In everything in life we must account for the unexpected. I would call it foolish to not do this. Most times when we have an emergency it is a major life changing event. However, when we have not set ourselves up for success financially to get through these types of events not only do we have a major LIFE crisis, but we also have a MONEY crisis.
This adds tons of unnecessary stress that could have been avoided. The reason why I seem to be harping on the need of an Emergency Fund a lot is for a couple reasons:
1.) It is the 1st step the I advise people to do. So if you wanted to ask me what your first step to financial freedom is I would advise to save up $1,000 (basic) emergency fund or $500 if your income is under $20,000.
2.) The other reason is because I see scripture advising us in this direction. Proverbs 21:20 "In the house of the wise are stores of choice food and oil, but a foolish man devours all he has."
It is literally foolish to devour all you have. So if you are living paycheck to paycheck and all your money comes in, then all your money goes out, scripture calls this foolish. This is why my first step is to break the chain and develop an emergency fund.
Showing posts with label Freedom. Show all posts
Showing posts with label Freedom. Show all posts
Monday, September 24, 2007
Wednesday, September 19, 2007
The Breakthrough Cont'd
If you did not read yesterdays post from Jim Collins' book "Good To Great" please check it out before you continue with this one.
In that illustration (known as the flywheel concept) you are using a ton of force and only moving it a little at a time however at some point the wheel begins to turn on its own and even goes faster with you doing little to no effort.
I think we all want to be there in our finances. I have stated as a goal of mine, I want my alternative income streams to be greater than my expenses. This to me is true financial freedom. How do I do this? First I MUST understand this concept because it changes strategy on what our plan is.
What would happen if you were pushing that flywheel and you got tired and took a break for just a second (or a month when it comes to personal finance). The momentum would be lost and we would be discouraged to have to start over. Not only that, we would not have as much energy as before. If that happens perpetually we would never get to be to the breakthrough point.
This "stopping factor" can come in many different shapes when it comes to personal finances. It could be that emergency that comes up that we didn't have an emergency fund in place to counteract so we could keep building momentum. It could be the realization that it is hard right now and we want it to be easier immediately, instead of looking to the breakthrough point. Or it might be that you are just focused on results right now and give up because you are not seeing any.
Just like with the flywheel when we start we will put in the most effort and get the least amount of results. But getting to the breakthrough point is worth it and in anything you do and this needs to kept in mind.
Practically for any goal you have with your finances this applies. If you are budgeting for the first time it will take the most effort and you will probably make the most mistakes or be the most frustrated than you ever will. It gets easier, I promise. After a little over a full year of actually living on a budget, I am able to accurately, efficiently, and effectively budget my money in a matter of minutes for the upcoming month.
All it takes is getting through the initial max effort min results stages and looking to the breakthrough point.
In that illustration (known as the flywheel concept) you are using a ton of force and only moving it a little at a time however at some point the wheel begins to turn on its own and even goes faster with you doing little to no effort.
I think we all want to be there in our finances. I have stated as a goal of mine, I want my alternative income streams to be greater than my expenses. This to me is true financial freedom. How do I do this? First I MUST understand this concept because it changes strategy on what our plan is.
What would happen if you were pushing that flywheel and you got tired and took a break for just a second (or a month when it comes to personal finance). The momentum would be lost and we would be discouraged to have to start over. Not only that, we would not have as much energy as before. If that happens perpetually we would never get to be to the breakthrough point.
This "stopping factor" can come in many different shapes when it comes to personal finances. It could be that emergency that comes up that we didn't have an emergency fund in place to counteract so we could keep building momentum. It could be the realization that it is hard right now and we want it to be easier immediately, instead of looking to the breakthrough point. Or it might be that you are just focused on results right now and give up because you are not seeing any.
Just like with the flywheel when we start we will put in the most effort and get the least amount of results. But getting to the breakthrough point is worth it and in anything you do and this needs to kept in mind.
Practically for any goal you have with your finances this applies. If you are budgeting for the first time it will take the most effort and you will probably make the most mistakes or be the most frustrated than you ever will. It gets easier, I promise. After a little over a full year of actually living on a budget, I am able to accurately, efficiently, and effectively budget my money in a matter of minutes for the upcoming month.
