you can find plenty of reasons to not declare that you have are making money on the side through your blog or any other kind of small venture. But you might have not considered the benefits you can get from telling your employer that you run a business. This is why I am going to give you a few benefits of telling your boss you have a small business.

Please note that in my case, due to legislation around my day job, I have to declare any participation in a corporation and all additional sources of income. In fact, even volunteer activities have to be reported in my field!

Being Job Independent

This is probably my biggest advantage: my boss knows that I could easily live from something else than my day job. She doesn’t know about all the details obviously, but she knows that my company is generating sufficient income to support my lifestyle. This makes a huge difference in the relationship you have with your employer. They know that you like your job (if not, you have the ability to quit) and they also know that they should take care of you (up to a certain point).  Being job independent doesn’t mean that you can be arrogant, far from it! However, it helps you to negotiate with your boss in order to get what you deserve. Corporate structure dictates that, sometimes your manager will have to “put you on the shelf” instead of giving you what you expect (promotion, salary raise, etc) right away. They do it because they don’t always have the choice (they still have to generate profits and manage their whole department) but they will pick someone else if they know that you are a little bit more independent financially…

Create a Wow

Having my own company helped me earn credibility from my boss, my peers and my clients. While most of them don’t know the details of what I do (I make sure to draw a clear line between my business and my day job), they are intrigued and impressed by the fact that I can manage everything at the same time. When people around you are impressed, it helps you shine (and obviously increases your chances of getting a promotion!).

The key point is not to brag about it and stay VERY HUMBLE. I don’t talk much about my company and I keep some mystery around it. Most people just know that I run websites and make money out from it. I tell everyone that I don’t get clients from my online business and that I don’t mix my financial planner job with my blogs even when I talk about personal finance. I actually do more than tell them… I don’t mix both in the real world either!

Get more Exposure

I am now known for being a great financial planner as well as an entrepreneur. The last time I had an interview (it was for the Canadian Business Magazine), I had the photographer to come to my branch and my boss was quite happy of having her branch shine at the same time!

Be honest

The last thing I want: is to create a bad surprise for my employer. I don’t want them to find my sites or my incorporation by chance. If it happened, I would be in serious trouble. Why did you hide it from us? What are you doing exactly? This is where you get tons of questions as if you were a criminal while you actually do everything by the rules. Being honest has always served me (even though I hate paying taxes ), so I applied the same guidelines with my employer.

Final thoughts on telling your boss

Since I first started The Financial Blogger, I didn’t know that I was going to make some serious money with the internet but I knew that someone I know could identify me. This is why I have decided to write only things that I feel comfortable with (or that I can defend if you turn it the other way around). Since I’m okay with what is being published, it means that I am also okay with people reading my stuff… including my employer!

I think that it is very important that you don’t bad mouth people you know on your blog because you do have a “louder” voice than most people through this medium. Therefore, you have to be careful with what you do with it. After all, with great powers, come great responsibilities!

What is your take on this? Are you comfortable telling your boss you make money online?

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So you have a small business idea that you have in mind or that you have already had time to develop and started to make a few bucks from it. Now that the tax season is over, you are probably thinking of the implication of having this new revenue added to your next income tax report.

Some people will advise you to incorporate right away; others will tell you that you are better off staying as a self employed. Depending on your case, both approaches can be good. In order to show you the benefits and flaws of a corporation, I’ll explain why we decided to go that route so early in our process. Please note that my experience is related to a Canadian Corporation so there might be some differences when creating a LLC in the US. However, the factors influencing your decision will remain about the same.

Tax implications of a corporation

If you ask to any tax expert that follows the letter of the law, they will tell you that there are no tax advantages in creating a corporation when compared to earning your extra revenue as a self employed person. Technically, if you earn income in a small business, you will be taxed at 19%. If your corporation distributes a dividend, you will be roughly taxed at 30% (depending your marginal tax rate and the province where you live). Therefore, an income of $100 will result in a payment of $19 to the Government when earned in the company and you will need to add an extra $24.30 ($81 * 30%) in personal tax for the dividends received. The total tax paid is then 43.3%. This is probably a similar tax scenario as if you would earn this income directly as a self employed (taxed at your marginal rate).

Cost of creating a corporation

The  good news when you are self employed is that you earn directly in your hands the income and you don’t have any expenses to incur in the “creation” of your small business. You charge your client under your name and you get paid the same way. At the end of the year, you only have a few more lines to complete in your personal tax report. That’s all.

