Alright, I am almost done with our 2017 tax returns! There are a couple of K1 forms that should be coming in April, but everything else is done. Now, I can share my 2017 blog income because that part is finished. We had a record year in 2017 and doubled our blog income from the previous year. That was great news, but we have to pay a lot more taxes this April. Last year, we didn’t have to pay a capital gain tax because we were within the 15% tax bracket. In 2017, I made too much money online and it pushed us up to the next tax bracket. I know making more money is a good problem to have, but it is still painful to write several large checks to the tax man.
I’ll share a few highlights first and then we’ll dig into the details of the blog income.
Here are a few highlights from our taxes.
- We owe the IRS a little over $9,000. We also owe the Oregon Department of Revenue around $1,000. In addition, I’ll have to send in estimate tax payments of about $2,500 every quarter. This adds up to $12,500 that will flow out in April. Ack!
- At least, we don’t owe any underpayment penalties. We paid 100% of what we owed last year. That gave us an exemption for under paying in 2017. This year, I’ll have to be more accurate and estimate better because that exception is only good for one year.
- We made a bit too much income and pushed up to the 25% tax bracket for the first time since I early retired. This is important because now we have to pay the 15% capital gain tax. We haven’t had to pay tax on our dividend income for a while so this was somewhat really painful. The higher income also reduced our child tax credit from $1,000 to $750. If I had made $5,000 less, we’d reduce our tax liability by $3,000. Now, that’s what I call diminishing return.
- Retire by 40 generated $65,388 last year and I put $30,150 into my individual 401k.
- I over contributed to my individual 401k by $30. I had to write a letter to Vanguard to recharacterize $30 to 2018 contribution.
- I did not take a home office deduction although 90% of my work was done at home. This is because my office doubles as RB40Jr’s bedroom. You can only take the home office deduction if it is exclusively used for business.
Blog income history
Here is the whole history of my blog income. I started Retire by 40 in 2010 to help me focus on my early retirement journey. At first, I was hoping to make a little income, but I never imagined Retire by 40 would help our finances this much. It’s pretty amazing that a simple blog generated almost $300,000 in revenue over these last 7 years. Everyone should have a blog. Here is my guide on How to Start a Blog and Why You Should. Many bloggers are more successful than I am at making money and others aren’t. You never know until you try.
My original early retirement plan in 2010 was to live on Mrs. RB40’s income, our passive income, and about $500/month of online income. Back then, we thought Mrs. RB40 would continue to work until she’s around 55. At the time, she just started a new job and she preferred working than retiring. Now, she’s a bit older and she has seen the benefits of early retirement. My quality of life is way better after I retired in 2012 and she wants a piece of it, too. Well, mainly she wants more time to pursue her interests. She likes work, but she just doesn’t have time to do other things that she wants.
Our current plan is for Mrs. RB40 to retire around 2020. Our passive income should be in a better shape by then. We’ll also depend more on my blog income. We’d probably need around $1,500/month of online income so we can put off drawing down our retirement accounts. Drawing down is fine if it comes to that. It’d still be much less than the 4% safe withdrawal rate.
*You can see how I’m doing with blog income in 2018 here. I update that page monthly.
2017 Blog Income
Here are the details of my blog income last year.
- Total Revenue: $69,846
- Expense: $4,458
- Net Income: $65,388
We had a record year in 2017. Our revenue was high and our expense was low. Our business expense was lower than in 2016 because I didn’t have any business travel in 2017. It was our best year yet and I’m working to improve it in 2018. It’s going well so far, but Q1 is typically the best quarter of the year. We’ll see how the rest of 2018 goes.
Retire by 40 generates revenue exclusively through advertisements. There are many ways to make money online, but I’m just not ready to branch out yet. More ambitious bloggers use their blogs as platforms to launch new careers such as becoming a published author, freelance writing, motivational speaking, consulting, and personal finance coaching. I’m not quite ready to do those things yet because I’m a bit lazy in my early retirement. If I was more driven, I’d work more to diversify my income. After Mrs. RB40 retires, I might try financial coaching or writing a book because I’d have more time. We’ll see how we both feel in 2020.