All it takes is getting through the initial max effort min results stages and looking to the breakthrough point.
Tuesday, September 18, 2007
The Breakthrough
This illustration comes from Jim Collins' book Good to Great. I will connect this illustration to where I am going with it tomorrow.
Picture a huge, heavy flywheel – a massive metal disk mounted horizontally on an axle, about 30 feet in diameter, 2 feet thick, and weighing about 5,000 pounds. Now imagine that your task is to get the flywheel rotating on the axle as fast and long as possible.
Pushing with great effort, you get the flywheel to inch forward, moving almost imperceptibly at first. You keep pushing and, after two or three hours of persistent effort, you get the flywheel to complete one entire turn.
You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. You keep pushing in a consistent direction. Three turns…four…five…six…the flywheel builds up speed… seven…eight…you keep pushing…nine…ten…it builds momentum…eleven…twelve… moving faster with each turn…twenty…thirty…fifty…a hundred.
Then at some point – breakthrough! The momentum of the thing kicks in your favor, hurling the flywheel forward, turn after turn…whoosh!…its own heavy weight working for you. You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster. Each turn of the flywheel builds upon work done earlier, compounding your investment of effort. A thousand times faster, then ten thousand, then a hundred thousand. The huge heavy disk flies forward, with almost unstoppable momentum.
Now suppose someone came along and asked, “What was the one big push that caused this thing to go so fast?”
You wouldn’t be able to answer; it’s just a nonsensical question. Was it the first push? The second? The fifth? The hundredth? No! It was all of them added together in an overall accumulation of effort applied in a consistent direction. Some pushes may have been bigger than others, but any single heave – no matter how large – reflects a small fraction of the entire cumulative effect upon the flywheel.
Tuesday, September 11, 2007
Cash Can Cause...
CONFLICT
I was in wal-mart the other day and saw a kid melt down because he wanted to get something but his mom would not let him. At first I thought how embarrassing that looks and then how thankful I was that I never did that as a kid (...right).
I realized that this was a conflict that was caused by money. It causes conflicts across the board: teenagers and parents, married couples, little kids in toy stores...it is messing stuff up all over the place.
CONFUSION
Money also causes confusion. I think that 2 groups that have a major role in people's confusion is the local church and the educational system.
It is strange that a senior can graduate from high school and can dissect a frog, knows the Pythagorean theorem, and can tell you the symbol for Sodium but cannot balance a checkbook or recognize a good interest rate.
It is so funny that major outlets of teaching will ignore the most practical thing people need to know. And when I mean ignore it, I mean never bring it up period. Then when someone is faced with financial decisions they are hit flat in the face without any experience. Maybe that is the reason why more people will declare bankruptcy than graduate from college this year. It is because we’re confused.
Money is dangerous stuff, you better know how to handle it. Jesus talks a lot about money, but most of the time he is warning us from it. Put yourself in a position to win with money. It really does matter. Are you controlling your money or is your money controlling you?
I was in wal-mart the other day and saw a kid melt down because he wanted to get something but his mom would not let him. At first I thought how embarrassing that looks and then how thankful I was that I never did that as a kid (...right).
I realized that this was a conflict that was caused by money. It causes conflicts across the board: teenagers and parents, married couples, little kids in toy stores...it is messing stuff up all over the place.
CONFUSION
Money also causes confusion. I think that 2 groups that have a major role in people's confusion is the local church and the educational system.
It is strange that a senior can graduate from high school and can dissect a frog, knows the Pythagorean theorem, and can tell you the symbol for Sodium but cannot balance a checkbook or recognize a good interest rate.
It is so funny that major outlets of teaching will ignore the most practical thing people need to know. And when I mean ignore it, I mean never bring it up period. Then when someone is faced with financial decisions they are hit flat in the face without any experience. Maybe that is the reason why more people will declare bankruptcy than graduate from college this year. It is because we’re confused.
Money is dangerous stuff, you better know how to handle it. Jesus talks a lot about money, but most of the time he is warning us from it. Put yourself in a position to win with money. It really does matter. Are you controlling your money or is your money controlling you?
Friday, August 3, 2007
Gut Check Time
Recently I have been thinking about my principles on personal finances because I am preparing to teach a two week Financial Class on October 21 and 28. (Click contact me if you want more information on this) These are 3 questions that I had to ask myself, that I encourage you to ask yourself to examine your financial health.
