In 2008, I started this blog as a hobby with a goal of making a few bucks in extra income. It took a lot of hard work, but this site is now generating about 15% of my annual income before taxes. That is pretty sweet! Here are some tips to turn your hobby into income.
Pick a Hobby You Love
I love money. It’s true. I love it so much I majored in money management in college. I have an undergraduate degree in finance and an MBA in finance. I watch my bank accounts and plan my investments for the fun of it.
It only makes sense, then, that money is a hobby. I had another successful blog in the past, so I was able to combine my interest and my skill into a hobby that I would enjoy for the long haul. I have spent countless hours writing, publicizing, and researching for this blog. More than 5 years and 834 posts later, and I am making significant income from the site.
I didn’t make a lot of money my first year blogging. I was pretty stoked to make my first $5. Then the next $10, then work my way up.
I was absolutely amazed when I made enough money from my blog to cover my costs. Then I was blown away by earning enough to cover my monthly beer budget. As my income slowly grew, I was astounded to see my blog making enough to cover my monthly mortgage payment.
This didn’t happen overnight. My first post had a whopping 2 views on day one, and those were both friends. I didn’t break the 100 visitors per day mark until 2010 and 1,000 visitors per day until 2012. I now have an engaged audience and growing traffic, but it wasn’t easy.
Interested People + Something to Sell = Revenue
Chris Guillebeau shares an important lesson in the $100 Startup, it takes both an interested audience and something to sell to make money. For this blog, I sell targeted advertising and an ebook to make money. Photographers sell digital images and prints. DJs sell music services.
In order to sell, though, you need someone to sell to. Define your target market and your product before you start to ensure you have a viable ability to make money from your project.
Remember to Make a Profit
You can write off business expenses on your tax return, but you can’t write off a hobby. Do you know how the IRS defines a hobby vs. a business? If it earns a profit.
The government understands that during a startup phase, your for-profit endeavor may have losses. If you can’t make a profit in about five years, the IRS may consider it a hobby and limit you from writing off your expenses as a loss in your taxes.
I never started a new business, and I have started several, with the idea of losing money, I always shoot for a profit. If you are looking to turn a hobby into income, have a clear goal in mind.
If you are looking to earn a few bucks to offset the costs, great, it is a hobby and you are making some income. If you are looking to turn the hobby into a long-term profit, run your business like a business and work toward that goal.
Have you ever turned a hobby into income? Please share the story in the comments.
Originally written November 18, 2008. Updated January 14, 2013. Image by stephendepolo / flickr.
Get the FREE Personal Profitability Playbook
Earn more, spend thoughtfully, grow your wealth, and live a better life through mindful personal finance.