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Internet marketing is a complete break from the day to day drudgery of full-time employment, but it is also a voluntary withdrawal from the type of safety net that those jobs provide. Internet marketers have to make their own plans for retirement and medical care, and they cannot rely on the type of safety nets that are built into most corporate jobs. This post will highlight some aspects of financial planning that you will take into your own hands as an internet marketer, and how to maximize your return on investment while you do so.
In many countries throughout the world, health insurance is publicly controlled and is financed through income taxes. For internet marketers in these countries, planning for illness or disability is relatively simple. In the United States, Mexico, and much of Asia, insurance is either completely or partially private, usually with “pools” of applicants that all pay into a fund based on their relative levels of risk.
If you are reasonably healthy and young, you may be tempted to go without health insurance in order to save money on the monthly payments. However, this opens you up to the risk that unforeseen medical expenses will bankrupt you, forcing you to sell off your hard-won assets. On the other hand, self-employed people have to pay more for insurance than employed people, as they are members of smaller insurance pools than their employed peers. Health insurance might end up being one of your largest monthly expenses, up to about 9% of your income, but don’t get sucked into a policy that won’t cover basic preventative and emergency care. So far, the best results that I have seen for most self-employed people have been through the American ACA exchange, with BCBS SEP being a close second.
Planning for Retirement
Planning for retirement is particularly hard in the internet marketing world, as the pace of technology is break-neck and it is nearly impossible to predict your own future earnings. There is a chance that you will hit a “jackpot” with a perfect niche and a well-structured affiliate program, but there is also a chance that a Google algorithm update will flush your work down the toilet. Planning for retirement requires monthly payments to a tax advantaged account, and it can’t be ignored no matter how well you think you might do in the future.
Tax advantaged accounts, like the American Roth IRA and the SEP 401K, are accounts that provide some type of tax benefit over traditional savings. In a Roth IRA, taxed income is placed into the account where it can grow free of income taxes, and can be withdrawn at full value. In a traditional IRA, pre-tax income is placed into an account and taxed after withdrawal, allowing you to claim a lower income rate on your tax returns. Both of these accounts have contribution limits depending on your demographics and income level, and you should make it a goal to max out your contributions to these accounts for every calendar year.
When you plan for retirement, use a concept called “Pay Yourself First.” Every month, set aside a certain percentage of your income that you will not use in any other budgetary calculations. This money should automatically go into a savings account or a tax advantaged retirement account, and you should not dip into this money unless there is a major emergency. Auto drafts and direct deposit are great ways to ensure that these payment plans are set up with maximum automation.
Paying Yourself vs. Paying the Business
With all of this talk about personal finance and retirement, it is easy to lose sight of the main goal of internet marketing. You need to start viewing yourself as more than employee, but as a self-responsible engine of growth, constantly striving to better yourself. The only way to make more money, year over year, is through consistent and intentional investment of money and time.
How much money do you need to live comfortably? If you cut expenses, learn to live frugally, and re-invest all of your extra money into your business, just think where you could be in three or four years. Entrepreneurship requires short-term sacrifices and hard work in the pursuit of a long term goal, and you will eventually reap the rewards of your business investments. New software, new marketing lists, even new employees – all will help build your personal brand and will maximize your future potential.