Why a Six-Figure Income Doesn’t Count

Why a Six-Figure Income Doesn't Count

One of the influential mind-tricks commonly used on the internet to boost perception of success is to mention the ever-glorious phrase “six-figure business”. When you hear that, you probably sigh with envy.

Six figures would be nice.

But six figures isn’t really that important. And in fact, focusing on making six figures is often a path that leads to financial loss. Surprised? You shouldn’t be. Impressive numbers are nice, but there’s only one number in the business world that counts:

It’s not about what you make. It’s about what you keep in your pocket.

Think about this for a minute. Success isn’t really that successful if you’re just shifting money around and using income to pay bills. That’s not what you’re in business for, is it? Most likely not. Paying the bills is nice, but those who start businesses want more than just that.

We’re in this to build income that lets us have a lifestyle we enjoy.

But what good is big income if most of it goes to pay expenses and the government takes a chunk on the rest? What if a small income with less expenses and less tax to pay actually ends up creating more money in your pocket?

Which would you prefer? Six figures with five of them going out and paying taxes on the rest, or five figures, and you get to keep three-quarters of it?

Hey, here’s a thought: You might actually be more financially successful than some pretty big guns out there. The problem is that most people don’t realize it. Why?

Because we focus on making money. And we forget to focus on keeping it.

What Success Can Look Like

The difference between making money and keeping money can sometimes be hard to grasp. But there’s a very distinct difference between a life full of income and a life full of disposable income.

In the first, money comes in and goes back out. There’s a bit left for you to enjoy. In the second, the money that comes in is all yours to keep and spend where you please.

Success is often just an illusion, and what you think you see isn’t always the reality. When you hear about six figure incomes? That doesn’t always mean the person is romping in riches.

If you’re sighing with envy wishing you could bring in six figures, remember that the few thousands you earn now could actually be a mark of better success – because you get to keep more of it.

At least… if you’re focusing on keeping it, that is.

It’s Easy to Focus On the Wrong Figures

Sometimes you don’t even realize that you’re setting yourself up for financial disaster. You hit on a great idea, and that project might look fantastically lucrative. But when you sit down and work out all the details, you realize that you’re fast-tracking yourself to some serious loss.

Take me, for example. I was recently discussing a new project with one of my consultants. Here’s what he said:

“You did what? Are you insane?! Do you even realize how much this is going to cost you?!!!!”

“Uh… Well, yeah. It cost me $212,” I stammered back awkwardly, a little surprised my corporate decisions hadn’t been met with wholehearted approval. “That’s all. It’s a great idea! I’m going to make…”

“NO!! NO!!” Clearly, my consultant didn’t agree at all. “This is crazy!”

The consultant and I talked some more. He asked me to list all the related expenses I could think of, and he really forced me to stretch myself into the future. I found some, sure. There are always costs to every project.

But when I was done listing the expenses I could think of, he listed about $4,000 more in additional long-term and hidden expenses I hadn’t even considered. Not just one-time expenses, but recurring ones, too. They were sneaky administration costs and extra accounting fees that added up sweetly over time.

I hadn’t considered them because I was focusing on how much income the project would make. I wasn’t thinking about how much I would keep. The income I’d make off my $212 investment? It’d be eaten up quickly, and it would bring my beautiful project to a major loss.

And I’d pay tax on the rest.

How to Shift Your Focus for Success

No matter what level of success we enjoy, no matter what kind of business we have, no matter who we are, we all get excited making money – and that’s when we miscalculate long-term costs badly, whether in time or money. That’s normal, too. Most people in business aren’t financial advisors and accountants.

But you don’t have to be a financial advisor to start reaching better success. You can find easy ways to keep more money in your pocket and make decisions that help you figure out which projects get you ahead.

All you need to do is shift your focus – it’s not that hard. Stop thinking about how much money you’ll make.

Start thinking about how much money you’ll keep.

Look at everything you’re doing right now – every single project on the go and every single service or product you sell. For each one, ask yourself, “How much money does this help me keep?”

