And as we’ve established, often the most straightforward way to do that is to start freelancing in addition to your nine-to-five. Ideally, you can even make that work something you already enjoy—like teaching a fitness class or creating designs—so it feels less like work. In other words, become a part-time freelancer in your chosen field.

There’s only one problem. Freelancing requires one precious resource that everyone seems to be lacking these days…

…time!

Even full-time freelancers have a hard time with time management. But if you’re already working a full-time job, have other activities you enjoy, need time to take care of yourself, and especially if you have a family, finding time to work on a freelance business can seem impossible.

It doesn’t have to be.

I asked a number of successful freelancers how they make time for their work. Read about the strategies and systems they use below, and you can be more productive and earning more money in the coming year. 

FINDING TIME

Unlike money, we can’t make more time, we can only free up the time we have. To find more time, you have two options:

• Identify blocks of uncommitted time in your existing schedule.
• Change your schedule to create blocks of uncommitted time.

I’m a newbie freelancer myself, and I’ve found that using pockets of empty time during the day has been critical to my ability to get everything done.

Identifying uncommitted time.

I know what you’re all saying:  “But I don’t have any free time!”

Exactly. None of us do. We’re all busy. Most of us have a 9-5 that we have to report to five days a week. However, this is why you need to use your time wisely by utilizing uncommitted chunks of time scattered throughout your day, instead of, say, surfing YouTube or watching another Family Guy marathon (I’m guilty of both).

For example, I’m a full-time accountant who works five eight-hour days per week, and here are some of the pockets of free time I can identify in my schedule:

• My lunch-hour (Here’s a great article for maximizing your lunch hour.)
• Waiting for meetings/teleconferences/training to start
• While I’m making dinner (I do this often!  I prop my laptop on a counter or breakfast bar.)
• Waiting at the doctor/bank/car shop/in line/etc.
• After dinner, on nights I don’t have plans.

Of course, I don’t have children, but I do have other activities that require my attention in addition my full-time job.

As you can see, my “free” time are usually short periods of time—just five to 30 minutes here or there. The key is using these times instead of wasting them. Rather than mindlessly browsing Facebook; use these times to e-mail a pitch, build on an idea you jotted down earlier that day, or finish a project. You have to stay focused.

Want to help other readers out? Think about uncommitted chunks of time in your day that you could use more productively and share them in a comment.

Creating free time.

What if you can’t think of even one time slot where you could spare a minute for freelance work? It’s time to sacrifice something else.

“I find that I can either stay up late or set my alarm at an ungodly hour to get things done.  If I alternate nights of sleep, no-sleep, sleep, no-sleep, I can get by.”  – Phil Villarreal, author and freelance writer for The Consumerist

Phil’s quote nails it—as a full-timer and a dad, he is seriously crunched for time. He had to create time slots to make freelance work fit into his life. He wakes early or stays up late. Everybody can do this. At some point, you simply need to decide which is more important: sleep or work.

This takes sacrifice. That’s the question that you have to ask yourself before you embark on your freelancing journey: Are you willing to sacrifice time or other things you enjoy to do work that you love?

If you’re not willing to give-up some shut-eye, here are some other possibilities:

• Outsource chores or other work (hire someone, recruit family members, or swap tasks with others)
• Get organized so your days become more efficient (see below)
• Say “No”; drop activities, groups, and recurring social events that don’t add value to your life
• Clear time sucks from your day like browsing Facebook or watching excess TV. (Several years ago, the Web’s wine king, Gary Vaynerchuk, said it best: If you want to find time to work on the side, “…stop watching fucking LOST!”)

Although finding decent time blocks you can dedicate to freelancing is most important, there are other things you can do to optimize your time management.

GET ORGANIZED

“Try creating a freelance schedule to make sure you’re using your time most efficiently. Use an egg timer to help you stay focused.” – Krystal Yee, freelance writer and designer

Disorganization. It’s plaguing our nation. Shows about hoarding are an extreme, but how many of us suffer from some kind of clutter and disorganization?

If you can’t keep your life organized, fitting in freelancing will be difficult. This isn’t an organization or cleaning blog, but I suggest you start by creating a clutter-free workspace. If you’re life is organized, you will be a better freelancer and be able to make more time for your work. But, it will be impossible to create top-notch work if your “freelance life” isn’t organized either.

Here are some things that you’ll need to keep organized when you start freelancing:

1. Administrative items. Keep your hours billed and invoice records in one place. (If you bill more than a couple clients and/or need to track your hours, Freshbooks is a billing app that may help.) Similarly, store tax-related items in one place (you’ll be happy you did this come tax time).
2. Contacts. Thanks to today’s tech, this is an easy task. Make Gmail or your smart phone apps work for you.
3. Your Work. I like to seperate my freelance work by clients. I have a seperate folder and notebook for each client. That way I don’t make an embarrassing gaffe like sending a draft to the wrong client.

CHANGE THE WAY YOU THINK

“Learn to accept some chaos. Focus on one or two major goals per day. Prioritize. Be gentle with yourself. Oh, and coffee. Lots of coffee.”   – Kelly Gurnett, freelance writer for Brazen Careerist

Once you get into the habit of freelancing, you can become even better at this “job” if you change the way you think.

Remember how I mentioned that you can create time in your day for your freelance work? Once you get that habit down, take the idea a bit further. Start living your freelance work.

Let me explain.

A majority of freelancers are doing this kind of work because they enjoy it; often, it’s a hobby that turned into a side business. For this reason, we tend to think about our freelancing more often than our traditional 9-5 job. This is good; this can help you become a better freelancer.

When I’m starting to write an article, I often start writing it in my head. I usually do this while I’m on the way to work, getting ready in the morning, working out, or doing other thoughtless, mundane tasks. Once I get the idea to paper, I’ve already written the opening paragraph. Things flow much more smoothly after that.

But, this idea isn’t just for writers.

By letting your mind wander and thinking about your freelance work throughout the day, you can become inspired by your daily activities. Keep a notebook handy or use an app like Evernote to record ideas that come to you throughout the day as it relates to your freelance work. Here are some examples:

• Do you do design work on the side? Take pictures or record thoughts for new designs.
• Do you develop apps?  Use conversations with your friends for tips on refining or creating your next project.
• Do you coach basketball at night?  Use team experiences at work to create team exercises on the court.