This is a different ball game when you look at a corporation. The first thing to consider is the incorporation cost itself. It could easily lead to fees of $1,000  since you need a lawyer to create your corporation and register it in your province/state. But you are not done with costs. You will also have to consider accounting fees for the following tasks:

- Annual financial statements

- Separate tax reports

- Bookkeeping (you need to keep track of all the credits and debits in your books)

- Updating your minutes book (with regards to shares and shareholder convention)

You can surely do most of this yourself but you will waste your biggest asset: TIME! In my case, I pay a little bit less than $200 per month for bookkeeping and accounting advice (I can call my accountant anytime) and I pay an extra $1,000 for filing the tax report and completing the financial statements. While the cost is significant, it saves me a lot of time (and I hate bookkeeping anyway!).

A Corporation is another person

This is probably one of the biggest advantages of creating a corporation: the corporation itself is considered to be a legal entity. This person will earn its own income, file its own tax report and will be responsible by itself (in case of a lawsuit). If you are working self employed, you can’t really separate your activities from yourself. This may lend some problems in the future (if you want to have a partner for example or if you are looking for financing; you will be directly held responsible for your company’s debts).

The Tax trick with corporation

While there is no “true” tax advantage of having a corporation, the main difference between the corporation and yourself is that the corporation is spending money before taxes while you are spending money after taxes. This allows you to defer taxes over time and use some expenses to pay fewer taxes. For example, we are allowed in Canada to use amortization to decrease the value of company assets (such as computers, web properties or real estate properties). The Amortization is a “paper loss” which saves you from paying taxes right away and defers them over time. This is in such situation where you can have a “tax advantage” of creating a company.

When should you create a corporation?

There is no definite answer to this question. However, there are a few indicators that can tell you that it is the time to create your corporation:

a)      If you have a partner

With a shareholder agreement and a good corporation, everything is much easier with a partner. Having a partner myself, I saw the immediate benefit of creating a corporation at the very beginning of our partnership. We wanted everything to be separated equally and we wanted to make sure that we planned an “exit strategy”. Now we know that if we split or one of us passes away, we have values and mechanisms ready to split the corporation accordingly.

b)      If you start making serious money

Some people will advise you to consider incorporating when you are making around 30K with your small business. This sounds reasonable as 30K would justify accounting expenses while also be big enough to weigh on your personal tax (probably around 40% if you add another 30K to your income).

c)       If you plan to grow this into a real business

Having a corporation also send a clear message to your customers: you are serious about doing business. Since it requires fees and a structure, you show people around you that you really want to grow and do business for a long time. This is definitely a sign of involvement and motivation.

d)      If you are already making a good salary with your day job

This is one of the reasons that motivated me the most to create a corporation: I’m already sitting in a higher tax bracket, I don’t need to pay more taxes than I already do. Since I don’t need this money to live, I would rather have it taxed at 19% and keep it within the corporation to grow or to simply defer taxes in time.

Final Thoughts on Creating a Corporation

I hope I gave you a few guidelines as to when to create a corporation for your small business. When we officially partnered up back in 2008, we were not making much money (about $200 per month) but we really wanted to make a statement upfront and kick our ass into the business world. In our case it was definitely a good idea!

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There seems to be a lot of hype going around about quitting your job and working for yourself. There’s a lot of cheerleading and promotion about the benefits of being your own boss and leaving your current employer. It seems like an amazing idea. You can leave your job, never have to see your annoying co-workers again, and be free for the rest of your life. Is it really that easy? I’m not so sure.

The other day Mike wrote about why he will never quit his job. I always enjoy a post like this because it helps to take a realistic look at things. There are people out there that are making lots of money of online and still don’t plan on quitting their job.

A while back I asked if you’re jumping on the self-employed bandwagon? The reason I did so is because it feels like more people just don’t want to work rather than work for themselves. Quitting your job isn’t the only answer to all of your problems. There’s more to the issue.

I don’t want to suggest that you should remain in a toxic workplace environment for the sake of money. I just wanted to take a realistic look at the whole notion of quitting your job. I wanted to share why I’m not a huge supporter of quitting your job just yet:

Money.

We all need money! What will you do for money? Do you have a strong backup plan or a war chest for money? I find that the idea of making money is overlooked too often. The thing with quitting your job is that I think you need to have your financial situation taken care of first. This means that you need a strong financial buffer mixed in with a proven income. Without this combination, quitting your current job will only lead to added stress. Do you want to go right back on the job hunt right after quitting?

If you have a way of making a living then quitting your job will likely work for you. Without a strategy you’ll be no better off. That’s just my opinion.

