This is a guest post from Belinda James. Belinda is currently attending Trident Online University and earning her master’s degree in business administration. In her spare time she writes automotive articles for Nissan Minneapolis.
A few years ago I had a regular administrative 9-to-5 job working for one of the three credit bureaus. It was an okay job with an annual pay of around $33,000 a year. In 1998 that was more than enough to pay for a tiny studio apartment, take care of monthly bills, and pay for my shopping sprees at Forever 21 (I still shop there, actually).
However, everything changed when I bought my first computer and started fiddling around the Internet. Somehow I ended up clicking a “Webmasters Click Here” link on a website and figured out that it was possible to make money online. After I received my first $20 commission check I was pretty much hooked.
It took a lot if trial and error but by 2006 I was pulling in around $10,000 a month from promoting affiliate programs online. I had high-traffic websites and would generally earn $30 or $35 every time a web surfer made a purchase through my affiliate link. In a great month I would make around $13,000 or $14,000 and in a “bad” month maybe $8,000. At one point I had more than $80,000 in the bank!
But I made a lot of mistakes that cost me everything. Eventually, my income dwindled so much due to the recession and industry changes that I was forced to look for a job again. Here are my hard-learned lessons that might save you a lot of grief if you’re running your own business (or think about starting one):
1. Pay your quarterly taxes on time
When you are self-employed you generally receive 1099s from the companies that you work for, and it’s your responsibility to file your taxes quarterly. I used to file mine yearly; I was making a lot of money so financial penalties (even in the thousands!) didn’t bother me.
One year I really overspent and I was wiped out once I paid taxes at the end of the year and never was able to recover from it financially. My income continued to plummet every year, but I was still responsible for income taxes for previous years. Paying your quarterly taxes in a timely manner ensures that you won’t get caught behind, because once you do it can be nearly impossible to catch up.
2. Find a good accountant
Having a qualified CPA in your corner is crucial if you want your business to survive. I never incorporated so I was responsible for self-employment taxes. I never found a solid accountant that I could trust. One CPA charged me $650 an hour and didn’t do anything for me that I couldn’t have done for myself. I was told that it wasn’t worth the extra paperwork for me to incorporate because my earnings weren’t high enough.
3. Don’t tie up a large chunk of your money in a car
When I was making a lot of money I bought a used Mercedes. It was certified pre-owned car, and I paid around $43,000 for it, in cash. Was it the smartest decision ever? No. But do I truly regret it? I would honestly have to say no (even though I know most people will disagree).
I like to enjoy life, and I’m not going to lose sleep over a purchase I made a long time ago. However, if your goal is to really get rich slowly, you will probably want to buy a used car instead.
4. Nothing lasts forever
When I was making six figures a year I was convinced that it would last until retirement and that I was financially set for life. Call it naivete or “sticking my head in the sand”, but I never thought that the money would run out. The truth is that nothing lasts forever, so enjoy it while you can.
Hindsight is 20/20
What else would I have done differently? I would have worked harder and smarter. I would have rented office space and ran things more like a real business. I would have hired employees to do the grunt work. I also would have expanded my business and not concentrated solely on doing the same thing over and over. My goal at the time wasn’t to get rich slowly, but to enjoy life, and that I did.
I do have a few regrets, but I still had a great run while it lasted!