Beating Broke

Breaking Your Money Superstitions

July 13, 2012 By Shane Ede 7 Comments

Did you know that when you were born, the only things you were afraid of were loud noises and falling? It’s true. Anything else is a learned fear. Now, it may be true that you can learn a fear at a young enough age that you won’t actually remember where the fear originates, but it’s still a learned fear.

Stop and think about that for a minute. What are some of your fears? Each and every one of them is a learned fear. And if something is learned, it can be unlearned. Or, at least corrected with proper learned knowledge. Take today for instance. It’s Friday the 13th. Well known as the day of bad luck. Walking under a ladder today, or breaking a mirror today is double bad luck. Isn’t it? Well, it’s something like that, I’m sure.

Superstitions and fear have done their fair share of damage throughout the years. The first good example that comes to mind would be the Salem witch trials. All those innocent women burned at the stake. It’s especially heinous when, after watching The Wizard of Oz, everyone knows that you pour water on a witch if you want to get rid of them. Less mess too.

Merry Crisis and a Happy new fear — Merry Crisis and a Happy New Fear by Robinsoncaruso, on Flickr

Seriously, though. Your superstitions about money, and fears about money are learned. Somewhere along the way, you decided that the superstition or fear was a valid one to have. Money superstitions are just as much hocus pocus as crazy Quaker witches. Today, Friday the 13th of July, 2012, take a few moments to really think about the superstitions and fears that you apply to your money. Then, do something small that goes against those fears.

Have a fear of losing it all? Take a handful of change down to the river or lake and toss it in. It’s not everything. Just some random bits of metal in a circular shape. Not only can you make more, but you’ll likely get along just fine without it.

What are your money fears and money superstitions? Share them below, and let’s all compare and see how common some of them are?

And remember, there are babies all around the world being born today that have none of them, until we teach them to them.

Why I Like Passive Income

July 11, 2012 By Shane Ede

When you’re in debt, and trying to escape from the cycle of debt, the one thing that seems to dominate your every thought is paying off that debt. Far too often, those of us who talk about debt and finances regularly tend to focus on debt as well. We focus on paying off debt, eliminating debt, and ways to spend less money so you free up more money in your budget to pay off that debt. What we don’t talk about often enough, in my opinon, is making more money. In many ways, increasing your income is just as important to your fight against debt as staying disciplined in paying your debt off.

I don’t know about you, but I often feel like my income is capped. In any job, you are either paid a yearly salary, or paid an hourly wage. In that way, you’re income is capped. If you’re paid on a salary, it doesn’t matter how much you work, you only get paid a certain amount every pay period. If you work hourly, there are only so many hours that you can work in any pay period. There are always ways to advance yourself through the workforce, and up the ladder at work, but your income is still capped.

Uncapped income.

Passive Income Cash Machine — img credit: Whatleydude on Flickr

One way to increase your income, that doesn’t require that you work all hours, and that doesn’t cap your income is through passive income. I’ve talked about it before here, and here, and here. The ideal definition of passive income is income you earn without putting in any work. And, maybe in an ideal world, that type of income would actually exist. In our less than ideal world, truly passive income is very hard to find.

How I define passive income

I like to define passive income in somewhat more liberal terms. To me, any income that I can earn with a minimal amount of work is passive income. If I can make income off of something that only takes me 30 minutes a month, I consider it passive income. Anything that continues to make me money long after I’ve put the work in counts too. It’s like Ronco income. “Just set it and forget it!”

For me, my blogs and websites are passive income. A majority of the income I make off of them is income from posts I’ve already written. The work has already been put in, and it would continue to pay me even if I quit writing. My traditional stock portfolio is a passive income. I did the work early on, earning the cash to buy the stocks, as well as doing the research to pick the stocks, and many of them pay me dividends on a regular basis. That dividend payment is a passive stream of income. Yet another stream that I take advantage of is my Lending Club portfolio of peer-to-peer loans. (See my latest report on LC)

Other forms of passive income can include things like royalties, patents, and rental properties. I’m sure if you think hard enough about it, you’ll find several other streams of potential income that would fit my definition of passivity. (Share them in the comments!)

Why do I like passive income?

Naturally, I like passive income because I’m lazy. 😉 After all, what could be lazier than earning money while you sit on your behind and watch soap operas on T.V.?

“Naturally, I like passive income because I’m lazy.” — @beatingbroke (Click to Tweet)

As much as I like that reason, the real reason is a bit more explanatory. I like paying off my debt. I like the ability to do that while still enjoying life. And, as many of you can attest, doing both of those things can sometimes be somewhat difficult. Balancing the expenditures that can come enjoying life (even a frugal one) with paying off your debt is troublesome. The best way that I’ve found to try and do both is to work hard at paying off debt, while working hard at increasing income at the same time. Without passive income, the only way to increase income is to work more hours at your hourly job or to negotiate regular raises at your salary job. Recently, it’s become even more difficult to do either of those. Passive income becomes the last, best way to increase your income with little to no continuing work output.

Why do you like passive income? What do you consider to be passive income? What are some of your passive income streams? What are some that you’d like to take advantage of?

Reducing Your Debt: Much Better than a Snowballs Chance

July 9, 2012 By Shane Ede 10 Comments

Credit card debt, mortgage loan, car payments, tuition…all of these add up to your debt and debt means stress in any economic environment. Like a lot of folks, you probably haven’t defaulted on your debt but it’s hard to keep up on and while there are a lot of plans to pay down cards by paying a little extra each month, it doesn’t move quickly. Paying the minimum payment on those debts doesn’t get you anywhere. It’s time to stop sending the minimum payment to your debts… sort of.

Get the Debt Snowball Rolling

I’ve written before about using a snowball plan for pay-down. You can read one of my favorites here: Debt Avalanche, Correct? If you aren’t familiar with how the debt snowball works, here’s a run-down. Add up all the extra you pay on your debt and apply it to your smallest credit card. Keep paying that extra to the card and your payments are going to start making a big difference faster than you would believe. Once that card is paid off, apply that extra and the payment you regularly made and apply it to the next largest loan or card. Here comes the hard part; as you pay off credit cards, cut them up. You don’t have to cancel immediately, and possibly shouldn’t for credit score reasons, but once your debt to income ratio is more manageable you may want to consider it. The goal is to quit being eaten by small payments and start making big payments.

Stop Paying So Much Interest

Step number two is adding an extra payment per year to your mortgage loans. This shaves 10 years from your mortgage through the elimination of interest. There are two ways to do this. Your mortgage lender probably has some type of offer available that lets you pay every two weeks instead of a monthly mortgage. Because of the various five week months, this effectively creates a 13th payment for the year, but once you commit you might struggle to get back to a monthly payment.

To stay in control of the extra payment you could simply mail an extra payment at some point in the year with bonus money, but a more comfortable way is to take your payment, divide by 12 and add that amount to your monthly payment. It’s a much more painless proposition that still adds up to an extra payment and ultimately gets more money paying toward your principal. Caution: This is only appropriate if you plan to stay in your home or if you have an equity goal in mind. If you are trying to sell your home, this may not be the wisest option.

The same is true of car payments. If after the credit card and personal loan debt is paid, you may be tempted to pay off your car. If you do not plan to buy another and are hoping to be payment free, this will absolutely work as rapidly for a car payment as for credit cards, loans and your mortgage; however, if you are considering a trade-in, keep the extra money you would spend on your car payment and start putting it to work for you in an IRA!