Once you get into the habit of regularly thinking about—or “living”—your freelance work, you’ll find you can really be inspired throughout your day. It can jump start your tasks when you get to them that evening (or the next morning, if you’re an early riser).

Do you work on the side? How do you make time? Share your best tactics in a comment.

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When I tell people that this blog isn’t only profitable, but capable of being my sole income, I immediately detect signs of disbelief. The raised eyebrow. The skeptical tone.

I get it.

NOT ANOTHER “GET RICH ONLINE” SCHEME

The Internet is stuffed with pitchmen standing in front of exotic cars and promising the secret to earning money online. Many of these guys, obviously, are frauds—maybe a few are for real. But legit or not, none of these “courses” or “products” deliver a gift-wrapped key to opening a profitable online business.

For every thousand people who launch blogs or Web sites in the hopes of quitting their day jobs while millions roll in online, only a few are successful. (And more often than not, they don’t earn millions, but they do earn a living wage.)

Still, there are a lot of us out there. In 2009, the Wall Street Journal estimated that there were almost as many full-time bloggers in the U.S. than lawyers. Given the difficult job market for attorneys of late, one can surmise that blogging may have surpassed the law as a profession.

But if I’m making a living with my blog, why do I still work a “regular” job?

When people realize that, they naturally assume that I don’t blog full-time because I can’t afford to blog full-time. A fair assumption, but it’s not so. I’m in my day job for a few reasons:

• I like being part of a team and contributing to a company’s mutual success, which I don’t get on my own.
• Structure is good for me. Despite growing my own online business, I’m not an entirely self-motivated person. Reporting to an office during scheduled hours and being accountable to my boss helps me do good work.
• I’m exercising some valuable skill sets at work that will enable me to succeed in a number of careers, not just blogging.
• Probably most importantly: Two incomes are better than one. I’m diversified. If I lose revenue from my blog or something happens to my day job, my family still has plenty of income. Finally, two incomes allow me to save a lot faster. With them, I hope to stash away money to create more freedom and choice for my family in the future. (For example, the possibility of taking a year off from life to sail around the world, or taking savings and buying a little seasonal business here on the Maine coast.)

So for now, you’ll just have to trust that I don’t have anything to gain by lying about this: In 2010 and 2011, Money Under 30 has been my family’s largest source of income.

So Why Am I Telling You This?

It’s not to brag or solicit pats on the back. It’s not to silence the skeptics (they’ll be skeptical still, since I’m not publishing actual screenshots of my earnings, etc.) I’m telling you my story as a testimony to my previous advice: The best way to get ahead in your finances is to earn more money.

People ask me: How did I get out of $80k of debt in three years?

The answer is simple:

• I got a better-paying job.
• I worked multiple jobs.
• Then I started this blog as a side business.

In short, I hustled. And if you want to get ahead, you need to start hustling too.

Last week I put out a call for people willing to share their finances (and their faces) with us in exchange for financial advice. I anticipate many of the responses will be similar: Readers with big debts and inadequate incomes looking for a magic pill that can alleviate their money worries without hard work.

Of course we all know this doesn’t exist.

But what I can offer is slightly different than the Dave Ramseys and Suze Ormans of the world, who simply tell people to scrimp and scrounge, and sacrifice until there’s simply not a penny more left in the budget.

That method sucks, and it often backfires. Although you absolutely should reduce unnecessary expenses, you can only cut so far before you begin to resent the fact you can’t have things you want. This makes it more likely you’ll binge and quickly undo the progress you’ve made saving or getting out of debt.

A far better solution is to save first, make moderate cuts in spending and find additional sources of income.

Takeaway #1: Think of your finances like a business: Don’t just cut cost centers, add profit centers.

How I Make Money Blogging

If you’re starting a blog and visit any number of blogs on blogging, most of the gurus will offer up the same advice: “If you’re starting a blog to try to make money, quit right now.”

That’s because very few blogs ever do make money, and for those that do, it takes a long time. Possibly years.

Despite that advice, I pretty much started blogging to make money.

And, of course, I didn’t make much for an entire year. You can see below how long it took to get meaningful traffic:

Monthly unique visitors to Money Under 30, March 2006 – March 2011.

But despite the very slow ramp up, I kept blogging because I like writing, I like tinkering with Web sites, and I saw the potential to be useful. To this day, there’s not a lot of content out there about personal finance for twentysomethings. (More than there was five years ago, but there’s still a gap).

The fact that I kept at it is rare (most bloggers—even those that achieve decent results—give up sooner or later). And honestly, persistence is probably the biggest contributor to my success. The others are luck, and to a smaller degree, talent.

Although I think persistence and luck may be larger factors in my success, I can’t say I haven’t done a few things right. And I think the biggest thing I’ve tried to do—although I know I can always do better—is to help others, both readers (to build an audience) and advertisers (to build monetization). To that end, I’m always trying to:

• Write articles that answer readers’ questions.
• Write articles that can create customers for businesses.

Takeaway #2: Success takes talent, persistence, and luck. But in the words of Thomas Jefferson: “I find that the harder I work, the more luck I seem to have”.

HELPING THE READER

Blogs typically become well-trafficked in one of two ways:

• Developing a clan of devoted readers who come back again and again.
• Publishing unique content that is frequently searched for, and drawing visitors from Google.

(A few brilliant bloggers, of course, might do both.)

Although I’m working on the clan of devotee part (wanna subscribe? nudge, nudge…) I’ve been successful attracting searchers on a variety of topics—from how much people have in their 401(k) balances by age 30 to understanding bizarre rules of credit scoring.

Yes, I know a little about search engine optimization (SEO), the black art of seducing Google’s supercomputers into thinking your Web site is more valuable than all the rest. But for the most part, I’ve tried to focus on simply writing on topics that are unique, helpful, that answer specific questions. (It’s easy enough to be helpful, I think, but with billions of web pages out there, being unique is a never-ending challenge).