Connections that you can build.

Think about the personal and professional connections that you can build at work. I’m sure that many of your close friends are individuals that you met on the job. In many case you’ll spend more time with your co-workers than your family. Just imagine how many more connections you can build if you stay employed. You can also meet connections that will take you in different directions when it comes to future employment and promotions.

Getting out of the house.

One of my friends once told me that he couldn’t live life with his wife not working. He also told me that he couldn’t imagine not working either. I think the thing is that we often feel like more free time is the solution to our problems. More spare time isn’t always the best solution. There’s no guarantee that you’ll use this time properly. There’s also no guarantee that you’ll be much happier just because you have more time. It can be good for you to get out of the house and to remain active with your current job. Maybe the problem is that you need to switch departments, companies, or fields. Simply quitting your job isn’t always the best answer to your work problems.

That’s just one side to the argument. I wanted to present a realistic look about why quitting your job isn’t always the best option. I would love to hear a counter argument.

Do you want to quit your job? Have you considered quitting your job? What would you do with your new found free time if you did happen to quit in the near future?

(photo credit: raleignichols)

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The other day Mike really inspired me with his post on why his business model is safer than the stock market. I’ve always been a huge supporter of paying for value and improving myself at the same time. I took the Earn1k course last year with Ramit Sethi. Yesterday I signed up for the Hustle Project with Adam Baker and Corbett Barr. I’ve often applied the motto, “if you’re not growing, you’re dying,” to all areas of my life.

My problem is that I don’t take enough risks. I feel that with my young age and overall situation I need to take more chances in an attempt to grow and take things to the next level. This is why I wanted to look at the notion of deciding to grow a business today.

If you’re thinking about investing some serious money you need to assess the situation first I feel. A few questions to ask yourself before you decide to invest money in yourself or your business:

Am I serious about this?

How serious are you about growth? Do you want to talk about it, do nothing, then complain? If that’s the case then you’ll be better off with keeping your money in an online savings account. If you’re serious about your plans to change things up then you need to strongly consider investing some time and money into yourself.

What are my goals?

Do you have any concrete plans? I know for a fact that I want to work with helping other young people reach their financial goals. Making money isn’t a big motivation. However, I’m very realistic and I do want to make some money in life. Do you have any goals? What do you want to accomplish? If you don’t have any goals then you might want to put your growth plans on hold for the time being. If you don’t know where you’re going you’ll never get there.

If you’re not 100% convinced that you want to include growth in your future plans, allow me to present the case for growing your business/personal life:

You don’t want to live a life with regrets.

I really do believe that we will regret what we didn’t do as opposed to what we did. You owe it to yourself to take some chances and to see what you’re made of. If  you don’t have the money or want to risk money, you can always attempt to grow by using time. Time is the greatest commodity around. We all have the same amount of time allotted to us. We just all choose to use our time differently. Freeing up your schedule to work on more meaningful projects can really send you in the right direction. You’ll be amazed by what you can pull off when you push your own personal boundaries to see what you’re made of. Do you know what you can accomplish when you put your mind to something?

Build something amazing.

I love the idea of building something powerful. I love the thought of building a community of like-minded people. I respond to every comment on my blog and I love the idea of building towards something special. By taking the leap and investing either time or money into growth plans, you can really build something unforgettable. Something as simple as starting a blog with a highly active readership can really make you feel like you’re doing something right.

Now to be fair we must understand that not everyone will be successful like Mike with the risks that they take. This is why I need to show the case against attempting to grow:

Risk of money.

There’s always that thought looming regarding the money involved. Any time you spend money on something that you’re uncertain of it’s really easy to get all nervous and let anxiety bring you down. Can you handle the risk of losing money? What would yo do if your growth plans fail and you have to find a way to pay the money back? Do you have a backup plan?

Failure.

Nobody wants to fail. The fear of failure is likely what’s holding most of us back from attempting to grow a side business or from taking huge risks. We don’t want to be mocked by our peers and be deemed a failure.

How does one deal with failure? Pamela Slim in Escape From Cubical Nation shared three strong points on learning to deal with failure:

1. Exam in the truth in fear.
2. Get comfortable with being uncomfortable.
3. Develop a strong safety net.

At the end of the day, failure is a harsh reality of attempting to grow a business. I believe that if you go by those three key points, you’ll be able to alleviate much of the fear of failure.

Time to turn it over to the readers: Do you have any plans for attempting to grow your business? Please share with us.

(photo credit: derek e-jay)

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