Beating Broke

Personal Finance from the Broke Perspective

What are YOU Working For?

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What are you really working for?

We all work, in some way, shape, or form.  Many of you, when asked the question, “what are you working for”, will likely give the easiest answer.  Money.  That’s what we all work for, right?  We need it to pay our bills, buy our food, and do many of the things that we choose to do.  But, one of the things that I’ve contemplated for some time, and that helped me make the decision to quit my job last year, was the furtherance of that question.  Sure, we all work for money.  But, is that all we work for?  And, if so, should it be?

The conclusion that I came too, as you can probably guess, is that money isn’t everything.  We do need some, but if that’s all we’re working for, it quickly becomes less of the tool that it should be, and, instead, becomes something that makes us feel trapped where we are.

Not All Work

Primal Money

One of the popular diets, recently, is the Primal Diet.  It’s a diet of foods that our primal ancestors (the hunter-gatherers) would have eaten.  Mostly meat, and readily available nuts and fruits.  The idea is that the human race has been around for thousands of years, but only been farming, and eating what we farm, for a fraction of that time.  Proponents think that we haven’t evolved sufficiently enough to properly handle the abundance of grains and other “farmed” foods in our diets.  (sidenote: the increase in Celiac disease over the last few decades might point to them being correct)  Because of that perceived evolutionary gap, they’ve taken up eating what our kind would have eaten before the rise of farming.  The movement made me think, though.  What of money?

For centuries, we’ve used money as a means of trade.  I give you a coin, you give me goods and services.  If I run out of coins, I have to find a way to make more.  I trade my surplus goods and services to someone, and they give me coins.  We repeat that cycle, and we have an economy.  Slowly, coins become the only way to attain goods and services, and we all depend on them.  And the more we depend on them, the more of them we need.  And the more we need, the more we have to sell our goods or services to get more.  Eventually, we end up where we are now.  We all work in order to gain more coins.  Our economies have evolved.  But, if that’s the case, what were they like in the Primal era?

Before we all became obsessed with coins, and money, our ancestors hunted for their food.  They didn’t need to buy it, they just went out and trapped or shot it.  Or they scavenged it off of the tree it grew on.  Or dug it out of the ground where it grew wild.  The work they did wasn’t for a new tv, or a new car, it was for survival.  If they didn’t do the work, they would starve.

If you don’t do the work, you get fired (if you work for someone), or you just don’t make any money.  And, yes, you still might starve.  Eventually.  But, food wasn’t the only thing that many of them worked for.  They worked to help their family survive.  They worked so that their children would grow up healthy and strong.  Their children were their legacy; what they would leave the world when they passed on.

Legacy.

Now, we’ve found the real purpose of work, I think.  That’s why I work, now.  It isn’t about the money, although money can have a place in legacy, but about what I leave the world when I leave the world.  The example that I set for my children, the good works I do, the changes I make in my world that make it better, and the life I lead, are my legacy.  Money is merely a tool, like the bow and arrow for our primal ancestors, to help me do those things.  And, here’s the funny part.  Looking at that list of things, it’s a tool that I don’t need that much of.  I set a better example for my children by being conscious of the things that I do, and by what I teach them.  Donating money to charity is a good work, but there are just as many good works to be done through volunteering your time and skills.  And, I can certainly make changes for the better in this world without money.  My legacy doesn’t need money.  I’ll use what money I have to give it a boost now and again, but it doesn’t need it.

I’m working for my legacy, not for a new tv or a new car, or even a new house.  The realization of that is what helped me make the decision to leave my job.  There will always be other jobs that I can get that will help me pay the bills and put food on the table, but I don’t need one to help me do my work.

What are YOU working for?

photo credit: The Marmot

Why Passive Income is Better

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Passive Income is a bit of a myth.  Not so much in that it doesn’t exist (it does), but in what it really is, and why we should all be striving to attain as much passive income as possible.  I’ve written before about what passive income is.  But, in that article, I only wrote a short paragraph on why we should want passive income.

What is Passive Income

You should read the original post on what passive income is, but I’ll recap here as well.  In a nutshell, passive income is income that you earn with little ongoing effort (work).

Why Passive Income

Alexander HamiltonThe why of passive income is really the motivating factor for most people.  Many of you know the allure of free money, or easy money.  And many of you will mistakenly think that passive income fits one or both of those categories.  It doesn’t.  The difference, and the reason you will still want passive income, is in the ongoing work part.  With a traditional job, like the one I recently quit, you get paid per unit of work.  If you work one hour, you get paid $x.  If you work one year, you get paid $xx,xxx.  If you build one widget, you get paid $xx.  Your earning potential is directly tied to the amount of work you do.  More work = more money.  It’s a finite system.  You can only work so many hours in a day, so you can only make so much money.

You’ll still work for your passive income, but, if it’s a true passive income source, you’ll be able to work less for the money as time goes on.  The income is no longer tied to the amount of work you put in, except in the beginning.  Please don’t think that passive income is easy, or that it requires no work.  It does.  In fact, you might work harder than you have before initiating it.  But, once it’s initiated, the work can decrease if you want it to.