Fortunately, this strategy has paid off. Money Under 30 now gets about 150,000 unique visitors a month, 80% or so coming from search engines.

On the downside, this puts me at the mercy of Google. When the search giant decides to change the way it ranks search results, my traffic can take a hit. (I felt a little bit of this earlier this year when Google rolled out its Panda algorithm changes). Fortunately, however, I wasn’t impacted nearly as badly as some other blogs I know. Why that is, I may never know, but I suspect it’s because I’ve written my content for readers (albeit with the search engines in mind) rather than just for search engines. In blogging, it’s a subtle but vital nuance.

How I’ve tried to structure my content explains how I’ve been able to attract so much traffic, but as many bloggers discover: it’s possible to have a shitload of traffic and not make a dime.

HELPING THE ADVERTISER

There are a number of ways to take a successful Web site and begin to make money, and they all have pros and cons. Below, I’ll talk about some of the different methods available and which ones I use. Lastly, I’ll get into why my most-used method actually helps advertisers directly, which contributes to why it’s been so successful for me and other bloggers.

Banner Ads

Most Internet advertising doesn’t pay. When you visit a big news Web site and see banner ads on the top and sides of the page, advertisers are probably paying the site $1 or $2 per 1,000 impressions (times the ad is viewed). That means the Web site may have to show that ad 1,000 times to earn a single buck. It’s no wonder newspapers are going out of business.

Pay-Per-Click (PPC)

The ubiquitous and sometimes sketchy-looking Google Ads are only slightly better. With those ads, a reader has to click them before the Web site makes any money. Depending on the ad, a site might earn $0.5 up to a $1 or so per click. Of course, most people don’t click those ads. So you might earn $5 or $10 per 1,000 impressions.

There are ways to improve upon both of these advertising models. For example, as a niche site (personal finance), the banner ads I run here are more targeted—most are for banks and credit cards—so advertisers pay considerably more than they might on a general news site.

Still, in order to earn a decent income from blogging, I had to look at other business models.

Product Sales

Some, I rejected, like any sort of pay-for-content model (subscriptions, e-books, training courses). I do hope to write a book some day, but I’d rather do that through a traditional channel.

I also think there may be some value in a specific seminar series, but to feel good about selling them I would need to give the project 200% and ensure they’re worth 10x whatever I charge. And I simply don’t have that kind of time right now.

Consulting/Speaking/Selling Services

Along similar lines, lots of bloggers are successful using their blog to launch speaking careers or personalized consulting. Someday I would love to start speaking on personal finances, but one-on-on consulting doesn’t really fit my chosen niche unless I want to become a financial planner, which I don’t have plans to do at the moment.

The model that’s left, which contributes slightly more than 50% of my blogging income, is the art of marrying consumers looking for a new bank account, credit card, or stock broker with those businesses looking for new customers.

This is known as affiliate advertising or marketing.

Affiliate Advertising

It’s a little-known and, often, misunderstood form of advertising, but when done ethically and correctly is a win-win-win situation for publishers, advertisers, and readers. (As with anything, there are always people abusing ways to make money like those that pop windows and trick readers into clicking links—but the majority of  sites working with affiliates (including most other personal finance blogs) today are ethical.

One way to think of affiliate advertising is that the Web site serves as an online broker for various financial products.

You can see this in action here:

Here, I’ve selected a handful of brokerage accounts that I think are good offers for readers. In most cases, I’m able to partner with the company to link people directly to an application to open an account. When I do, I disclose the fact that the company is an affiliate. And in the event somebody clicks through my site and opens a new account, I’ll earn a referral commission.

Obviously, no one page like this can account for an entire income. But given that the site has over 1,000 pages and many older articles continue to draw dozens of readers from search queries a day, it adds up. Again, ideally this model is a win-win-win. I deliver the reader a product or service he or she is looking for, I give the advertiser a new customer, and I earn a fee for the transaction. As I do so, I’m extremely careful only to promote products I’ve used myself or thoroughly vetted.

How to get started with affiliate marketing.

If you already have a blog with at least some traffic, you can apply to affiliate marketing networks which will link you with advertisers. Two I use are Commission Junction and FlexOffers (FlexOffers has a lot of financial bloggers as publishers, and a lot of relevant advertiser offers).

Takeaway #3: Make yourself more valuable to others (your boss, clients, audience, etc.) by thinking in terms of how you can help them and make their lives easier.

Recurring Income, But Not Without Work

Perhaps the most beautiful thing about this business model (content-based advertising/affiliate marketing), is that it can be somewhat passive, at least now that the site is established.

That said, I dislike the term passive income because truly passive income is far more elusive than people think. Royalties a retired musician earns from music sales are an example of passive income. But even the touring musician is playing shows to drive song downloads, so that’s not entirely passive!

Same thing goes with blogging.

Yes, money comes into my accounts in the middle of the night, or on weeks I’m on vacation, but there’s still a lot of work required to sustain the business:

• Writing new content
• Moderating comments
• Monitoring technical issues
• Complying with advertiser requests
• Answering emails
• Keeping up with social media
• And lots more!

With another full-time job, new family, and now a home, my time for these activities is quickly dwindling—and that’s frustrating because I want to stay focused on creating new valuable content for you and steering the direction of the blog for the future.

But despite my time crunch, I have high hopes for Money Under 30. I want it to become a valuable and referenceable online compendium of financial information for starting out in life. I want to carry its message into other mediums like books and TV. And I want to grow our community from thousands to tens to hundreds of thousands.

Along these lines, I have an exciting announcement I’m going to make tomorrow—the first step in continuing to move Money Under 30 forward. I can’t wait to share it!

Until then, I hope this peek behind the scenes of blog-as-a-business was interesting. If you read all of this, I’m guessing you’re interested in the topic…I’ll take specific questions in the comments if I can, although there are some things I’m gonna keep close…every business has its trade secrets!

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For example, unless you’re sitting on a seven-figure trust fund, the best financial advisors probably won’t return your calls. (And you should be wary of those who do, especially if they’re hawking life insurance policies to you when you’re 24, single, and childless). And if you do find a trusted financial advisor, you may not be able to afford regular planning sessions.