To find the answer, make a list. Write down direct expenses, because those are pretty easy to spot. Then dig deep to find all the hidden expenses and indirect costs that aren’t so easy to see.

There’s start-up cost, there’s time, there’s maintenance, there’s production costs, launch costs, distribution fees, commissions, subscriptions, administration fees, software renewals, upgrades, year-end accounting, taxes, licenses…List every single possible expense this project might cost your business for a full 12 months.

You might be surprised to discover that what you thought would be profitable was really just a disguised loss.

And if it is? Fantastic! You found out now before you lost your money! Invest your time, energy and resources into projects that let you keep more… even if they bring in less.

Because remember – it’s not about what you make. It’s about what you keep.

Want some great resources that help you keep more money?

Check out The Money Book for Freelancers – for people with not-so-regular jobs - and IAC-EZ. This baby lets you keep track of expenses and find hidden money leaks fast.

Post by James Chartrand

James Chartrand is an expert copywriter and the owner of Men with Pens and Damn Fine Words, the game-changing writing course for business owners. She loves the color blue, her kids, Nike sneakers and ice skating.

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  1. Hi,

    Great advice and something for all of us to ponder about. It’s all about the disposable income. The money which you can actually spend in the end, for your kids, for yourself, for your family.

    But I was a little confused here:

    Isn’t the money that you keep = disposable income = profit after tax ?? (aren’t all three the same thing? because in the article you seem to give the impression that profit is not equal to disposable income/money that you keep).


  2. Hey James,

    Really Great Post and awesome advice.
    I’m totally agree with you.
    Thanks for sharing this super-awesome advice man;).


  3. Hey James!

    I like what you’re saying here. Super points. Quite a bit of Internet marketing has gotten Pavlovian. Unless an Internet biz can make potential clients drool by offering to boost them into the six-figure income category, they often don’t find the program enticing. What’s missing in our lives that we believe six figures will fix? Apparently, it doesn’t fix too much because the six-figures then want to make high six and then low seven and then high seven, etc.

    I’m drawn to your idea to focus on what you’ll keep rather than doing all sorts of crazy things to achieve a number that doesn’t guarantee less stress or more income. And what you’ll keep may be an enjoyable life where you discover you already have enough.

    Enjoyed it! Giulietta

  4. @Nabeel – Not sure where the article mentions profit isn’t money you keep. That’s exactly what it is, and unless I’m mistaken, I don’t think I wrote otherwise?

    @Dev – Welcome!

    @Giuletta – The idea for the post actually came about when my consultant pointed out that a schoolteacher might actually be considered more financially successful than an international corporation – many of those corporations run at a loss.

    It’s a perception of money that kind of rocks you on your heels, when you think about it 🙂

  5. Oh, yes. This is a fundamental lesson that so many folks don’t get. And if you don’t look closely, it’s easy to get swayed by those six-figure business claims. They aren’t lying: most of them are careful to say that they’re talking about *revenue*. But folks don’t stop to consider that revenue profit.

    Thanks for an excellent reminder to focus on what’s really important.

  6. GREAT post James!

    This one should be shouted from the rooftops because it’s essentially the difference between operating at a loss and operating at a profit. Plus, it’s also true about money in general. This is why I try to live as simply as possible AND why my business has very few expenses.

  7. This reminds me of a teenage British blogger who brags about his 6 figure earnings in just a short time (fact). Yet he almost doesn’t help fellow bloggers for free. He just keeps on selling. What a shame.

  8. James,

    Love this post!

    I’ve screwed myself many a time because I underpriced products or didn’t properly calculate how much time a service would take.

    It’s so important to look at your “buck for the bang” before launching a product or service. There are many six-figure business owners who, if they divided their profits by the number of hours they work, would probably make minimum wage. Not a great buck for their bang, eh?

    My info product Get Famous Fast includes real-life pitches that worked – one of them is a pitch Danny Kofke used for his book, “How To Survive (and perhaps, thrive) On A Teacher’s Salary”. http://dannykofke.blogspot.com/ Your consultant was absolutely right. 😀


  9. James,

    Not only can a project lead to hidden losses of cash, but there is also the loss of time.

