Beating Broke

What is Passive Income

September 26, 2011 By Shane Ede 11 Comments

One of the terms that is always circulating the personal finance area is the term “Passive Income”. What is passive income? Why do we keep talking about it? How do we get it?

What is Passive Income

Passive Income is income that you don’t have to actively work to attain. Residual income like royalties on a book, dividends on dividend stocks, and interest earned are all examples of different kinds of passive income. Some would argue that the work you have to put into all of those to write the book, purchase the stocks, or earn the money to make the interest make those less than passive, but in my definition, any income you earn that is new income, even if it is earned off of old income that wasn’t passive, is passive.

Why Passive Income

The reason that we all want passive income is pretty self-explanatory. It’s additional income that you don’t output any work for. You purchase the stocks, and the company just sends you a dividend check every quarter. You write a book, and then the publisher sends you a check based on it’s sales. You deposit your money, and it accrues interest. Beyond that initial setup, you do no work to continue the income stream.

How to Make Passive Income

The how of passive income is usually where people hit the brakes. You see, when people think passive income, they immediately think “easy money”. But, the truth of it is that there is nothing “easy” about it. You do have to put in the work to set it up. Some passive income ideas are easier to set up than others. If you’ve already got the money, you can pretty easily set up a passive income interest stream. Or a dividend stock income stream. But, unless you’ve already written several books, you’ll still have to write the book to set up the royalty stream.

The more passive income streams you have, the less work you have to do to maintain the level of income you have. With some hard work to set them up, you can stop thinking about side income jobs, and thinking about how you’ll spend your “passive” time building more passive income streams. It isn’t easy, but it can be very rewarding once you’ve got the streams all set up and working for you. And, even if you have to do a little bit of minimal maintenance once in a while, you’ll still be earning far more for your time than you would on any non-passive income stream.

photo credit: alancleaver_2000

Sell! Sell! Sell!

September 23, 2011 By Shane Ede 16 Comments

Goodness! Did you see what the markets did yesterday? Down almost 400 points! If you haven’t already, you had better join the rest of the world in getting out while you still can. The era of easy gains in the stock market and guaranteed returns has officially ended, and it isn’t pretty. It’s time to let go of the bull market ideals. Do you know what happens to a bull in a room full of bears? Here. Let me show you.

Seriously. Those bears are going to eat you alive! Sell everything you got now. Take it out in gold, and head for the hills. Don’t forget the canned supplies and vegetable seeds for after the apocalypse that will follow! Quit your job, pack your family up, and head for North Dakota. We’ve got plenty of oil field jobs available. (see: Bakken formation) And with a bunch of liquid black gold running over your fingers, you won’t need to worry about the crashing stock market anyways!

Ok, obviously, this whole post is a little bit tongue-in-cheek, with the exception of the North Dakota part. We really do have plenty of oil field jobs available. Best economy in the U.S.A., in fact. And, even if the post weren’t tongue-in-cheek, and you took it seriously, you really, really, should talk to a financial professional before making any thing resembling a sell everything move. The whole post was all for the enjoyment of myself, MoneyMamba, and others who felt that there would be a whole plethora of posts by our colleagues touting the benefits of dollar cost averaging and long term views on the stock market. They may be right, but sometimes you just have to poke a little fun. 😉

Despite my best efforts, I don’t know everything about finances, stock markets in particular, so please don’t construe this as advice. It isn’t.

photo credit: VirtualErn

Give the Gift of Experience This Holiday Season

September 21, 2011 By MelissaB 11 Comments

It is only September, but I have already seen Christmas trees and holiday presents in Costco. Most people probably aren’t thinking about holiday gift buying now, but they will be in another month or two. If you are like most people, you probably have difficulty coming up with gift ideas for several people on your gift giving list; most people often have everything they need, and what they don’t have, they buy themselves. Or, you may look around your house at “stuff” you are not using that is just taking up space and dread the latest infomercial product Aunt Shirley will buy you for the holidays because she doesn’t know what else to give you.

If you are tired of giving more “stuff” that people don’t need or the generic gift cards that people now resort to, consider giving a different present this year—the gift of experience.

Maybe your best friend, inspired by Dancing with the Stars, has always wanted to take a ballroom dancing class but can’t justify spending the money on that kind of indulgence. Why not give the gift of a class or two for her so she can try it out?

Perhaps your sister recently had a baby and would like nothing more than a weekend away to reconnect with her husband. You could offer to babysit for the weekend or to pay for a room at a bed and breakfast for her.

The opportunities are endless for this type of gift. Chances are that those closest to you often tell you what they would like to do and what is most important to them at this stage in their lives. By listening closely, you will have endless gift giving possibilities.

People often will not splurge on things they want to try or experience, so they will appreciate your gift all the more. In addition, they will remember your gift for years to come. You probably don’t remember that cousin Ricki gave you a $50 gift card to your favorite department store last holiday season, but you will remember that she paid for a three hour cooking class for you to take at the local culinary school.

Another bonus of giving the gift of experience is that there is no remnant of it physically. Unlike gifts that you don’t want or need that just clutter your house because you feel bad throwing them out or selling them in your next garage sale, the gifts of experience do not take up a physical presence in your home. They enrich your life and create pleasant memories, and you are able to keep your home free of clutter.

If you are tired of the commercialism of the holidays and would like to connect to your friends and family on a different, more thoughtful level, consider giving the gift of experience this upcoming holiday season. Chances are they will enjoy the gift and the new experience and will remember it for years to come.

photo credit: Shandi-lee