But just because you don’t have millions in the bank (at least not yet) doesn’t mean you don’t deserve investment advice you can trust.

Enter Bo Lu and his company FutureAdvisor.

Bo and his team realize that not every investor is best served by exclusive—and expensive—financial advisors. That’s why they’ve launched FutureAdvisor, a new Web application that provides automated portfolio analysis and diversification recommendations. Essentially, it’s a virtual investment advisor.

Today, I bring you the FutureAdvisor story for two reasons. For one, I think FutureAdvisor is a promising product—especially if you agree with my simple, low-cost investing philosophy. But this post is as much about entrepreneurship as it is investing, and a good start-up story should inspire anybody, whether you’re trying to make it on your own, too, or just earn a few extra bucks to get on top of your finances.

*To clarify something that came up in the comments, I am NOT part of FutureAdvisor’s affiliate program nor do I have any sort of financial relationship with them…Bo approached me through a fellow blogger and I liked his ideas and company, hence the post.

Here’s Bo:

Seeing The Need

Long before FutureAdvisor, my cofounder Jon and I were rookie software engineers at Microsoft. Like many of our peers, we were geeks in our early 20s who never before had much money (nor cared much for it), and suddenly started earning almost six figures.

As you might expect, some predictable things happened: friends bought BMWs, posh waterfront apartments downtown, and all the plasma TVs and video games you could imagine.

But something else happened, too: some of us started asking each other: “I want to start saving some of this cash to maybe buy a house, and even retire early someday…but how? Where do we start?” And eventually, some of my friends started complaining to me that it wasn’t easy to figure out how to start or manage 401(k)s.

Becoming Reluctant Advisors To Our Friends

Some of our friends went to find financial advisors, but found two problems.

One, many advisors have asset-minimums, meaning that you needed usually $250,000 or more in assets before they would take you as a client. We in our early twenties didn’t have anywhere near that much.

Second, the few advisors who would consider working with us wanted to charge 1% of our total portfolio value, which was a ton of money, and would quickly become thousands of dollars a year as we got older.

Meanwhile, I had been investing since I opened an IRA with money from my first summer job at the age of 16. I had read up on the research behind index investing, and why low-fee, broadly diversified mutual funds and ETFs are the absolute best way to invest.

My friend Simon, who is a CFA and had worked for Putnam Investments and the Bank of England, ran his investments the same way. We helped our friends over numerous dinners, teaching the underlying tenants of passive investing and proper asset allocation. Slowly, one-by-one, we helped our friends clean up their 401(k)s and create broader portfolios.

It took forever, but along the way we quickly realized that while everyone’s financial situation was different, much of the underlying tenants of our investing advice were broadly applicable.

The Idea

We realized that the underlying math to pick the best funds for a particular purpose (such as finding the lowest-cost way to broadly index domestic blue-chip stocks), and the algorithms to tailor a portfolio to an individual’s financial situation (such as a 27-year old who wants to retire early at 55), was something that computers were well-poised to handle.

I talked this over with my good friend Jon, an experienced investor himself and a graduate of MIT’s Computer Science program, and we decided to build ourselves a prototype to see if our hunch proved out. We applied to the start-up incubator Y Combinator, a California boot camp for new companies run by experienced entrepreneurs.

We consider ourselves exceptionally fortunate to have spent the summer working with some of the best start-up advisors and fellow founders in the world. Soon afterwards, we built a team of engineers and finance professionals and began our journey in the historic Pioneer Square district of Seattle.

FutureAdvisor’s Mission and Methodology

FutureAdvisor is a registered investment advisor now serving thousands of clients with unbiased, personalized investment advice delivered via the web application FutureAdvisor.com.

We implement well-known best practices of personal investing and apply it via algorithms to address the unique financial situations of each of our clients. We believe that you shouldn’t pay mutual fund managers thousands of dollars in fees to pick stocks for you, because research shows that stock picking doesn’t work for the long-term. We believe in asset allocations that match your time horizon and risk tolerance, implemented in low-cost, passively-managed mutual funds and ETFs.

(Here’s a screen shot:)

Throughout the application, whenever we give advice, that advice is backed by research and clearly-written explanations.

We believe FutureAdvisor is especially needed now, as companies completely move from pensions (defined benefit plans) that guaranteed employees a certain amount per month in retirement, to 401(k) and similar plans (defined contribution plans) under which your financial future is in your own hands.

We also think that professional quality investment advice should be personalized, research-driven, and available to clients anytime…even in your pajamas. Most importantly, we believe that advisory services should be accessible regardless of how much money you have now or will have invested someday.

This is our story; we hope join us on our mission to democratize unbiased and high-quality financial advice and make it affordable to all.

Learn More: Give FutureAdvisor a free test drive for 14 days.

*Note on the free trial. The FutureAdvisor site currently requires a credit card to enroll in the free trial, but Bo has offered to waive that requirement for Money Under 30 readers if you email him at bo@futureadvisor.com.

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Last night, I spent a couple hours catching up on reader emails. Inevitably, about a third of the emails I receive are from people in their 20s or early thirties who are stuck under mountains of debt.

Student loans. Car payments. Credit cards.

Some of the debts stretch into the six figures (not including mortgages). Some of the readers have fallen behind or simply haven’t been paying the bills. And almost always, the person does not earn enough money.

No coincidence.

The less money you earn, the easier it is to fall into debt, and the harder it is to get out.

I know this from experience.

Spending Less Only Goes So Far

If you have been reading personal finance books and blogs for a while, you’ll have come across plenty of advice on frugality—how to live on less and save money on everything you buy. It’s there for a good reason; it’s smart to be frugal and not pay full price for everything.

But frugality has its limits.

REACHING YOUR EXPENSE FLOOR

Although it’s possible to cut unnecessary expenses out of our budgets and to save money on everyday expenses by comparison shopping, clipping coupons, negotiating, or buying used, you can only trim so much fat before you’re cutting away the meat.

Sooner or later you’re going to hit what I call your expense floor. It’s the amount of money you need to live at your minimum comfortable level. Once you hit your expense floor, you can’t practically cut your expenses any further.