    We can always make more money, but we each get a finite amount of seconds to be on this earth.

    It is very important to look at new project in terms of a time amount that can be gained or lost as well. There are things that may look great on paper, but will cost you dearly with time spent away from friends and family, because your project becomes too “YOU” intensive.

    -Joshua Black
    The Underdog Millionaire

  10. I love the way your posts make me think in different ways.

    The thing I always think about when marketers do the six-figure income promise is: What does that really mean? Could be $100,000, could be $999,000. Guess no one cares about that wide a range. They’d probably just be happy if they could make $100,000.

    But aside from that, as someone who went from educator to small biz owner, I can so relate to it’s “what you keep, not what you make.” The first time I had to pay the “self-employment tax” (both halves of my social security taxes), I internalized that concept.

    As a creative professional, I have a relatively low overhead, but, still, the cost of doing business isn’t always 100% apparent. Years ago when I was freelancing, one of my clients decided to stop reimbursing me for Fed-Exing the copy to them. Since I was writing grant proposals and every freakin’ project was “rush” to meet uncompromising deadlines, I took a huge hit. I decided to drip that client.

    Sitting down and costing everything out, as depressing as it sometimes is, gives us the information we need to determine if a project or new venture is even worth pursuing.

    Very helpful post, James. Thanks.

  11. Yo James,

    This is the story I been sharing with people for years now, most people spend more than they make..which is crazy..lack of money management.

    I know people who make 20k a year and have more money left over than people I know who make 100k a year.

    Its all about your lifestyle you live..someone once told me years ago..what will you do with 1,000,000 $$$, I told them I will invest half in real estate and play with the rest.

    This was smart thinking of me, but other people will spend the entire amount on just stupid stuff, remember people..life is about making choices, so when you do start to make the magic number of six figures.

    Ask yourself this magic question..how can I save more versus spending..how will you answer that?

    “TrafficColeman “Signing Off”

  12. I couldn’t agree more. “Turnover is vanity; Profit is sanity.”

  13. Ah, the perception of profit, loss and who is successful.

    It seems like every day there is more email in my in-box from 20-30 year old males who boast their six figure income and if I just buy their $2000 course in the next 24 hours… I will also easily get six figures.

    And then since they are all friends, after their initial AMAZING offer, then they have to do the “affiliate” thing and talk about their buddies’ programs. To me, besides the greed, it feels like being set up on blind dates “oh, you’re going to love this” ….

    My secret to stretching the “nothing” is to use barter–the old fashioned way of trading goods and services.

  14. You have sensible points here. People may only be looking at how much one is earning and not how much is left of that when all bills are paid. It reminds me somehow of this story about a self-made millionaire who’s just making a minimum.. but because she don’t have a credit or debt at all, has managed to save up and turn herself from rags to riches. Or, how about that millionaire who lives in an average neighborhood? The problem when one’s earning 6 digits is the perception that you have to spend for luxury you don’t really need.

  15. @Kathleen – It never ceases to amaze me when people say, “But he earns six figures! But… but…” But what’s he taking home? As you say, it’s not lying, and it’s all truth, but it’s the power of perception and assumptions at play, so the onus is on the reader to be a critical thinker.

    @Laura – Since my *cough* cherished consultant yelled at me, I’ve started to look at EVERYTHING I spend in that same “What am I keeping?” way. If I’m not keeping money, am I keeping happiness? More time? More freedom? Surprising how many things in life we could cut and not miss a minute.

    @Poch – ‘Tis a shame. Those who have nothing to fear always have the confidence to share the how-tos.

    @Heather – A lot of people forget the time investment. They might make $30,000 overnight, absolutely – but it might also have taken them six months of labour, stress, frustration and other costs to get there. That’s not much good, is it!

    @Joshua – WHAT?! Were you reading my mind?!! How the… Oh, never mind. You’re smart. I’m smart. That’s why we say the same things. *goes off to check house for hidden cameras*

    @Judy – I never look at job costing as depressing. I look at it as being smart ahead of time, because while you may be disappointed you have to set a project aside, I can guarantee you’ll be nearly crushed if you put everything into it and watch it founder.

