In the lead up to Christmas, businesses ramp up their marketing budgets and efforts in an attempt to make the most of the holiday and gifting period. As a result, January is a pretty good month for the YouTube side of the business at it’s when I receive these December AdSense earnings.
However, when these marketing campaigns are reduced after the new year, this tends to be reflected in the earnings throughout January, thus are reflected in the February earnings paid the next month. Saying that however, the AmazonBasics Plane video has been picked up by the YouTube algorithm as a ‘good video’ therefore is being pushed to more potential viewers; which then leads to more income. So hopefully January AdSense won’t be as bad as past years.
I’m doing this slightly different to Rob for a couple of reasons. Firstly, I work with a number of small businesses and suppliers that may not appreciate me leaking individual transactions. Therefore I have grouped these into categories and rounded to the nearest pound (£)
Secondly, as I’m at a stage where I’m trying to scale and grow my business, I think there’s more value in seeing where I am choosing to allocate my profits for the long term. As opposed to talking about what I’m spending in the short term, which is usually just wood and food. Rob will testify to this.
Profit Allocation in Detail
I overcompensate on tax every month just because I think it’s a good habit. Also, I’d rather be on the far side of the line rather than scramble to reach it at the end of the year. It also means that I get a little bonus when I pay my annual tax, which somewhat sweetens the blow.
I do this by putting 20% of my overall months revenue into a separate bank account, as opposed to calculating it from my profits. The bonus then comes from the expenses and yearly allowance being subtracted from my tax return.
Long Term Investment
As said in my first report, I put as much money into equity biased index funds as I can justify. However, I don’t follow or attempt to time the markets whatsoever. I also have little interest in learning the causes-effect relationship of how it all works. I just put my money into diversified funds and close my eyes. At the start of January however, I decided to take a shot in the dark by investing in the US equity index to coincide with the Biden inauguration to see what would happen. Spoiler, not a lot. Although there was a nice little rise on the 5th and 6th that I managed to accidentally ride.
It's worth saying that I don't put these investments down as an expense. It's more of a redirection of my salary. But I chose to include it in my reports as it nicely encompasses my attitude to money.
Short Term Investment
I’m introducing short term investment, not as something that I'm saving for immediately (IE, the next couple of days / weeks) Instead, it’s relating to the next significant operation I need to save up for. Which in some cases can be a few months away depending on the size of the project.
In this case, I’m putting money aside every month to fund the marking knives. Primarily, I need to be able to fund the manufacturing of the initial batch. I doubt I’ll need to put much advertisement into this as the email waiting list is so large. However as the waiting list begins to thin out, I’ll have to allocate more profits advertising to people outside my bubble.
Once the ball is rolling, I’m aiming for the knives to become a self funding entity where each batch provides enough profits to afford another batch with a higher quantity of units and advertisements than the last. I think that’s standard practice anyway. I haven’t done this before!
I guess this could also be referred to as the rainy day fund, or the emergency fund. Either way, I make sure to keep my balance above a certain threshold. Currently it’s enough to sustain roughly 3 months expenses. But my aim is to grow it to 6 months worth of expenses to give myself a buffer if things start to go terribly wrong. The last thing I want is for the internet equivalent of COVID-19 to hit (theoretically) and only have 3 months to cover my ass while I figure things out. 6 months is a much better bet. The liquidity of my long term investments act as a 3+ month emergency fund in the meantime. Albeit somewhat more unstable.
As a result, nothing shiny for me this month. With the January lockdown being put into place and remote teaching being enforced, my costs with commuting to and from Rycotewood have been significantly reduced. Therefore my 2 day a week teaching salary at Rycotewood is just about enough to cover all my personal expenses such as rent, food and bills etc.
The Coming Month (February)
February is when I expect to get my new PC thus the output of videos is going to be high towards the end of the month. However I don’t expect these to bring in much AdSense revenue due to low marketing budgets, and also the less popular video formats (Long form tutorials as opposed to short, intense videos) However it will be intrinsically rewarding to get videos out to my audience who have been ever so patient with me the past few months.