Everybody’s expense floor is different. Yours will depend on things like:

• Where you live.
• How much debt you have.
• What you’re willing to sacrifice and what you aren’t.

The last one is tricky. Personal finance gurus love to advocate SACRIFICE. They’ll say you should sell your car and take the bus to work. Or that as long as you’re in debt, you should never take a vacation or go out to eat again. Now, I’m not saying you should indulge in a week in Paris or regular meals at Morton’s when you can’t afford it. But I AM saying this: Allow yourself to enjoy life while you work on your financial goals. Within reason.

Why? Because if you don’t give yourself little indulgences on a routine basis, eventually you may break down and sabotage your progress by blowing your money on something big.

There are a lot of great studies out there showing that willpower is like a muscle, and that willpower can be depleted.

This applies when you attempt to run a few miles, work uninterrupted for several hours, stick to a diet, or resist spending money on a regular basis.

(Also, I shouldn’t need to point out, that when you reach your expense floor, life won’t be much FUN. I mean, you don’t need to be rich to enjoy life, but nobody WANTS to sweat every penny month in and month out.)

How then, do you continue to find more money to save or put towards debt if you’ve cut your expenses all the way to the floor?

You earn more money.

This is the conclusion I came to several years ago.

Example: How I Started to Earn More

Here’s my story. (Cue the wavy lines and flashback music.)

It was five years ago—the Spring of 2006—and the consequences of my early-adulthood financial fatuity were approaching their most severe. I had been out of college for three years, but my choices of both major and initial career (sociology/journalism) weren’t exactly helping my finances.

I had managed to leverage my editorial skills to trade my magazine job for one writing marketing copy—a move that got me a sorely-needed extra $5,000 a year in salary.

Not enough.

So at 24, I swallowed my pride and moved back in with my mom and dad.

Still not enough.

I didn’t have to pay for rent or food. My only necessary monthly expenses were gas and car insurance (plus all the minimum debt payments). Of course, I wanted SOME money to have a little fun each month, but the fact was that I barely had enough to cover my debt payments, let alone accelerate my repayment progress.

I could’ve cut out every penny of “fun” spending—the occasional dinner and drinks with friends—but I simply wasn’t able to completely cut this out (because I knew from experience, overexerting my will day in and day out only led me to later screw up in an even bigger way.)

I had reached my expense floor. I couldn’t (or, at least, wasn’t willing) to cut my expenses any more.

Still, I HAD to do something about my debt…I didn’t want to be in debt forever.

THE DECISION

That month, I made the decision that would change my life…the decision to earn more money. I was sick of being in debt. I had cut expenses all I could. Then, I decided to figure out how.

I wrote down the three ways I knew to earn more money:

• Get a raise or higher paying job.
• Get a second job or freelance.
• Start a business.

Eventually, I would do all three, but I started by getting a second job.

I don’t necessarily think that a second job/freelancing is easiest of the three ways to earn more money, but it’s absolutely the one you can make happen the fastest.

• If you’re willing to do crappy jobs for low pay, you can find part-time work.
• If you have marketable skills, you can freelance.

In my case, I became a Starbucks barista. I’d work 8-5, hop in my car and battle rush hour traffic to work 6-10 serving coffee 3-4 nights a week. Then I’d do a six or eight hour shift on Saturdays. That brought in an extra $800 or so a month (net).

That was good, but I wanted to get out of debt AND move out from under my parents’ roof. It wasn’t enough.

In a couple months, I found a new day job that paid $6,000 a year more. I took it.

I continued to work at Starbucks, although with the new job’s location, I now had to sit in 45 minutes of even worse rush hour traffic to get between the two. But in less than six months, I had gone from earning $34,000 to over $52,000 a year, putting well over an extra $1,000 in my pocket—and towards my debt—each month.

Was it easy? Hell no. But I was making progress.

Just a few months later, I got lucky. My previous employer created a new position and thought highly enough of me to ask me to apply. Ultimately, they offered me more money to come back in a slightly different and more challenging role. The result was an $8,000-a-year raise plus bonuses. So now, in less than a year, I had more than doubled my income.

While all of was happening, I started MoneyUnder30.com.

Back then, this blog wasn’t much. I posted a couple crappy, wandering posts, let the site sit idle for several months, then wrote a bit more. But in early 2007, I started to find a rhythm with blogging. Some of my posts did well in the search engines, and rising traffic levels gave me motivation to keep going.

I watched and learned from other growing blogs like Get Rich Slowly, Consumerism Commentary, and I Will Teach You To Be Rich, and I kept at it, a little at a time.

Eventually, I started to earn some money from the site, too.

It started slow—a hundred dollars here, a couple hundred more there. A year later my site was earning over a thousand dollars a month. Another year, and my site was grossing the equivalent of a modest salary. Today, I earn more from my blog than I do from my job.

I’m NOT saying this to brag about my blog’s success, but to show you that in five years, I increased my annual income about 500%. As a result, I was able to pay off some $80,000 debt in just a few years. (Not to mention afford to get married, move into a house, and start a family.)

Had I NOT increased my income, or not done it so dramatically, I would probably:

• Still be in debt.
• Not have emergency savings of any kind.
• Not have been able to afford a home, have a baby, or even have gotten married.

So there you have it. If you’re tired of cutting expenses and getting nowhere, make the decision to earn more money today. If you’re willing to do what it takes, this hands down the best way to get out of debt or reach your savings goals faster. I know because it worked for me.

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What is the Section 179 deduction?

The Section 179 deduction allows you to deduct purchases for equipment that is used in your business in full (as expenses) instead of depreciating them slowly over time.

To make things more clear: Without the deduction, you would have to deduct portions of, say, a computer that you purchased for your business over a time period of several years. The technical term for deducting portions of equipment purchases over several years is called depreciation. With the Section 179 deduction, you don’t depreciate equipment purchases, you deduct them in full.

What are the limitations on the deduction?