1.) Is there anything in my finances that if made public would discredit me?
If your financial records suddenly became public, is there anything you are doing that would make you embarrassed? You know what that is and chances are you need to cut it out of your life. This rings true especially if you are a Christ Follower. It may be your $400+ monthly eating out expense when you say you have a heart for the poor. Money is an indicator of our heart, the tough thing is that it is so easy to keep it private. I encourage you that if there is something in your financial life that if brought to light would be a negative representation of you, to cut it out.
However, this is just a symptom of a bigger issue. If you are not content in every situation in life you will always have these type issues being brought up. Cutting out something of your life is behavior modification and will probably be brought up again. Praying and working on being content because God has given you so much already is the solution. That is not an overnight thing, that takes perseverance and time.
2.) What am I doing right now that will make me be where I want to be financially a year from now?
I know a lot of us say, "we are going to save money when this changes" or perhaps we say, "once that thing goes away I will spend less." Whatever reason (cough, excuse) we might be telling ourselves, the better question is what am I actually doing? Am I making steps to be where I want to be?
One of my goals has always been making my money work for me so I wouldn't HAVE to (I would still WANT to because I love working at what I am passionate about; I would just do it for free now). I want my "alternative income stream" to be larger than my expenses. What I qualify as alternative income is anything that I don't go to a job for. This could be interest earned, dividends, rental income, or any type of income stream that doesn't require me to "go into work for." This is a lot longer than a goal than one that can be achieved a year from now. But I honestly have to ask myself, if this is a goal then what steps am I or have I taken towards it.
3.) Am I increasing in generosity?
It doesn't matter if you follow Christ or not, you have to be increasingly generous. I believe that it is truth that the love of money is a slippery slope that can ruin a persons life. In fact, it is cool that I am writing about this today because I just read 1 Timothy 6 this morning. (Fresh Bread)
1 Timothy 6:9 "People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction."
I believe that God created our hearts and through his divine word he is warning us about money. It is a blessing to have money and in that same chapter (1 Tim 6:17) scripture says that God richly provides us with everything for our enjoyment. Now, right before that is says do not put your hope in wealth but hope in God and they go together. What I am saying is, it is okay to enjoy blessings from God (after tithing, basic needs, and generosity of course) as long as you put your hope in God and not in wealth. I am not using that scripture as justification for being greedy so please don't hear me wrong.
But to get back on track, generosity is key to keeping our hearts in check so that we won't fall into ruin and destruction like 1 Timothy 6:9 talks about.
Those are 3 questions that you can ask yourself that will help examine if you are on track to being financially healthy.
1.) Is there anything in my finances that if made public would discredit me?
If your financial records suddenly became public, is there anything you are doing that would make you embarrassed? You know what that is and chances are you need to cut it out of your life. This rings true especially if you are a Christ Follower. It may be your $400+ monthly eating out expense when you say you have a heart for the poor. Money is an indicator of our heart, the tough thing is that it is so easy to keep it private. I encourage you that if there is something in your financial life that if brought to light would be a negative representation of you, to cut it out.
However, this is just a symptom of a bigger issue. If you are not content in every situation in life you will always have these type issues being brought up. Cutting out something of your life is behavior modification and will probably be brought up again. Praying and working on being content because God has given you so much already is the solution. That is not an overnight thing, that takes perseverance and time.
2.) What am I doing right now that will make me be where I want to be financially a year from now?
I know a lot of us say, "we are going to save money when this changes" or perhaps we say, "once that thing goes away I will spend less." Whatever reason (cough, excuse) we might be telling ourselves, the better question is what am I actually doing? Am I making steps to be where I want to be?
One of my goals has always been making my money work for me so I wouldn't HAVE to (I would still WANT to because I love working at what I am passionate about; I would just do it for free now). I want my "alternative income stream" to be larger than my expenses. What I qualify as alternative income is anything that I don't go to a job for. This could be interest earned, dividends, rental income, or any type of income stream that doesn't require me to "go into work for." This is a lot longer than a goal than one that can be achieved a year from now. But I honestly have to ask myself, if this is a goal then what steps am I or have I taken towards it.
