November 26, 2012, 7:50 am

Yearly Income Update; Small Joys & Deceptions

by: The Financial Blogger    Category: Alternative Income,Career,Personal Finance
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I particularly enjoy the period of end of November and December as it is the moment of the year where I resume my successes and failures and setup my goals for next year. Last year, I’ve wrote about my biggest personal income report ever making $176,000. Was I able to repeat it this year? Not at all… but I knew I couldn’t since I started a new book with new clients.

 

For those who are in the business, you will understand how hard it is to start from scratch and show a big 0 in the $ under management column. Even thought I knew I was going to make less money this year, I made the move for several reasons:

 

-          I save 2h30/day in transportation time

-          I also save the cost associated to this transportation

-          I increased my base salary

-          My future potential bonus is better than my previous job

-          I have the opportunity to work for the best department in the financial industry (private wealth).

 

Nonetheless, all these very good reasons don’t pay for my mortgage at the end of the month! Lol! But I can’t really complain as “on a bad year” I made slightly over $131,000 this year.

 

How My Income is Earned:

 

As you know already, I’m the only income earner in a household of five. This is why I feel additional pressure to make money in order to insure that my wife and three kids live a great life without money problems. This is also for this reason that I have built a sideline business to ensure stable income over time. My online business represents 27% of my overall income this year (as compared to 19% last year). It’s been three years that both my partner and I are benefitting from our online company even though we don’t pay ourselves salary. We are better off leaving the money inside the company to ensure its growth as opposed to bleeding it right away.

 

In 2012, our online revenues didn’t grow since Google hit both private ads and our traffic on sites that were doing well with Adsense. Nonetheless, we should make roughly the same revenues we earned in 2011 as we were able to generate additional sources of revenues such as our newsletter, affiliate programs and our eBook (now showing over 300 copies sold already!!!).

 

My other source of income is obviously my day job. I’ve separated this source of income into 3 different parts:

 

Base Income

My base income is super important since it is my main source of income throughout the year to pay my bills. I was able to increase it this year by having a promotion to work in private wealth. While I know I could make a lot more money if I was a broker paid strictly on commissions, the security behind a stable biweekly pay check is awesome when you have a young family. I just don’t want to stress with money and have to work 70 hours a week to compensate for this stress.

 

Bonus

The most interesting part of my day job is the time when I receive my year-end bonus. It is usually the most interesting moment. But not this year and this is my biggest disappointment of the year. I knew it was coming because I started a new book, but my bonus is nothing compared to what it was last year. I don’t even want to write down the drop in % as I would cry! But sometimes you have to accept taking a step back to move forward. I did this back in 2008 when I barely increased my overall income and suffered from another drop in bonus. In 2009, this career move allowed me to jump from high 60s to over 100K. I hope I’ll be right again this year!

 

Employer’s benefit

 

Most people don’t consider their employer’s benefit as $ in their pocket and I think they should. But I don’t consider all my benefits because some of them are too complicated to calculate. For example, I ignore my insurance and pension plan benefit. I know they count as an important part of my overall income but I can’t really put a dollar sign in front of it.

 

I do consider the interest I save on my mortgage because I work in the financial industry and I have an additional rebate on my interest rate. The other thing I consider is the “free” portion of my employer stocks paid by my employer. Since I cash out my stocks each year, this is clearly cash in my pockets!

 

My overall sources of income from 2011 to 2012 have been relatively stable. In fact, each part increased besides my bonus. Here’s how it is distributed:

This Year:

 

 income distribution 2012

Last Year :

 

 income distribution 2011

As you can see, the main difference between 2011 and 2012 is the importance that my bonus is taking in my overall income. On the other hand, if I consider how much I save in gas and transportation cost, there is a big part of my loss of bonus that is being compensated! Plus, I don’t feel tired anymore which is priceless.

 

What’s Coming for 2013?

 

I was happy to see my overall income staying well above 100K even though I’ve turned my back on a potential bonus over 35K for a 4th year in a row. Overall, my other sources of income have proven that my “personal business model” is solid and can provide over 100K in income even in a bad year. A 6 figure income is great for a single individual but when you factor in that I have to compensate for my wife’s income, I’m not making more than any family household with two average salaries of 50K each.

 

In the upcoming year, I’ll be first working on increasing my bonus. I’m already working on a plan to generate a bonus over $25,000. It’s not going to be easy as I will have to do around 150% of my objectives while my book size is a quarter of what it should be. I’m still in the dark as of to what my exact objectives and payouts on bonus will be for 2013 so I’m currently working with this year’s metrics. I hope it won’t change much and that my plan will be successful. I have identified where I can get business to with my existing clients and made a list of potential clients I can approach. The rest is pure mathematics: the number of calls you make gives the number of appointments you get gives the number of deals you close ;-) .