There are a few limitations on the deduction:

• First, you cannot deduct more than $500,000 for you business during 2010 and 2011. If you have more than $500,000 in expenses, consult your tax preparer, because you could qualify for bonus depreciation on the excess expenses.
• Second, the deduction will start to phase out dollar for dollar on all expenses over $2,000,000. For example, if you have $2,100,000 in qualifying expenses, you would only be eligible to deduct $400,000 in expenses ($500,000 less the $100,000 excess over the $2,000,000 threshold).

What expenses qualify?

Luckily, most depreciable property qualifies for the deduction. Almost everything you use in your business is considered depreciable property: the computer you type on, the desk your computer is on, the chair you sit in, the cabinets you store your files in, etc. Here’s a list of common qualifying equipment:

• Machines purchased for business use
• Computers
• Computer software (including off-the-shelf packages)
• Office furniture
• Office equipment
• Certain vehicles (limitations apply)

Let’s say that you bought 10 computers, 10 software packages for those computers, 15 desks, 15 chairs, and five file cabinets for your office this year. You can deduct the entire amount of all of these purchases—as long as the total amount is less than $500,000. As I’m sure you’ve figured out by now, the Section 179 tax deduction is great for small businesses.

What expenses don’t qualify?

Even though most business equipment expenses are deductible, there are still those expenses that don’t qualify. The major expenses that do not qualify for the deduction are:

• Real property (buildings, land, or anything attached to the land, like parking lots)
• Air conditioners and heaters
• Furnishings used in hotels, motels, and other places used for lodging
• Property outside of the United States

How do you claim the deduction?

Claiming the Section 179 deduction is relatively simple. First, you’ll need to fill out Form 4562. The Section 179 deduction is completed in Part 1 of the form, so if this is the only depreciation deduction you plan to claim, you’ll only need to fill out Part 1.

The amount that you calculate in Part 1 of Form 4562 is then carried over to your Part 2 on your Schedule C: Profit and Loss from a Business form.

Overall, the deduction is beneficial to small and medium sized businesses. It’s a really great deduction to take advantage of over the next few years while the thresholds are so high and it should prove to be a great stimulant for our economy.

Have you or are you planning to claim the Section 179 deduction for your business? Do you think the deduction has helped your business if you’ve previously claimed it?

Shannon’s a talented artist, and a few people approach her about buying her paintings. Then, they tell some friends, and one day Shannon actually starts to make money selling her art. In the beginning, it’s just enough to cover her supplies, but after several months, she starts to earn a decent profit. Although she never intended it to, Shannon’s hobby has turned into everybody’s dream: a fabulous source of side income.

But here’s the question: Now that she’s making money, is Shannon operating a business or practicing a hobby?

You might think the answer is obvious. She made a profit, so she must be in businesses, right? Actually, you’d be wrong. From the point of view of the Internal Revenue Service, if Shannon isn’t painting with the intent to make money, she’s practicing a hobby.

The IRS defines a hobby as an activity that an individual pursues without intent to generate a profit. Almost everyone partakes in some sort of hobby without worrying about whether it will generate income. However, as soon as you take steps to attempt to generate a profit you’ve got a business on your hands. Of course, that’s not necessarily a bad thing.

Tax Limitations for Hobbies

The biggest tax limitation for a hobby is that you cannot deduct a loss from its activities. Most hobbies come with some sort of expense, be it equipment, supplies, or educational fees. But the IRS says you cannot deduct those expenses beyond the amount of income you generate from your hobby.

For example, in the case of Shannon, her painting supplies (paint, brushes, canvas, paper, etc.) obviously cost money. Before she starts to make money from her paintings, she cannot deduct any of painting expenses on her tax return. When she starts to make money, she can deduct painting expenses—but only up to the amount of income she generates from the art, meaning that she could create a net taxable impact of zero from her hobby. Until Shannon starts to treat her hobby as a business, she won’t be able to claim a loss on her taxes.

How to Convince the IRS It’s a Business

Let’s say Shannon decides that she’s making enough of a profit that she wants to take her art to the next level and turn it into a business. How does she make the change from hobby to business?

Here are nine questions the IRS has provided to determine whether your activity is engaged in for a profit (e.g. a business):

• Does the time and effort put into the activity indicate an intention to make a profit?
• Do you depend on income from the activity?
• If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
• Have you changed methods of operation to improve profitability?
• Do you have the knowledge needed to carry on the activity as a successful business?
• Have you made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Do you expect to make a profit in the future from the appreciation of assets used in the activity?

If your answers to these questions imply that your activity is a business, you can treat it as a business for tax purposes. As I mentioned earlier, the biggest advantage of running a business instead of participating in a hobby is that you can deduct losses against your income for your business.

If your activity does qualify for a business, than you would use Schedule C to claim all income and expenses from your that activity.

If You Don’t Qualify As a Business

If your activity does not pass the test to be treated as a business, then you won’t be able to deduct a loss (if you have one) on your tax return. But that doesn’t mean you don’t have to keep detailed records of all your transactions that result from your hobby.

If you generate income from your hobby, you’ll still have to report that income to the IRS because it’s against the law not to report all income that you earn. It’s important to maintain records of your hobby expenses since you are allowed to deduct expenses up to the amount of income that you generate. There is one catch: You must itemize to claim any expenses for your hobby.

Don’t Let Taxes Deter Your Interests

If you don’t want to mix taxes and pleasure, then simply avoid generating any income from your hobbies. If you don’t receive income from your hobby activities, you won’t be affected by tax laws. Don’t let complicated tax code scare you off from doing what you love.

Do you participate in hobbies and make a profit?

Freelance work is a hot topic these days—especially among members of our generation and especially among those interested in personal finance. And it’s easy to see why:

• Want extra cash to get out of debt or build an emergency fund? Freelance.
• Want to build your personal brand and visibility within your professional circle? Freelance.
• Want to escape the rat race and work for yourself? Freelance!

Even better, you can often freelance doing something you already love. For someone that has a passion for graphic design, they might design images or headers for websites in the evening. For another person that enjoys playing the guitar, they might teach students how to play on the weekends.

Yes, even you can freelance.

We all have skills that another person doesn’t have. You’re probably really good at something that your girlfriend or brother really struggles with. I despise cooking, but my best friend thrives on it. My co-worker can’t stand personal finance, so I help her with her budget. There is something—no matter how big or small—that comes naturally to each of us that does not come naturally to everyone.