3.) Am I increasing in generosity?
It doesn't matter if you follow Christ or not, you have to be increasingly generous. I believe that it is truth that the love of money is a slippery slope that can ruin a persons life. In fact, it is cool that I am writing about this today because I just read 1 Timothy 6 this morning. (Fresh Bread)
1 Timothy 6:9 "People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction."
I believe that God created our hearts and through his divine word he is warning us about money. It is a blessing to have money and in that same chapter (1 Tim 6:17) scripture says that God richly provides us with everything for our enjoyment. Now, right before that is says do not put your hope in wealth but hope in God and they go together. What I am saying is, it is okay to enjoy blessings from God (after tithing, basic needs, and generosity of course) as long as you put your hope in God and not in wealth. I am not using that scripture as justification for being greedy so please don't hear me wrong.
But to get back on track, generosity is key to keeping our hearts in check so that we won't fall into ruin and destruction like 1 Timothy 6:9 talks about.
Those are 3 questions that you can ask yourself that will help examine if you are on track to being financially healthy.
Thursday, July 26, 2007
In Case of an Emergency
Do you have a plan for when "life" happens. I don't think there is one among us who have not experienced some sort of unforseen event in our lives. We have all seen the car break down, the refrigerator dying, the air conditioning bust, or worst of all...the tv blow out. This stuff happens, it is GOING to happen again. There is no guess work involved; in your life you are going to have an unexpected event. Since this is GOING to happen, you might as well plan for it.
If you plan for a credit card to be your Emergency Fund I ask that you reconsider. If you use it for an emergency you are not taking care of that emergency at all, in fact you just made it even HARDER on yourself.
Imagine something serious happens like your car breaking down, a loved one is injured, or even worst a friend or family has died and the costs from the event are coming in. Life is hard enough to deal with trials. You don't need to pile on more crap (I think I can say crap, its my blog) in your life. You don't want to have a life problem AND a money problem.
If you don't remember why being in debt is bad, we talked about it a few weeks ago. Quick Recap: Proverbs 22:7 "The rich rule over the poor, and the borrower is servant to the lender." Another translation says "the borrower is slave to the lender." When you establish a lender/borrower relationship you are actually establishing a slave/master relationship. The sad thing is I know too many people whose master is Visa or American Express. I don't think that the people who named "MasterCard" were too far off.
Anyway, in order to hedge life I recommend that the FIRST thing you do is save/set aside $1,000 in an "Emergency Fund." This is a fund that is not a big earner, it's not an investment, it can't be tied up and not easy to get to, and you don't touch it. Put it in a money market account (see Money Market and leave it there. I have mine earning 5.10% in a Money Market through Bank of America. I just moved it there from ING Direct earning 4.50%. Regardless of the percentage points, the important thing is to do it because when life happens you need to have a plan.
The reason why I say it do it FIRST before paying off debt is this. Let's say you are throwing all your money and attacking your debt. Well, if life happens and you don't have any buffer you are going to put it back on the credit card and emotionally kill all the momentum you built. There is so much freedom in when an emergency happens you can just write a check and its over. When you draw out those expenses it builds an emotional burden that is very real. After all, personal finance is just as much personal as it is finance. That makes sense considering God created our hearts and money connected (see heart and money).
Challenge Step: $1,000 in an "Emergency Fund." After you pay off debt I recomend getting an "Emergency Fund" of AT LEAST 3 months expenses. That way if life happened and you lost your job. You would not have the unbearable stress of not knowing if your family can be taken care of while you look for another one.
If you plan for a credit card to be your Emergency Fund I ask that you reconsider. If you use it for an emergency you are not taking care of that emergency at all, in fact you just made it even HARDER on yourself.
Imagine something serious happens like your car breaking down, a loved one is injured, or even worst a friend or family has died and the costs from the event are coming in. Life is hard enough to deal with trials. You don't need to pile on more crap (I think I can say crap, its my blog) in your life. You don't want to have a life problem AND a money problem.
If you don't remember why being in debt is bad, we talked about it a few weeks ago. Quick Recap: Proverbs 22:7 "The rich rule over the poor, and the borrower is servant to the lender." Another translation says "the borrower is slave to the lender." When you establish a lender/borrower relationship you are actually establishing a slave/master relationship. The sad thing is I know too many people whose master is Visa or American Express. I don't think that the people who named "MasterCard" were too far off.