    @Traffic – Yo backatcha! Reading your comment, I thought, “What would I do with a million?” and a whole bunch of dreamy ideas came to mind – but I couldn’t really say firmly. “Ooh, I could… Oh wait! I would do this… or maybe this…” Then I said, “Alright, what would I do with 10 thousand?” And boom. There was the answer, without a doubt. And achieving that goal would let me achieve others.

    Small goals lead to bigger ones 🙂

    @Office – Well, I thought my blue guitar was vanity, but now you’ve made me feel better about that 😉

    @Mary – Don’t worry. There’s plenty of 20-30 females getting in on the game, and they’re no less cheesy or tacky to me…:)

    @Issa – That’s it exactly. I am much more impressed by someone who says they have zero debt versus someone who says they bring in a mint a year.

  16. “I don’t mind earning 5 figures… as long as they’re all 9’s.”


    The 6 figure online income dream puzzles me. The trouble seems to be when its wrapped in some internet money making email cash machine geyser with tropical beaches and palm trees. The people I know making the most money are also the hardest working.

  17. Couldn’t agree more! If you use South Korean Won as your currency, I’m a multi millionaire by 25! Surely there’s an ebook in there to write? 😉

    The company I work for takes in a lot of money, but outgoings are quite high too, so whilst we’re solvent, we’re not all as rich as people seem to think we are.

    Unfortunately, to be an internet marketer, you need to show a lot why people should listen to you. Aston Martin DB9’s aren’t cheap 😛

  18. I remember how thrilled I was the first year my income crossed over from 5-figures to 6-figures and I have been blessed to keep it so for a few years but it has had its costs and sacrifices just as all things do. I admit, a nice income is NICE and I have paranoia about financial security but everything you said here is also true. I pay so much in taxes and that we (honest people anyway) would not be able to change. On the rest though, I have been vigilant about my finances. I think it’s important to be wise with your expenses and ALWAYS, always live well below your means. When my co-workers were off buying beamers and big houses and nice boats, I was saving and driving my little Honda and living in my little house. The only expense I could not help is traveling the world. And someday, you do get to a point where the income is nice but living a certain lifestyle is even nicer and that does not have to cost you a 6-figure income. Thank you Men with Pens for a very thought-provoking post here.

  19. > It’s not about what you make. It’s about what you keep in your pocket.
    Beautiful point. It’s the same insight for anybody who wins in a Casino … it’s now how much did you win, it’s how much did you leave with 😉

  20. Very interesting blog topic James and I like your take on it. I can’t remember the exact details, but a study was done some time ago in the UK. It was on a street where all the residents were earning a significant income. Enough to make most people pretty happy.

    They told half of the residents that they earned the most in the street. They told the other residents that they earned the least on the street. No resident was financially hard done by. However, the residents that were told they earned the most money, all said they were very happy with their income. The residents that were told they earned the least, all said they were not happy with their income. One of those residents told they earned the least, did in fact earn the most in the street.

    I just thought the perception of income was interesting the way it affected the happiness of the residents. Kind of like the teacher that may earn less but take home more than a company.

  21. I’ve been self-employed for a long time and learned early that a great big CHA-CHING at the Gross Profits line is good only for bragging at cocktail parties. It’s the Net Profits, the bottom line, where you say, “Oh no, where dit it all go?” that is the important number. As you pointed out so well, tracking and projecting *all* expenses is the key.

    Thanks for another great post!

  22. Another home run, James! We work with small business owners every day who struggle with these challenges. Defining what “success” is for the individual owner/entrepreneur is often the first order of business in our coaching. In fact, stepping back and looking at the “Why” behind their objectives helps to define the “What”. Only then can we successfully lay out the strategy for the “How”. Great post! Keep up the valuable work.

