Tuesday, January 23, 2007

The Great Big Lie about personal finance blogging!

I often wonder why many PF Bloggers do what they do?

One of my good friends publishes Personal Finance Blog - he considers the blog part of his effort in pursuing financial discipline. The blog helps hold him accountable. $2 Million seems to follow in this path as well. I think this is one of the best results one can expect? These gentlemen seek to work hard, save and invest to the point they achieve financial freedom.

Many personal finance bloggers are looking to escape the daily grind in a Robert Kiwosaki-like effort to create income producing assets. They don't want to be employees, they want to be rentiers - investors with enough dividends and income to not have to work for anyone, but themselves. They read books like Multiple Streams of Income, Rich Dad, Poor Dad and wonder how can they become more independent from their jobs.

Empty Spaces at Money Shaker is one of the best examples of those who aggressively try to develop assets outside of their job that produce significant income. He's doing quite well with real estate, private loans and some oil royalties. He also admits he's sacrificing career growth in his current job for external success.

Then there are others who try to turn their own blogs into commercial engines in their own rights. Very few succeed at this. Consumerism Commentary, PFBlog and PF Advice (by Jeffrey Strain) are three examples of those that seem to be taking in quite a bit. What drives their success is the following:
  1. A business like approach to creating a network of financial sites focussing on niche topics
  2. An organizatin - whether with one's wife or business partners to accelerate content generation
  3. Regular and consistent publishing
  4. Creation of attention grabbing properties

My point in this posting is that many people think they can or will escape the rate race by becoming personal finance bloggers; i.e. the advertising and related income from their personal finance blog will be enough to replace their day jobs and day income.

Except for those with very limited needs, demands and lots of time, this is a pipe dream. It's fairly easy for me to identify a small number of financial successful PF Bloggers because there are so few!

The most compelling personal finance blogs are written by financially successful people! Who wants to read a rehashed article about the mutual fund of the month - no one! You can get that from MONEY magazine on line. People do want to learn how to make and save more money than they have - and they want it from financially successful people. Look at the interest in PFBlog - mm is saving very large amounts of money - increasing his networth by almost $200k every year - people want to follow his story and emulate it! Most of his income is still generated form his day job (and expatriot tax benefits). His actual planned investment gain per year is only 8% - though he hopes to do better. However, he plans to save more than $100k from his regular job. Enough years of saving $100k and he expect his investment income to eventually exceed his regular income. People want to read about that.

Remember how popular nycmoney's blog was? She managed to start an internet business (SEO), create an on-line retailer and then grow her $400k in $750k through wise investing. People wanted to know that story.

However, there are many people who believe that by creating a personal finance blog, they will garner large amount of advertising revenue and one day be financially independent. The truth is - it's a lie! Most will never find independence through on-line publishing. Advertising pays very little - hopefully enough to cover webhosting fees, etc....

And let's think about this quite honestly, if you're income is so low that advertising can replace it - if you're fortunate enough to acquire a good amount of advertising - are you really living at a sustainable income? Will personal or family needs change requiring a larger income in the future? If you're happy living like a monk, will many people want to emulate that lifestyle?

The most powerful use of PF blogging is to use it for what it is, a platform to declare your values, goals and mission and compare your progress against them. Secondarily, it's a wonderful source of support along the way and discussion to relevent topics. A blog should not be a MONEY magazine or Personal Finance for Dummies - those things exist - and are done very well by an army of professionals. Why struggle to be second best when you can be yourself - and very successful at it.

I often wonder how many people who earn more than $200k a year complain about jumping out of the rat race? Usually these people are executives and in fairly comfortable positions with attractive future growth options in their current career path. If they live modestly and save much, they can easily save up enough money to be financially independent in 10-20 years. That's not an attractive option for those who want it today.

But for many, there is an important question - should you spend more time thinking about how to succeed in your job and less about starting a side business? Should you spend more time saving what money you have and investing it carefully than starting a side business to live up to your income?

Regards, makingourway


traineeinvestor said...

Great post. You very nicely describe what makes a blog interesting reading (at least for me). It's the personal element - individual success stories and how and why people are building their financial future.

My own (rather modest) blog was launched with the objective of imposing a greater degree of financial accountability and self discipline on my finances.

mOOm said...

I actually see quite a lot of financially unsuccessful people taking advice from each other online...

Unknown said...

Well said! I agree with you that we probably aren't going to replace our day jobs, but by simply listing my personal finances out loud adds a layer of accountability I don't get otherwise. Keep up the great postings!

makingourway said...

Thanks for the supportive comments. Actually I wouldn't mind someone disagreeing either.

Moom - I have to say that you've made the most amazing and best resonating comment of them all "financially unsuccessful people takingadvice from each other...." Brilliant!!

I'd like to write about that, too...maybe I'll call it the path of the lemmings!


Anonymous said...

Interesting post. I agree that people shouldn't enter into this solely for profit, and I also agree that people should focus on personal experiences. While I've been known to sometimes re-hash the latest (interesting) mainstream article, I strive to write as much as I can about personal experiences -- what's worked for us, what hasn't, and how we handle things. In fact, when I see other sites regurgitate articles, I typically just skip over them.

All of this being said, I do think that you're underestimating the amount of income that can be generated by a successful personal finance weblog. No, I wouldn't ever recommending quitting your job over it, but in some cases online earnings can outstrip even substantial 'regular' salaries.

Jim said...


How many posts did you write before you started receiving decent money from online advertising?

I think that I add about one or two new posts per month to my blog. If I can maintain this level of posting for another five years, for example, my blog will have a lot of posts by 2112. If the adsense revenue keeps increasing every month, that could potentially be a significant source of income.

I wouldn't quit my day job, but it certainly would be nice to have that extra money, much of which would be generated by old posts that people can find by searching on google.

Anonymous said...

I didn't start pf blogging as a side job, although since it does take about a half hour a day on average, so I guess it could be considered a very small side job. What struck me most about your post is that maybe I should approach blogging as a side job. My goal is to have something useful to say that lots of people within a niche market will be interested in reading. If I approached it like an actual business, maybe that would be more likely to happen.

Anonymous said...

Interesting observations and quite accurate.

It also helps to have a strong motivating reason to make it into a business - in my case living in both the US and Japan, I needed to create a job that I could do anywhere (although I didn't start with the expectation of turning it into a full time job, when it appeared I could, I jumped at the chance).

Earning a living from a blog alone, although possible, would be quite hard. I certainly rely on the other sites I run to bring in revenue and the blog by itself would not do it.

Adventures In Money Making said...

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