Anyway, in order to hedge life I recommend that the FIRST thing you do is save/set aside $1,000 in an "Emergency Fund." This is a fund that is not a big earner, it's not an investment, it can't be tied up and not easy to get to, and you don't touch it. Put it in a money market account (see Money Market and leave it there. I have mine earning 5.10% in a Money Market through Bank of America. I just moved it there from ING Direct earning 4.50%. Regardless of the percentage points, the important thing is to do it because when life happens you need to have a plan.
The reason why I say it do it FIRST before paying off debt is this. Let's say you are throwing all your money and attacking your debt. Well, if life happens and you don't have any buffer you are going to put it back on the credit card and emotionally kill all the momentum you built. There is so much freedom in when an emergency happens you can just write a check and its over. When you draw out those expenses it builds an emotional burden that is very real. After all, personal finance is just as much personal as it is finance. That makes sense considering God created our hearts and money connected (see heart and money).
Challenge Step: $1,000 in an "Emergency Fund." After you pay off debt I recomend getting an "Emergency Fund" of AT LEAST 3 months expenses. That way if life happened and you lost your job. You would not have the unbearable stress of not knowing if your family can be taken care of while you look for another one.
Wednesday, July 25, 2007
Attack That Debt
This is a proven method that helps you stay on track with attacking your debt. This method gets criticism and I will explain why. It is your life and your money, and all I can do is show my work to why I believe what I believe. I am not trying to hide anything from you, or pull anything over your eyes.
This is called the "Debt Snowball Method" and the first I heard of it was from Dave Ramsey's book Financial Peace.
The first thing you have to do is make a budget and set aside however much money you are going to put towards debt each month. I am not going to go into this but I am assuming you have canceled the cable, lowered your cell phone plan, got rid of the gym membership, and done any and everything to free up money in your monthly budget to attack debt. Now once you have that number that you are going to attack your debt with write it at the top of a sheet of paper.
Then list all your debts from smallest balance to largest balance. Pay the minimum payment on all of them except the smallest debt and destroy it. Then once its gone, add the money that you were paying on the little one, to the next little one (this is a little more because you are adding the minimum payment plus what you were paying on the little one). Continue in this method until each debt is gone and move on to the next one with a bigger amount to attack it with.
Just so you can see the example:
Weaponry: $1,500
Visa: $250...................................$25.00 Minimum Payment
MasterCard: $2,100..................$100.00 Minimum Payment
American Express: $2,500.......$120.00 Minimum Payment
Medical Bills: $10,200...............$400.00 Minimum Payment
Total Minimum Payment..........$645.00
So in this example you have $1,500 to attack debt with. $645.00 is going out for minimum payments and that leaves $855.00 to attack with. This means we can put $225.00 of that towards Visa and get it out of our life forever, then still have $630.00 left that we can put on Master card. After that month our new debt will look like this (will be different baring interest):
MasterCard: $1,370
American Express: $2,380
Medical Bills: $,9.800
Then attack it again the next month and have a blast crossing stuff off the list. The reason why this method gets criticized is because other people think that you should keep the debt with the lowest interest rate and therefore not to rank or pay them off according to balance but interest rate. The thing is I agree with them and they are correct mathematically. But I have realized that personal finance is just as much personal as it is finance.
The reason why this is a proven method is because it offers the emotional pat on the back that is NECESSARY in order to keep the passion and motivation needed to attack debt. You may have intensity at the beginning with doing the interest rate method, however, it is so much easier to lose that intensity when you are not seeing results. Its just like when a Shark tastes blood, he wants to attack more. The same happens when we start seeing results from attacking our debt.
Now, if you want to do some balance transfers or consolidation and get a lower rate on something that is fine with me. But the reason why I am not harping on that is because balance transfers and consolidation are just smoke and mirrors. The real issue here is the DEBT. And by you shifting your problem around tricks you into thinking that you are doing something when in actuality you are mistaken.