 

My base salary and employer’s benefits are fairly stable over time and I should only see an inflation adjustment on them. I wish I could get more but it’s impossible in my position. The only way I can get a bigger raise on my base salary is to crush 2013 and build a huge book. At that time, I will be in a good position to ask for a raise. In the meantime, I’ll stay quiet and concentrate on my job!

 

As for my online revenues, I don’t expect a huge increase this year either. The reason being we are paying off our corporate debt at a super high pace. We were at $100,000 in corporate debt at the beginning of the year and we are now showing $73,000 as of November 1st. We should continue to reduce our debts by about $3,000 per month for the next 2 years until we have nothing left owed. Then, I should see a huge increase from my online income, hehehe! More seriously, I expect to increase my online income by 5% only this year in order to leave enough liquidity to the company so it can pay back its debts. In 2 years, we will have a marvellous debt free money making machine.

 

Overall, my income goal in 2013 will be to reach $150,000. This won’t be as great as my record year at $176,000 but this should be enough so I can treat myself to a nice trip ;-). The only reason why I focus so much on money is to be able to treat myself and my family. If not, there won’t be any reasons to bust my ass like I do!

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Comments

Sometimes you do have to take a hit to get ahead and it seems like you did the research and made the right decision for your family. I need to make a game plan for my online adventures for 2013!

$150,000 sounds like a good goal Mike! I think the chances are high you will get there.

Can you remind us how the company got into $100,000 in debt? Paying off debt if it’s unmanageable or come with a high interest rate sounds like a decent idea.

The pie chart is interesting, in that it shows your day job as more important to overall income than before. Glad to hear you are so pumped about the upside from work.

Sam

by: The Financial Blogger | November 26th, 2012 (10:14 am)

@Sam,

We borrowed money to buy more sites. It’s hard to finance growth from your profits only! Considering the fact that we can pay off about 30 to 35K per year in debts, we will become completely debt free in 2 years.

It is manageable ,but since money isn’t free, we are also tired to pay interest on it! lol!

What’s the interest?

Do you think I could do my own P2P lending in the blogging community? I’ve considered it, but am afraid of people not paying me back!

by: The Financial Blogger | November 26th, 2012 (10:42 am)

8 to 10% depending on the debt, it’s quite expensive but it was the only commercial financing terms for a start up in the web industry :-(

This could be an interesting model but I’m not sure how you can protect yourself from default. The other problem is that it could be harder to get the borrower’s credit bureau if you do it on your own.

Most importantly…. where are you thinking about going on this trip? :)

by: The Financial Blogger | November 26th, 2012 (11:55 am)

If (and only IF) I get my 25K bonus, I’ll go to Hawaii with my wife to celebrate our 10th wedding anniversary :-)

but I’ll only go if I can pay cash for the trip… that’s another story!

Why not let the PF blogging community lower that debt for you? Start a listing at 7 or 8% and see if it gets bid down by your fellow bloggers? readers? At the very least will keep those that are backing you engaged!

Ahhh, if you are going to Hawaii (Oahu), I know all about it! I can give you some great tips.

But don’t you know the saying in PF land? No spending anything until you pay off all your consumer debt! )

8-10% = business expense at least! Yah see, I’d be willing to lend you money at 6%! Seriously.

Sam

@Evan, Sam

Thx for the idea, I might start looking at cheaper financing for my business loan!

Hey Sam,
I’ll surely send you an email when I’ll buy my tickets for Hawaii :-). I know I should pay off all my consumer debts but I should be closed to it in 18 monhts! that’s the plan anyway! lol!

As for your offer, let me discuss with my partner :-)

Wow, the bonus decrease sucks. On the bright side, your online company is looking great! Congratulations on the increase this year!

Seems like it would have been more prudent to leave the $35k you received in company benefits inside the company. If both you and your partner did that (assuming he withdrew an equal amount) this past year, your company could be debt free.

I also really like this time of year because it is filled with hope for what is to come. With a month left in 2012, its the perfect time to survey your accomplishments and your failures, and to look ahead at how you can change your life for the better in the upcoming year. Staying optimistic is key!

[...] The Financial Blogger provided us with this yearly income update. [...]

by: The Financial Blogger | November 30th, 2012 (6:14 am)

@J,

you are right, not touching a dime from the company would have put it debt free. But we would have paid a lot of money in taxes (to reimburse debt, you must make profit). Therefore, we are better off paying off our debts over a few years like we do instead of clearing everything the same year and pay an extra 20K in taxes ;-)