  23. James,

    This post is coming at a perfect time for me. I’m in the process of transitionig my business and, so, am having to look at all kinds of things from branding and services to budgeting and profit-planning. Your post is a wonderful reminder of how to think about this so you get the proper perspective. Because we can then see more clearly, we can judge our opportunities more rationally and intelligently, and come out better for it on the other side. I just love happy endings! 🙂

    PS – Love the Jack Sparrow quote at the bottom. Nice touch!

  24. Such an important lesson here. I too was wrapped up in the idea of “the amount”. I have a close friend with a huge home, beautiful cars, and envious vacations. We both work hard, put in lots of hours, self-employed. I always wondered why I was in the middle and he was up top. One day he shared with me how stressful it was to maintain “the lifestyle”. The income needed was 4 times my monthly need. Sooo, all in all I would rather keep more, than make more. Great post. As always.

  25. @Paul – All nines works for me too 😉

    @Rhys – Now there’s a nice perspective. We can all walk around saying we’re millionaires – I bet no one would think to ask *where* we’re millionaires!

    @Farnoosh – I try to operate with the same ideals you do. There I things I definitely want in live (16-room home with three pools and a stable on 1000 acres of land, for example), but I’m also perfectly happy to own a modest duplex in the meantime rather than debt myself out buying a bigger house. Just doesn’t make sense to have expenses that don’t help you get ahead in life.

    @JD – Ha, good point! It’s also one reason I don’t frequent casinos 😉

    @Jay – Now that’s an interesting study for sure. Just the perception influencing it all, eh? Goes to show you that it’s all in our minds – so why not choose the best mindset possible instead of wishing for what we don’t have?

    @Allan – I think learning the lesson of difference between gross and net is a crucial one for businesses that are sustainable and that keep bringing in profits. But most freelancers tend to sorely neglect keeping account of time and money that closely, and so… well. You know how that ends!

    @Bobby – This is very true – everyone’s definition of success is unique, and we have to be careful to make sure we’re striving for our personal definitions and not someone else’s!

    @Jamie – Aye, absolutely. I find with this mantra of “what you keep in your pocket” always running in your mind, you make far wiser decisions and spend your time in the best places.

    (And thank you. Master Jack is our mascot. 😉 )

    @Billy – Heh. Around here, when we see people with fancy cars, houses, clothes, etc, we always tend to look at each other, shrug and say, “Bet you he has the debt to go with it.”

  26. I wonder how Master Jack would take to being a “mascot.” 😉
    Nice choice, though.
    Do you have any posts around his leadership style and business acumen? Love to read them!


  27. Got one in the works, in fact. Realized the other day I wasn’t doing Jack any due diligence 😉

  28. @James – Excellent! Can’t wait. I’ll get my eye patch and parrot ready.

  29. Excellent post James…I believe that’s one of major reasons why many people struggle in their online or offline businesses. All we have to do is change our focus

  30. Hi!
    This post was right on point. it really help me refocus on the right thing. how much money do we actually keep after expenses and those recurring hidden expenses can eat you alive! Thanks for a great post!!


  31. I have a six figure income $000,000 🙂 Sorry, couldn’t resist. Guess I’ve had one too many affiliate markers today. They drive me crazy and who would trust what they say?


  1. […] This post was mentioned on Twitter by Glenn Arcaro and Todd Rutherford, FreelanceCamp 2010. FreelanceCamp 2010 said: Why a Six-Figure Income Doesn’t Count http://bit.ly/cGCRzZ […]

  2. […] you may generate more revenue than before, but do you really want those new customers if, after the additional expenses, you’re still bringing home the same amount of money? The only thing you’re really […]

  3. […] Why a Six-Figure Income Doesn’t Count – Focusing on making six figures is often a path that leads to financial loss. Surprised? You shouldn’t be. Impressive numbers are nice, but there’s only one number in the business world that counts: It’s not about what you make. It’s about what you keep in your pocket. […]

  4. […] a post on Men With Pens that echoes this point – far more eloquently that I did. Discover why a Six-Figure Income doesn’t count.Cheers,Other Articles You Might Like:How to Not Make Money Blogging…What to do in 10 years […]

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