The way to get out of debt is to attack. It's going to take a half a year or more living on beans and rice, grilled cheese and ramen noodles. But it's worth it to be free. I was listening to a radio program and the host asked the caller who was a hundred thousand dollars in debt, "What would your life be like if in 3 years you had no more payments?" She had to use every bit of energy to respond over her overwhelming tears and sniffles and all she could muster was, "I can't even imagine what life would be like if that happened."
That broke my heart that she was in BONDAGE. This is serious stuff and it matters. It affects everything in people's life, and for this lady she was at the end of her road. She could not take being in this bondage anymore to the point that life was not life anymore.
I know things may seem bleak and overwhelming but chances are the reason why is simply that you need to get organized. Getting organized and putting a plan down like I am suggestion allows you to see the light at the end of the tunnel that isn't an on coming train.
I can't say this enough, if you need to attack debt don't get caught up and play around with the balance transfer games, just attack it with intensity and that is how you will obtain Financial Freedom.
This is called the "Debt Snowball Method" and the first I heard of it was from Dave Ramsey's book Financial Peace.
The first thing you have to do is make a budget and set aside however much money you are going to put towards debt each month. I am not going to go into this but I am assuming you have canceled the cable, lowered your cell phone plan, got rid of the gym membership, and done any and everything to free up money in your monthly budget to attack debt. Now once you have that number that you are going to attack your debt with write it at the top of a sheet of paper.
Then list all your debts from smallest balance to largest balance. Pay the minimum payment on all of them except the smallest debt and destroy it. Then once its gone, add the money that you were paying on the little one, to the next little one (this is a little more because you are adding the minimum payment plus what you were paying on the little one). Continue in this method until each debt is gone and move on to the next one with a bigger amount to attack it with.
Just so you can see the example:
Weaponry: $1,500
Visa: $250...................................$25.00 Minimum Payment
MasterCard: $2,100..................$100.00 Minimum Payment
American Express: $2,500.......$120.00 Minimum Payment
Medical Bills: $10,200...............$400.00 Minimum Payment
Total Minimum Payment..........$645.00
So in this example you have $1,500 to attack debt with. $645.00 is going out for minimum payments and that leaves $855.00 to attack with. This means we can put $225.00 of that towards Visa and get it out of our life forever, then still have $630.00 left that we can put on Master card. After that month our new debt will look like this (will be different baring interest):
MasterCard: $1,370
American Express: $2,380
Medical Bills: $,9.800
Then attack it again the next month and have a blast crossing stuff off the list. The reason why this method gets criticized is because other people think that you should keep the debt with the lowest interest rate and therefore not to rank or pay them off according to balance but interest rate. The thing is I agree with them and they are correct mathematically. But I have realized that personal finance is just as much personal as it is finance.
The reason why this is a proven method is because it offers the emotional pat on the back that is NECESSARY in order to keep the passion and motivation needed to attack debt. You may have intensity at the beginning with doing the interest rate method, however, it is so much easier to lose that intensity when you are not seeing results. Its just like when a Shark tastes blood, he wants to attack more. The same happens when we start seeing results from attacking our debt.
Now, if you want to do some balance transfers or consolidation and get a lower rate on something that is fine with me. But the reason why I am not harping on that is because balance transfers and consolidation are just smoke and mirrors. The real issue here is the DEBT. And by you shifting your problem around tricks you into thinking that you are doing something when in actuality you are mistaken.
The way to get out of debt is to attack. It's going to take a half a year or more living on beans and rice, grilled cheese and ramen noodles. But it's worth it to be free. I was listening to a radio program and the host asked the caller who was a hundred thousand dollars in debt, "What would your life be like if in 3 years you had no more payments?" She had to use every bit of energy to respond over her overwhelming tears and sniffles and all she could muster was, "I can't even imagine what life would be like if that happened."
That broke my heart that she was in BONDAGE. This is serious stuff and it matters. It affects everything in people's life, and for this lady she was at the end of her road. She could not take being in this bondage anymore to the point that life was not life anymore.
I know things may seem bleak and overwhelming but chances are the reason why is simply that you need to get organized. Getting organized and putting a plan down like I am suggestion allows you to see the light at the end of the tunnel that isn't an on coming train.
I can't say this enough, if you need to attack debt don't get caught up and play around with the balance transfer games, just attack it with intensity and that is how you will obtain Financial Freedom.
Tuesday, July 10, 2007
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."
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."
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