Bloggers go to sleep at night, dreaming of their blogs making money.  While there are several ways to make money online, the end result is always the same: Blog Revenue!

You just made $5000 last month from your blog.  What are you going to do?  A trip to Disney Land sounds nice, but really, what are you going to do?

The Reality of Making Money Online

I was listening to a book on tape I bought years ago about starting your first business.  It was one of those “idea” books, heavy on the why’s and what to do, but empty on the how to do’s of actually starting your own business.

The focus of the book was to start a part time business and find ways to turn your normal personal expenses into business expenses.  At first glance, this could seem to be a good thing.  After-all, as a blogger, you have expenses; domain fees and hosting fees are fixed expenses.  You know how much you must pay monthly or yearly for the cost of running your blog.  Include into that the cost of your Internet connection (a must to run your business).  Everything else is free and clear, ripe for taxation!  Further business expenses can include paying for an online review, a custom designed WordPress template, and some Google AdWord advertising to target traffic to your blog.  A new computer is also a good expense, although it has to be depreciated over a set amount of years.

Don’t get into the trap of trying to come up with creative ways to spend your business income just to get out of paying taxes.  Accounts (bean counters) will tell you great ways to expense away your income so you will have to pay little or no taxes.  Get this through your head:  Everybody pays taxes.  As a business you can control how many expenses you have but be warned.  If you get flagged for an IRS audit, there is a chance that the more deductions you have and the more creative they are, that the deductions will be disallowed, possibly back for several years, and you will have to pay back taxes along with fines and late charges.

The Safe Way to Spend Your Blog’s Revenue 

These are the 4 ways to spend your business income in a real way and won’t get you in trouble with the IRS, as long as you don’t lie on your taxes:

1. Invest the first 10% of your gross income.  There are plans where you can invest tax free (IRA’s, Roth IRA’s, SEP’s, etc) and that good, but we’re looking for flexible investments vehicles where you can do what you want with the money.  This includes withdrawing it to fund an emergency.  The goal is the have that 10% make more money.  You will have to pay taxes on this money, but getting it into the job of creating more money is the true path to wealth.
2. Pay operational expenses.  These are the MUST DO bills that are required for the blog / business to continue to run.  If these are not paid, then your business income will come to a halt.
3. Expand the business.  This is the creative side of running a blog.  What can you do to bring more readers to your blog?  A paid review from John Chow for $400?  AdWord advertising to bring readers from other blogs to your blog?  Learn and start affiliate marketing to create a new stream of income?  Let your mind wander.  After making sure the business will continue, the main function of business income is to create MORE business income.
4. Your cut.  Too many bloggers out there want this to be the 1st item on the list instead of the last item.  Still want to take that trip to Disney Land?  How about taking it 1st class airfare, staying at the expensive Disney Land Hotel in a suite, staying the whole week, and not having to worry about how much it costs?  Get to learn these words: delayed gratification.  Wait for it.  Build your blog’s revenue.  Get it increasing month after month.  To get to this point you’ve had to invest your time building the blog from nothing.  Don’t quit now.  Keep building it until it’s making enough money that you can pay for that dream vacation, even after you’ve spent a ton of money expanding the blog to make MORE money!

To make a living and truly become a problogger, you need to treat all your revenue with respect and run things as a business.  The main principle to keep in mind is that the blog’s income is to help the blog make more money, not to spend.  Keep that in mind and you’ll eventually have more money that you thought possible from blogging.

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