How we made money through advertisements.
- Banner ads: $20,577. These are the banners you see on the sidebar and in the content. I like these ads because the readers don’t have to click on them. In a sense, these are like the ads on TV. I was with AdThrive the entire 2017 and I’m happy with them.
- Click ads: $2,354. These are the banner ads that readers need to click on. In 2017, I used MyFinance for this and it worked pretty well. MyFinance was much better than Google, Yahoo, and Amazon, but this income stream was kind of disappointing. Click ads just don’t work that well anymore. Even Mrs. RB40 doesn’t click on ads anymore.
- Affiliate: $44,244. Our affiliate income increased quite a bit in 2017. These are the links you see sometimes in a blog post. We receive a referral fee when readers sign up for services through these affiliate links. Last year I focused on generating more income and added affiliate links to almost every post I published. Adding more links worked very well and I hope the bounty continues for a few more years.
- Brand ambassador:$2,671. Occasionally, we work with companies to build brand awareness. This usually means publishing an article to highlight their products or companies. It’s really tough to make these posts interesting and useful so I cut way back on this one. Google also doesn’t like this kind of thing because they say we are manipulating their search algorithm. Our income decreased about $5,500 in this category. I’m okay with this because we made up for the decrease through other categories. I’m also happy that we have fewer brand ambassador posts. Although, some companies are good to work with. I worked H&R Block last week and it turned out pretty well.
Our expenses were not too bad in 2017. $4,458 may look high, but that’s because we have more fixed cost now. When I started in 2010, our expense was much lower than this. If you’re new to blogging, don’t worry. It won’t cost this much to run a blog when you’re starting out.
- Advertising: $673. This is mostly for Aweber, our email marketing company.
- Travel: $0. I didn’t go on a business trip in 2017.
- Financial fees: $101. PayPal fee and such.
- Contracts: $9. This is for the CDN (caching network.)
- Insurance: $210
- Meals: $835. We were able to deduct 50% of the business meals.
- Repair: $7. Minor repair for my computer
- Internet: $821
- Phone: $169
- Mail: $56
- Hosting: $656. I use Siteground now and it’s great. Retire by 40 has much less server problems now.
- Product review: $159. Various stuff that I reviewed at Fit by 40.
- Computer: $901
- Software: $87
- PO box: $90
- Small business license: $100
Overall, the expenses weren’t too bad. This year should be comparable because I haven’t added anything new.
2017 Net Income: $65,388
My blog income was great in 2017. This isn’t bad at all for part time self-employment. I work about 20-30 hours per week and I don’t have to report to anyone. It’s great to dictate my own schedule and work at my own pace. One of my goals in 2018 is to make $100,000 from blogging. This is probably too ambitious so I’ll grade myself on an academic system. I’d be happy to get a B- this year ($80,000.) I’m sure we’ll get there at some point.
In 2017, I focused more on generating income from this site. It worked out quite well and I think 2018 will be very good too. The problem with blog income is that it isn’t stable. What works well this year might not work next year. You can see that from the historical income graph. Our income dropped in 2015 and 2016, and then picked back up in 2017. We have to make hay while the shines.
So what are you waiting for? If you don’t have a blog yet, you really should start one. It’s a great way to build your brand and explore different ways to make money online. You can get started in just a few minutes by signing up with SiteGround (example of an affiliate link), one best hosting companies in the business. They are much better than other hosting companies and the price is still affordable. See my tutorial on how to start a blog if you need a little help.
Okay, that’s it for today. I’m really glad I’m almost done with taxes, though. It’s kind of fun, but it just takes so much time to go over all the accounting over and over again. Have you finished your taxes yet?
Image by Glenn Carstens-Peters
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.