Beating Broke

Personal Finance from the Broke Perspective

Are You Leading Your Finances?

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This last weekend, I attended a young professionals conference.  As you can imagine, a large part of the conference was spent talking about leadership.  One of the speakers was legendary basketball coach Dale Brown.  One of the breakouts was entitled “Visionary Leadership”.  I’ve also just started reading the book “Entreleadership” by Dave Ramsey.  In all of those places, there are lots of buzzwords that describe leadership, and what a leader is.

Of course, this being a personal finance site, my mind couldn’t help but apply as much of it as possible to personal finance.  When we think of our personal lives, we rarely apply the word leader to any aspect of it.  We apply it to ourselves and others in our work and volunteer lives, but not our personal lives.  Why not?

When it really comes down to it, we are the leader of our lives.  We are the ones who apply the same principles that leaders apply to business and volunteer organizations to our lives.  Or don’t.  We try and become better leaders at work.  We expect better leaders to lead us.  But rarely do we try and become better leaders in our personal life.

Leading your Finances

Leading Your FinancesPersonal finance aren’t all that much different from a business and a business’ finances.  We still have income coming in, expenses going out, and the profit left over.  Unfortunately, for many, that’s where the parallels end.  Let’s change that.  Let’s apply some of those leadership principles to our lives.  Specifically, let’s apply them to leading your finances.

Financial Efficiency

Business leaders are always looking for ways to make their business and employees more efficient.  Over the years, businesses have foregone the paper and pen and replaced them with computers.  They’ve replaced old marketing tactics with websites and social media.  Leading your finances means finding, and embracing, new ways to make your finances more efficient.  Forego the old check and envelope method of paying your bills and sign up for bill-pay.  Or automate your bill paying by setting them up for auto-pay.  Find ways to save that also create income.  Look into better rates at better banks.  Learn about dividend investing.  Learn about peer-to-peer lending.

Financial Opportunity Seeking

Many of today’s biggest and brightest businesses wouldn’t even exist today if their leaders hadn’t been continually opportunity seeking.  If all Apple still made was computers, it wouldn’t be the multi-billion dollar company that it is today.  If Steve Jobs hadn’t seen the opportunity in the iPhone, iPod, and iPad, they’d be just another company making computers.  Apply the same to your finances.  Peer-to-peer lending hasn’t always been what it is today.  There was a time where it was still a fledgling opportunity.  A small percentage, relatively, of the population saw the benefit of it as an investing avenue, and, for most, their finances are the better for it.  Be open to services and products that can help you make your finances better.

Continual Financial Improvement

Good enough is never good enough for a business leader.  The only thing that stays the same is their desire for improvement.  Beyond always seeking opportunity, we must also always be finding ways to improve our finances.  We must always be assessing the risk involved with those new opportunities, and making decisions on what will best improve our finances.

Financial Failure

Businesses fail.  If they have good leaders, they only fail momentarily and spring back stronger than ever.  They’ll have set the company up to be diversified so that any one failure shouldn’t be enough to ruin the company.  Investors talk all the time about the importance of diversifying an investment portfolio.  But, it can be applied elsewhere in our finances.  Having all of your money in one online bank is great.  Until your internet goes down and you can’t get to it to bill pay.  Diversifying to have a set amount of cash available in an emergency can help you out there.  Not depending on just stock investments is another great way to diversify for failure.  Prepare your finances so that an opportunity that fails only sets you back, doesn’t bankrupt you.

How can you improve your finances today?  What opportunities can you learn more about and assess for use in your finances?  What efficiencies can you create to make your finances better? What other leadership qualities can you apply in leading your finances?

Why I Like Passive Income

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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?

Quick and Easy Passive Income Ideas

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Building passive income streams can be hard work.  They usually take a significant amount of work and/or money to set up before they can really become a full-fledged passive income stream.  It’s part of the argument over whether they really are “passive” or not.  Obviously, as with anything, the more work or money you put into your passive income ideas the better the resulting passive income streams will be.  But, when you’re first getting started, there are several ways you can set up some small passive income streams that will provide with different forms of passive income.

Here’s a few passive income ideas.

  • deposit money with passive income ideasBlogging – As a blogger, myself, this one is one of the first ones I usually suggest.  To be sure, it’s not for everyone, but it can set up a rather nice passive income stream.  Blogging is work, but a well set up blog, with some content, could eventually be left alone to collect traffic, and Google adsense checks.  The initial work is a bit heavier, but the maintenance while setting it up can be as little as a few hours a week.
  • Cash Back Cards – Some might argue that this isn’t really a passive income stream, but I think that it can be.  Using a tax free cash back card to pay for bills/things that you would normally buy anyways makes the cash back an added bonus.  The only added work is to immediately pay the balance for the things that you’ve bought, and the cash back becomes an extra stream of income that you earned by buying things you would have anyways.  I have a coworker that does this and makes $500-$600 a year.
  • Peer-to-peer lending – I’ve written before about my portfolio on LendingClub, and how, with very minimal maintenance, I’m slowly building a passive income stream that earns me money.  As my portfolio grows, and I reinvest the interest, the interest income from the portfolio grows with it.  Eventually, if I keep with it, I could have a compound interest passive income machine, built with less than $20 and 20 minutes a month.

Those are just a few quick and easy passive income ideas to build passive income streams.  They don’t require a lot of work to get started and maintain, but they will provide for extra income that you can use to build them further, or to help beat broke.
photo credit: alancleaver_2000