Small businesses fail at a high rate. After all, starting a business is a risky venture. If you’re extremely lucky, you’ve got a spouse with a good, steady job. If you’re lucky, you’re starting a side business or something that doesn’t require a ton of initial capital. But if you’re unlucky, it’s something like a restaurant with tons of expensive equipment and huge staffing needs.
I open with this because as a streamer you’re a small business. While a lot goes in to making a business successful, one of the most common causes of failure is that the business can’t support its owner in time. The business is making some money but the owner ran out of runway.
We know streaming is a viable career. We’re fortunate enough to have hundreds of examples of people who have made it. I’m going to talk about the one big thing you almost totally control that can help you make the leap if you’re not yet full-time… or even make your life easier if you are. That’s your cost of living!
Calculating your cost of living
So, what is your cost of living? It’s in the name; the sum total of every expense you have that keeps you alive, happy, and out of debt. I prefer to break it down into needs and wants since that helps me accurately categorize my spending.
Once you’ve categorized all of your expenses, you add them up. That’s your cost of living and it’s that simple. If it something that you find difficult to do on your own, a service like Mint might help. The best way to do this, at least initially, is to manually track your spending through your credit card and bank statements. This can help you catch infrequent expenses like annual insurance.
Needs
These are the basics that keep you afloat. Common needs are housing, food, power, internet, some entertainment, paying debts, basic insurance, basic clothing, and transportation.
The big thing to know is that needs are different for everyone. Some of us need to fund education, some need child care services, and others need an extra room in a house or apartment for work. You should be realistic with yourself about what’s a need. After all, if you’re sneaking some wants into the need category you’re only lying to and ultimately cheating yourself.
Wants
Wants are everything that’s not a need. It can get tough to draw the line. For instance, my wife and I need a place to live but we want a three-bedroom apartment. We could function, likely unhappily, in a studio. I need food to live but I want to go to my favorite brewery with friends.
My goal isn’t to say you should avoid all wants. We’re humans, not robots. It’s just to be realistic with what falls in each category. That way, when you’re analyzing if lowering your cost of living could help you achieve other dreams you have an idea of what to target.
Indexing your cost of living
Your cost of living can vary dramatically by where you live. San Francisco has more expensive housing than literally anywhere but New York City. In some cases, it can be a 5x factor. Usually housing is the biggest determinant of total cost of living though sometimes energy and transportation costs creep up as well.
Once you’ve calculated your cost of living set that number to be 100% or 1. We’re using it as our baseline. After that, if you’re considering moving to another place take a peek at a site like Bankrate to see how your city compares to others.
For example, if you live in Salt Lake City (1) then LA is a 1.46 and Lafayette, Louisiana is a 0.96. You should use that number as a quick indicator of your relative cost of living when making other decisions around your business and finance.
Adjusting your cost of living
Here comes the big part. If most businesses fail because they can’t support their owner you have two routes out. The first is to earn more and the second is to spend less. I’m a fan of both (in fact, more income is usually the best answer) but in this article we’ll be discussing spending less.
Often, the most effective way to lower your cost of living is to move to a new location. If you’re completely reliant on a job outside of streaming then this is something that would be a gradual move, at best. If you’re a full-time streamer and it’s tough to pay the bills then moving might make the difference while you continue to build your stream.
The largest change might come for someone who is right on the cusp of going full-time. If your stream covers most of your essential expenses but isn’t quite there, what would change if you suddenly were paying 25% less overall? Would that give you the bump you need? Moving is a huge decision so don’t take it lightly. However, you also shouldn’t ignore it as an option.
Galen as an example
As I mentioned, approximately three years ago I moved from Madison, WI to Thousand Oaks, CA. I live in a place that is approximately the same size as the one I lived in before the move. However, my rent in Madison was about $1,200/mo and in Thousand Oaks it’s $2,300… and that’s because of a year 1 discount we got.
If I were a streamer looking to go full time that $1,100/mo adds up. Assuming the premium sub rate that’s 315 more subs I’d need to make up the difference. If you’re at the default rate that’s 440 subs. The worst part is that those numbers don’t take taxes into consideration. Since you’re paying rent with after tax dollars it’s an even bigger difference. If you were at a tax rate of 22% that would be 403 subs at the premium rate and 565 subs at the default rate.
Yes, you have other revenue sources besides subs. Yes, I moved to one of the most expensive areas of the country. Even so, if I were looking to go full-time streaming I’d carefully consider where I lived. Your results might not be as dramatic as these but you should do the math to find what they would be.
Conclusion
Your cost of living has a huge impact on your ability to make streaming your full-time job. Often, your largest non-deductible expense is your rent or mortgage. If you’re in a particularly high cost of living area the extra you’re paying could be the equivalent of several hundred subs. What would a several hundred sub train mean to you?
You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here.