This is where freelancing comes in.

With freelance work, you start by advertising your skills to interested parties that are looking for someone to complete a job or project. Freelance work can also be acquired through job postings just like any other job. But, instead of someone hiring you as an employee, they hire you as a contractor.

Your get paid for your efforts and your “employer” reaps the benefits. In most cases, you’re doing something you love, so it’s a win-win situation.

So how do you get started?

How to Get Freelance Work

There and endless opportunities for freelance work. Often times, prospective freelancers get hung up on translating their skills or talents into a marketable service.

“Who in the world would pay me for that?” is a common excuse.

Plenty of people. You just need to find them.

Websites like eLance.com are an obvious starting point, but the best way to find freelance work is to simply ask.

Leverage both your professional and social networks. Call up former employers and colleagues. Post your services on Facebook. Ask mentors for help. If someone has your dream freelance job, don’t be afraid to ask them for tips and pointers. Consider setting up an informational interview with them. They might know of some potential employers or be able to give you some advice on how to snag some entry-level freelance work. After all, they’ve been there before.

Do not, however, waste your time and money building yourself a Website, printing business cards, or setting up a business entity for yourself before you even have a single gig. That stuff doesn’t matter! What matters is having a paying client. And then another one. And then another…

Preparing for the Financial Impacts of Freelancing

With the perks of freelance work come some additional tax responsibilities. You don’t want to end up like many freelancers who learn this the hard way. Because, as a freelancer, you work for yourself, you’re technically self-employed. This means that you’ll have to file a Schedule C: Profit or Loss from Business and a Schedule SE: Self-Employment Tax.

Don’t panic. This only means that you’ll attach these schedules to your regular tax return. If you make more than $600 in freelance income from any one employer, they’ll send you and the IRS a 1099-MISC form that lists what they paid you.

Usually, when you freelance with someone, they’ll pay you in a lump sum without deducting any taxes. Now, this doesn’t mean that this income isn’t taxable; it just means that you’ll have to calculate and pay the taxes yourself. (So, it’s important to set a portion of your freelance income aside to pay taxes—between 30 and 40 percent is a good rule of thumb.)

You’ll use Schedule C to calculate your total profit or loss from your freelance work. This final amount is carried over to your 1040 form and included in your total income amount to determine your federal income tax liability.

You’ll use the Schedule SE form to determine your self-employment tax. This is different from federal income tax. To make this clear, think about all the amounts that your day-job employer deducts from your paycheck. They deduct things like Social Security and Medicare taxes in addition to federal income tax. Those items are calculated for your freelance income on the Schedule SE. After you’ve calculated the self-employment tax, you are allowed to deduct 1/2 of that tax from your Adjusted Gross Income on your 1040 form.

Finally, don’t forget your expenses! If you work for yourself, you don’t have your employer to lean on when it comes to supplies and equipment. That means you can deduct things you buy to support your work. For example, if your freelance income consists of teaching guitar lessons, you might be able to deduct expenses like guitars, sheet music, guitar picks, studio rental time, music stands, and more from your freelance income. If you only earn a little bit freelancing, you can probably deduct most of your expenses to balance out that income. Hence, it’s important to document anything you buy that could be related to your freelance work.

Anybody can freelance. You don’t need to have some unworldly talents, 30 years of work experience, or the desire to be a super entrepreneur. You just need to know how to do something somebody will be willing to pay for and be willing to put yourself out there. To ask for work.

Do you supplement your income with freelance work? What are your best tips for finding freelance opportunities?

How I Got Here

When I launched Money Under 30 in mid-2006, this blog was purely a hobby. I was trying to get a handle on my finances and I always enjoyed writing and fiddling with Websites. Around that same time, I left a marketing job in publishing to work for an online marketing firm where I learned a truckload about blogging and search engine optimization. Just four months later, however, the publishing company recruited me back as a textbook sales representative.

Living alone, over a hundred miles away from my wife (we weren’t married yet), and traveling frequently, I had plenty of time to continue building Money Under 30. As the site grew, so did the income I earned from advertising partners. For the first few months, the income was nothing more than a curiosity. Soon, it grew to a small monthly amount that was perfect for making extra debt payments. About a year ago, however, I began earning more from my blogging business than I did at work.

Now, as many bloggers (especially financial bloggers) will tell you, earning more from your blog than from a job isn’t enough to justify going full-time. Blogging income is volatile and unpredictable. Advertisers and traffic come and go, and they can take the blogger’s paycheck with them. I’ve seen this first-hand. During last winter’s credit crisis, many advertisers suddenly pulled out of the blog market and my income dipped considerably.

Considering all the risks of leaving the workplace and becoming a blogger, I realized a few things. Before becoming a full-time blogger, I needed:

• A solid emergency fund to protect myself against slow months or lost income.
• Comfortably more monthly income than expenses. (Again, as a cushion).
• Health insurance!

I took care of the emergency fund and living below my means a while ago (they’re key financial moves for anybody), but health insurance was the kicker. Going without health insurance was not an option. Although I’m healthy and rarely visit the doctor or get prescriptions, I knew it would just take one illness or accident to bankrupt me.

In late 2008, my girlfriend and I became engaged and we made the decision to live in Maine (where her career is based) rather than Massachusetts, where I was working. This wasn’t easy. We’re both from Massachusetts, but I went to college and she attended law school in Maine. We liked Maine. The state’s slogan is “the way life should be”, and we agreed. There are fewer people and cars. There’s the breathtaking coastline, tranquil lakes, and lush mountain forests. Maine seems to have it all; except jobs. Finding a job in Maine in my area of experience—publishing and marketing—was, and still is, a near-impossible task.

But of course, I had blogging. I just needed health insurance until we got married and I could go on hers. So, in January, I packed up my Massachusetts career and took a job working for a great locally-owned coffee shop that gave employees great health insurance. I had hoped it would be a great trial run for blogging “full-time”. Problem was, working on your feet for almost 40 hours a week doesn’t leave you much energy for working another 30 or 40 on a blog. I had health insurance, but I was still a very part-time blogger.