Passive Income Examples

One of the most common examples of passive income is rental income.  You rent out a property, using a property management service, and all you have to do is sit back and let the rent checks roll in.  Sounds easy, right?  It is.  But, you have to get there first.  You’ve got to do the work necessary to have the ability to purchase that rental property. RWinvest have some great tips on investing in property for beginners to help you learn how to become a property investor easily and effectively, and get the best return on investment.’

You’ve got to do the work to make sure that it meets codes so that it can be rented out.  You’ve got to do the work necessary to find a property management service that fits your needs.  And, even though it then becomes almost entirely passive, meaning you do no work to attain it, there might still be some occasional work that needs to be done, like deciding whether a repair should be done, and by whom.  As you can see, there’s a huge outlay of work to set up the passive income stream.

Another popular example of passive income is dividend paying stocks.  You own some shares of some companies that pay dividends to their shareholders, and let the dividend checks roll in.  Sounds easy, right?  It is.  Again, you’ve got to get there first.  You’ve got to do the work necessary to have the ability (money) to purchase those shares.

Passive Income isn’t Free Money

Passive income isn’t free money. I can’t repeat that enough. And it isn’t easy money.  You’ve got to put some work in to set up the passive income streams first.  But, once you’ve set them up, each day, week, and year, makes your work cost to attain those funds diminish.  Until, at some point, your work cost per unit of income is fractional to what it would be in a traditional job.  If a traditional job requires 1 unit of work for each unit of pay, over time, passive income might require 1/100th unit of work for each unit of pay.  And, that, is why we should all want passive income.

For me, passive income isn’t about being able to sit on a couch and watch television while the fat checks roll in.  It’s all about being able to pay my bills while I do the things that I like to do.  This site, and others I own, help me with that (although they are far from passive, they aren’t traditional jobs for me either).  I’m working on other methods of increasing my passive income stream as well.  I’ve always wanted to be a published fiction author.  I’m participating in NaNoWriMo to that end, with hopes of being able to self publish ebooks and use the royalties from that as another passive income stream.  I like to take photos, so am going to be exploring avenues of making some income with that as well.  It will require taking more photos, which is work, but, because it’s something I do as a hobby already, it’s a variant of a passive income stream for me.

What are some of the passive income streams that you employ?  What are some of the things that you do as hobbies already, that you might be able to turn into an income stream?

photo credit: quinn.anya

Is Personal Finance Really Important?

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In case you haven’t noticed, this site is all about personal finance.  Well, mostly.  We certainly talk a lot about personal finance.  But, is personal finance really all that important?

How much time do you devote to your personal finances?  To your budget? To coupon clipping?  In the end, does any of it make a difference?  Or are we merely just going through the motions because of some larger issue?  Ever since my Junior year in high school when my english class went through a whole section on propaganda, I’ve (rightly so) questioned anything and everything.  We don’t deal with propaganda on the level of that they did in war times, but we still deal with it on a regular basis.  And at it’s root is the necessity by those companies who are spreading the propaganda to further the consumerism society that we’ve become.

Over the last few months, I’ve been reading a lot of books on the subject of breaking free of what you are, and becoming what you should be.  Books like “No More Mondays” and especially “Early Retirement Extreme” have brought me to take an even closer look at the consumerist lives that we live.  Jacob (the author of Early Retirement Extreme) lives on somewhere around $10,000 a year.  A Year!  Could you even make it 3 months on that?  I know that I would have an incredibly tough time even trying to come close to living on 10k a year.  It would take some very radical changes for me, but I might try working towards that by reducing my consumerist habits.

And, when you reduce your consumerist habits, a funny thing will likely happen.  Your expenses will go down.  And you’ll be able to “live” on less and less.  And another thing that will happen, is that personal finance will become less important.  We worry about the most frugal way to do this or that, or the proper way to save for retirement or buy a house or pay off debt, or even the best way to negotiate a better deal on your next car when what we really should be worrying about is why we are living the lives we are.  How many of you are working jobs you don’t want to because you have all this debt from your house and your car or from all the fun “stuff” you bought on credit?  I know my hand is raised.  How LIBERATING would it be to walk out of your office today and not look back.  And not have to worry that someone was going to come and take your house away.

Do me a favor.  Take 15 minutes and watch this movie that Adam included in his post on focusing on what truly matters.

*direct link to youtube video if my embed doesn’t work for some reason: http://www.youtube.com/watch?v=3Cakm2nIQWo

Now, tell me.  Could you stop and not keep going if you had to?  Or are you so tied to your “career” and “job” that you have to “keep going”? Take the steps today to free yourself of the consumerist lifestyles that we live.  Free yourself from the eternal “going” that we experience every day.  You likely won’t accomplish it in a day, or even a month or year, but if you take a little step every day, you can get there.  I’m taking that journey, step by step, and it’s difficult.  It’s difficult to give up some things that we don’t really think about.  But, if we want to be able to stop whenever we want to, we need to be able to do that.