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Compartmentalizing Income Streams

Ever since I lost my very first 9-5 job post-college (quite a number of years ago now), I’ve always had an underlying fear of putting my eggs into one basket. I’ve felt that tethering yourself to one job means locking in your one and only source of making money. For as much as people grumble about their day to day life at work, the vast majority of them would be dead in the water without it. As such, you’ll need to constantly diversify your income and create additional revenue streams as you go along. Once you’ve established said revenue streams, you can then decide where each can be best put to work.

My Breakdown

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As it stands, my own “hydra’ of income is very much a work in progress. I bring in extra money from a number of different sources, but most of it comes from my one, as it does for many of you out there as well I’m sure. I’d like to think that I can snowball at least one of these income streams as an investment into something that will continue to pay me down the line (like dividend paying stocks, for example). So, here we go:

  • My Job as a Technical Writer – This is my bread and butter, and gets funneled into the usual monthly expenses. These include my mortgage, utilities, and other bills. Any home repair funds are also siphoned from here.
  • Niche Site Portfolio – My oldest brother and I collaborate on a few projects, but this has been our most successful to date. We presently have about 20 sites, and all together they bring in a nice monthly amount of advertising revenue that I never rely upon but I’m happy to have. These funds fill up my emergency fund.
  • Writing – I write on the side for a few sites/blogs. It isn’t big money but the work is easy and fun! It also serves as a nice monthly check as well. This goes to paying off debt.
  • Poker – No, I’m not much of a gambler and you won’t see me on the WSOP circuit, but I enjoy poker as a hobby. Online poker is banned here in the United States for now, but there are subscription sites that operate legally under sweepstakes law (If you’ve ever watch the World Poker Tour, you’ve seen the ads for their site). They charge a monthly fee in exchange for running a variety of tournaments each month. Since they operate as a sweepstakes, however, there is a loop hole any poker hobbyist can take advantage of, because if you send in an index card with your membership information, they’re obligated to provide you with a month of service free of charge. This means that you’re literally gambling with the house’s money (since you are playing for free), and while you won’t get rich, it can be a fun side gig if you enjoy the game. All money I earn each month goes into dividend-paying stocks.

As you can see, diversification is an important part of personal finance for more than one reason. While it certainly expands your savings/spending power, it also allows you to safely store funds where their needed once your living expenses are met. If you were to create your own hydra of income (each head represents an additional income stream), how would you build such a monster?

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Empire Building: Your Financial Conquests

p>While I enjoy examining my finances and making adjustments as I go, I’ll be the first to admit that the world of personal finance is often…well not very exciting. I’m hesitant to say flat out boring, but I know plenty of people who start out with fancy spreadsheets and budgets only to abandon them and return to their normal spending habits a few month later. Building wealth can often be compared to watching paint dry, as for most of us the ascension to financial prosperity isn’t a spring but a marathon. In short: Brick by brick my citizens. Seemingly small amounts of money are socked away or thrown into the debt pile, seemingly never to be seen or heard from again. Over time, these amounts compound and grow, eventually flowering into a bed of warm fuzziness that helps you sleep comfortably at night.

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I find that attributing my monthly financial routine to a larger goal is more gratifying. If you know, deep down, that every time you whisk that monthly deposit into your retirement account you’re solidifying your future and strengthening your own foundation, it can help get you through the doldrums and paperwork. An empire in the historical sense has a number of similarities to your financial portfolio, so let’s go with that theme.

Patience

Pushing your citizens too hard and too fast can lead to discontent, resentment, and eventually, revolution. In finance, if you try to get everything done at once and cut completely to the bone, your habits will be unsustainable. Eventually you’ll become unhappy and decide that it just isn’t worth it, and you’ll slip right back to where you started. To ensure that your empire grows steadily, you’ll need to make adjustments on a more rational basis. Little by little, your strength will grow, and when one goal is accomplished, you can move onto the next.

Expansion

There’s a reason that many people will take on additional jobs when they first start cleaning up their finances: it works. To succeed, you’ll need to continue to expand on all fronts. If you make your money, you can save faster and pay off debts more quickly. If you cut down your budget, that expands your savings capability. Always looking to change and improve and innovate will ensure your long term success. Try and fail and then try again.

Maintenance and Oversight

Always examine your current finances at least once a month. Much like a good empire will need roads maintained and utilities functioning, you need to keep an eye on your spending and saving. Examine how much is going in and how much is going out. You’ll catch leaks quickly and cancel unnecessary services as soon as you see the monthly drain they’re putting on your accounts. A tight financial ship is something you can be proud of.

As for my own empire, my recent transition into self employment put a hurting on my ability to save for awhile. I consider it a quality of life adjustment, but I’m finally catching my stride again. My empire has been temporarily weakened by internal turmoil, but I’m confident that I’ll emerge stronger on the other side.

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Lessons From the Debt Meltdown in Europe

It seems like everyday I load up Yahoo! Finance to see what’s going on with the market today, and there are a cascade of headlines revolving around the Eurozone. Countries like Greece and Ireleand have had a slew of debt issues in recent months, and even with economic assistance from other European countries, they may not be out of the woods yet.¬† The problems aren’t isolated to them, however, as now Spain has had to seek re-capitalization for its banks as well. As a consumer, what lessons can we take from this economic disaster? Quite a few, actually.

