Alternative Income Streams

I have been very interested in something that seems to be growing in the personal finance blogging world; it is called Alternative Income Streams. The idea is very simple, it is the idea of tracking side income that does not come from your job. Basically it is getting money outside of your job.

Now that I am tracking this I have naturally been looking for avenues to make this increase. I have already had an ingdirect.com account that has been earning me 4.5% interest. To put numbers to that if you have $4,000 in that account it will get you and extra $180 a year or I like to view it as $15 a month. With the idea of compound interest (my topic for tomorrow) that number will increase but just to put a round number it is $15 a month.

This is nice considering if you are saving up for something you are not using that money anyway, you might as well get paid a little bit each month while saving. I have recently opened up a Bank of America money market account that gives me 5.05% which given the $4,000 example would be about $17 a month.

However, recently I have been getting into prosper.com. This is a middle man for borrowers and lenders to meet. Banks are very profitable. They are charging people 10-12% (excellent credit ratings) for unsecured loans while we are giving banks loans and only getting 4-5% (if that). I am essentially a "bank" through prosper.com where I have access to their credit report history and prosper takes care of collecting and distributing the money to lenders. Also they have collection agencies that go after delinquent payments and this will hurt the borrowers credit the same as if they were in default for a bank.

This not a plug, I am not trying to sell you on anything but (whenever you say "but" it erases everything before it) if you want to get $25 for signing up and making a loan click this link to do the referral thing. You can do the same thing through ING Direct (you get $25) but you have to do it through e-mail, just contact me if you want a referral. Okay, enough with the shameless plugs.

To sum alternative income streams up, it is my goal that my AIS is greater than my expenses outside of my house payment. If you read a lot from me you will realize that I really want to pay off my house quickly because I like the idea of freedom in our finances. Owing someone money just sounds dumb to me. If I owe money than I do not have complete freedom because I HAVE to get a paycheck or my house gets foreclosed on. Don't get me wrong I am a strong advocate of working (and working hard) but I want to CHOOSE to work not HAVE to work.

So a mini plan (or goal) of mine is to pay off my house early and have my AIS be greater than my expenses (gas, food, utilties, clothing). Those are the 4 basic needs that I have after I don't have a house payment and I will make sure I never have a car payment. If this happens that is my idea of freedom. Imagine getting to work and devote your full time to something you really believe in and then say, "Nah don't worry about that paycheck, I'm good."