Fast forward eight months, and (as some readers may have realized) we were married two weeks ago. I left the coffee shop around the same time. Now, after a week on an Aruban honeymoon and a week unpacking wedding gifts and settling into our home as husband and wife, we’re both back to work. For me, for the first time, it means working as a full-time blogger.

The time is right to give this a try and follow others in this space like the bloggers behind Personal Finance Advice, Get Rich Slowly, The Simple Dollar, and more. (Are you a full-time personal finance blogger? Let me know and I’ll add you here…I’m not sure who else is full-time and curious to connect with others who have taken the leap!)

Where I’m Going

I have big aspirations. I started this blog because I am passionate about educating twentysometings about financial issues so that others can avoid many of the mistakes I made in my early twenties. Despite all the great financial blogs, books, and other media out there, last year’s credit crisis proves that we, as a society, are still financially ignorant. I believe that much of this has to do with an almost total lack of financial literacy education in our schools and even colleges. Forget learning calculus; we need to learn how to balance a checkbook and read a credit card statement!

In the next year, I plan to make Money Under 30 a comprehensive educational site that will provide readers of all ages with the necessary tools to master personal finance basics. In addition, I hope to continue doing print, radio, and television interviews and other speaking engagements to talk about the importance of personal financial literacy amongst younger generations.

Longer term, I will also be working on a new non-profit Website that provides the most basic, easy-to-understand personal finance lessons possible. Ultimately, I hope to develop a company that can take these vital messages into schools, colleges, and even corporations to spread financial literacy across the world.

That said, I’m still treating blogging full-time as an experiment. I feel blessed to have this opportunity to take this chance, but I realize that it’s just that—a chance. It may not work out. I’m prepared to reevaluate my career and find work that is both satisfying and in-demand here in Maine, where my wife and I have chosen to live. Though you might be surprised to hear this from a personal finance blogger—it’s not all about money. Becoming a full-time blogger, giving up a salary, and taking on risk may not be the best move for my finances. But I’m optimistic that this decision is the best one overall, and I can’t wait to see what it will bring.

One Last Note

Now that I’m full-time, I will have a lot more time to write content for Money Under 30. Where I probably spent 10 hours a week on this site in the past, I’ll be spending 50 or so a week on it now. What’s missing? What do you want to read more about? Do you have financial questions you want addressed on the site? Please leave a comment or send me a note or a tweet!

What is “Rich”?

These days, I think far too many people mistake being “rich” with being financially secure. Certainly, to somebody who is broke, somebody with a $1,000 in their pocket will seem rich. And, as other bloggers and financial magazines sometimes document, ordinary Americans become millionaires everyday. These ordinary millionaires don’t earn seven figures (or even six figures) a year, they don’t inherit their money, nor are they business owners—they just play by the right personal finance rules. They’re millionaires, but are they “rich”? I don’t think so.

In fact, I’ll bet if you ask people who reach a net worth of over $1 million, many will tell you that they aren’t going to stop until they reach a net worth of $4 or $5 million. Even then, they won’t be “rich”. Financially secure? Sure. Upper-middle class? Yes. But “rich”? No.

Rich is having tens of millions, or billions. Like Bill Gates, Warren Buffet, or Sir Richard Branson. Rich is having your own island and a private jet. Rich is giving away more in charity every year than most people will ever have in the bank.

And the fact is, you can’t get that rich on a salary.

What Can You Do on a Salary?

Just because you work for a paycheck doesn’t mean you can’t take control of your financial future. In fact, if every salaried employee’s financial destiny were predetermined, there would be scant use for financial advice!

Working for a paycheck, you can control how that paycheck grows by:

• Proving value to your employer,
• negotiating your compensation,
• investing in yourself (via training and education), and
• managing your career track.

You can also maximize how much of your paycheck you keep by:

• Living well below your means,
• Getting out of and avoiding debt, and
• Saving and investing regularly.

At the end of the day, however, you can only squeeze so much out of your chosen career field. Will it be enough to make you comfortable? Probably. Will it be enough to make you content? Hopefully. Will it ever make you “rich”? Unlikely.

Why Does it Matter?

Most of us don’t care if we ever get that rich. Most of us, myself included, will be just fine being comfortable and building a modest level of financial security. Still, it pays to steal a few tactics from the playbooks of the truly rich. A few of those tactics include:

• Taking calculated risks,
• Working for yourself,
• Seeking opportunities, and
• Understanding the value of time.

Incorporating some of these tactics of entrepreneurs and business leaders can only help us maximize our paychecks, but also may lead us to new earning opportunities outside work that will supplement our incomes and either increase our overall wealth or propel us to financial goals faster (such as early retirement).

In the coming weeks I’ll be writing more about how to pursue entrepreneurial activities on a part-time basis and how to supplement full-time entrepreneurship with a “day job” as well as the importance of risk in building wealth. In the meantime, do you agree that it’s impossible to grow rich on a salary? Please share your thoughts in a comment!

If you earn any income from a business or self-employment, you need to try Outright today.

Outright, formerly GoBootstrap.com, is an awesomely simply online accounting tool for entrepreneurs and small businesses. According to its founders, Outright’s goal is:

[T]o keep [accounting] as simple as possible, while helping entrepreneurs track all of their income and expenses to get their taxes done accurately.

I think they’ve succeeded.

In 2008, I earned a significant amount of income on my own for the first time in my life. As a result, my 2008 tax return is a nightmare. Although I paid some estimated taxes, I didn’t pay enough, and I’ll owe Uncle Sam a chuck of change—and possibly penalties and interest—come April. Plus, I have the pleasure of digging back through a year’s worth of credit card statements to see what might be deductible as business expenses.

I resolved that things would be different in 2009, and Outright will help me stick to that resolution.

Within five minutes of creating an account last week, I inputted all of my income and expenses so far for 2008. And already, Outright has calculated how much I should pay the IRS in estimated 2009 taxes come 2009.

As Outright is in Beta, so far it’s free. And so far, I’m a big fan. If you earn money from a small business or freelance work, you owe it to yourself to give Outright a try today.