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Don’t Let Your Investments Sink You

In the world of business, risks are commonplace. We all enjoy reading stories about small business owners who went out on their own and put everything on the line, double mortgaging their house and maxing out their credit cards only to finally hit it big and come out a millionaire on the other side. Far too often, however, reckless disregard for the consequences of risk¬†lead to financial ruin, and countries like Spain are feeling that pain right now. Don’t be Spain. Carefully weigh your appetite for risk and, if you’re like me, never bet more than you are willing to lose on a new venture or investment. The possibility that you’ll fail is ever-present, and while you shouldn’t shy away from risk, always understand what exactly will happen should things not go your way.

Confidence is Key to your Financial Strength

Spain is in this mess right now because their banks are holding assets that are essentially junk at this point. For years, people were willing to lend the money to these large banks because, well, they were large banks and they were good for it. Once the confidence in these institutions was shaken, consumers began dropping out and the banks couldn’t find creditors to lend them money without being charged an obnoxious amount of interest. Thankfully, they are so important to the financial system that both the Spanish government and the broader Eurozone were willing to step in and help. There is no such safety net for you. If your credit gets crushed, your lenders will be more than willing to watch you go to bankruptcy court.

Control Your Spending

Tightening the proverbial belt is rarely a fun process, and the temptation is always there to ignore it. For years, cost cutting measures and making tough choices were put on the back burner in lieu of making people happier in the short term. Eventually, though, as it always does, the situation inevitably collapsed. If you don’t keep on top of your spending habits and saving, eventually something will come along to break you.

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Good Debt Vs. Bad Debt: My Own Musings

Often times when reading Personal Finance article,s you’ll hear the term “Good debt” and/or “Bad Debt.” As you might expect, it is generally easy to distinguish between the two. Credit cards? Bad. Student Loans? Good (Mostly). Mortgage? Good. The list goes on and on depending on how much the lender manages to fleece you out of each month. The higher the interest rate, the more likely you are to be struggling to make progress to eliminate the loan from its parasitic-by-nature existence.

Originally, when I first began my own finance journey, I avoided just about every type of debt there was. I had short bouts where we would need to pay off the remainder of our small car or the remaining credit card debt of my now-wife. Early on, this whole process is easy, because without a lot of obligations, discretionary income is rather easy to come by. Now that I’m a homeowner, however, its easy to see why people get stretched thin. Right now we have one student loan, one car payment, and one mortgage to pay, and that makes me really uncomfortable sometimes. I can just feel the tendrils of the bank latching on and taking their fair share of my hard-earned lifeblood of income. They need that sustenance and, at the moment, I have no choice but to give it to them. For awhile now I have been more flexible in my view on debt. A mortgage became acceptable, paying the minimum each month on my student loans was OK, but as the months roll by, I’m quickly beginning to realize that it isn’t OK anymore.

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After taxes, this money is mine, and I want to keep it that way.

As per my previous post, a war on debt needs to be fought on multiple fronts. Severe cuts in your daily lifestyle can make rapid repayment possible, but often via the hidden cost of happiness. If you really enjoy heading to the bar on a Friday night with friends to have some drinks (This is an arbitrary example), then having to cut that out is, in fact, going to hurt you. Not a lot, but enough that you’ll miss it.Earning additional money will help you get your debt under control, but working too hard will burn you out and leave you left without much time for leisure activities. No, a balanced approach is necessary.

In the end, I’ve come full circle. I have returned to my original thinking that all debt is bad. I understand why some of it exists, but I will no longer stand idly by and continue to pay the minimum.

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When is it OK to "Spend your way out?"

In the midst of an ongoing economic recession, you’ll often hear that the government has the ability to try and spend its way out of a crisis. The idea is that the government spends more than it has on hand in order to keep the economy going temporarily, a shot in the arm of money, as it were. From a personal perspective, you don’t have access to the cheap interest rates or deep pockets that say, the U.S. government has, and so spending your way out of a problem is usually the wrong way to go about finding a solution. Yet in my case, when I lay out all of the goals I want to accomplish, one thing becomes abundantly clear.

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I’ll need to make more money.

This sentiment is often scoffed at in Personal Finance enthusiast circles. You don’t need to earn more, you need to spend less. You don’t want to inflate your lifestyle, you want to slim it down to the point that you are living below your means. But what if your goals come with a price tag? Travel, for example, has been a dreamy ideal of mine for some time. I want to get out on the road and see if my generally introverted, reserved self has what it takes to hack it. I want to challenge myself to meet new people, see new things, get out of my comfort zone, and ultimately come out with a fulfilling experience on the other side. The issue here, unfortunately, is that I also like having my modest home in a just-far-enough suburb of Philadelphia. I like having a home base to come back to. I’ve finagled my way into a mobile job that pays the bills and then some, but if I want to pay my mortgage and see the world, I’m going to have to up the Ante.

Plan of Attack

My journey into learning about investing and saving really took off when I found the idea of compartmentalizing. People often joke that they’re excited to get a paycheck, only to see it flitted off to various bills and accounts, leaving little left over. I, however, loved the whole process. As long as what’s coming in is more than enough to cover my own ideas and savings, I viewed my accounts like a book shelf. Some went into my cost of living, another portion made its way into the emergency fund, while a smaller amount got transferred into spending or travel, a new gadget, etc. Everything was accounted for, but when you start expanding out and building new shelves, the money quickly gets thinned out.

Spending my way out

I am, in a way then, spending my way out. I want to be able to travel on a more long term basis while keeping my home here to come back to. This means that I’ll need to keep buffering the emergency fund, shove some more money into travel fund, and keep extra around for the usual maintenance and repairs, not to mention our one car. Adding additional streams of income when your necessities are already covered opens up a whole new realm of possibilities. You can save more, you can buy more, you can do more. Money may not buy happiness, but it does provide a level of opportunity. What will you use it for?

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