Mar 132017
 

I recently came across an informative and inspiring thread on the financial independence subreddit about additional income streams that people have. Here are some ones I thought could be relevant to people who read this blog.

Ideas for Extra Income

  • Rent your car. Turn a depreciating asset into an income stream. ūüôā “I rent my car out on Turo. It’s the AirBnb of car rentals. I live walking distance from work and rent it out all the time. I rent my Wrangler for about $50/day and have been making around $800/mo in gross margin.” ~plz_callme_swarley
  • Invest in a rental property. “I’ve got two rental properties, both I pay someone else to manage. I made 8k off of one last year and 21k off of the other one in net profit (new roofs are expensive). They’re both paid off and provide a small but steady trickle of income, I’ll probably try to save enough to get 1 more each year for the next 7-8 years.” ~SEJeff
  • Buy profitable blogs and websites. “Bought a few niche websites on Flippa, earning a little over $100 per month. Import some stuff from China and sell it on Amazon as well.” ~jb611
  • Walk other people’s dogs. “Signed up through rover.com but now my clients pay in cash to avoid extra fees. I only have 2 clients because I’m too busy to take on more. I mostly work on lunch break from my job with occasional overnight stays. Make about $300/month….I recommend signing up on Rover.com. The process takes a little effort and you need 2 references – I had my girlfriend write one and a buddy wrote the other. The site isn’t extremely easy to navigate which is partially why my clients pay me under the table now.” ~CalPolyJohn
  • Write online. “I make about $3,000/month editing Wikipedia for pay. I get my clients from https://www.buildersociety.com/, they’re great! I know a lot of other people doing this so if you want in, just start editing Wikipedia, learn the rules, and then all you need is just clients…..I can do a new page in about an afternoon and I charge $500-$1,000. It’s only 3-6 actual jobs/month. If you want to do it, make sure you spend some time editing the Encyclopedia to learn the rules.” ~TaylorSwift2015
  • Become a freelance translator. “Freelance translating (Japanese>English). Brings in $4200/month pre-tax for 50 hours/month of work…Professional (and non-professional) translators usually create profiles on both ProZ and TranslatorsCafe to look for and offer work. People with no real translation background may use a site like Gengo, whose rates are considerably lower (3 to 8 cents/word). Finally, it is also common to Google “Translation agency” and send your resume to as many translation companies as possible (rarely works, but then again you really only need 1 good client to establish yourself).” ~nakoyao
  • Monetize your lifestyle/hobbies. “I rent out my place on AirBnB when I’m travelling ($6300 in 2016). I offer private lessons as a cross-country ski instructor ($1600 this season). I host house(boat) concerts ($1-2000/event). My friend sells the overflow from my vegetable garden at the farmer’s market ($700). I take tourists out fishing/netting/ice fishing/canoeing ($3200 in 2016)” ~Holy_BatLogic
  • Teach English online. “I teach online classes for $20/hr. Just started last month, made $692 in half of February.” ~OzarkCatholic¬† “There are online tutoring gigs for ESL, you can get 16-20 an hour pretty easily. Check out VIPKids” ~brikky

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Dec 222016
 

Outgrowing The¬†“Middle Class” Label¬†

Hello high-income earning friends! It’s been a few years since I’ve written¬†about my income from a holistic point of view. So for the sake of transparency I thought I would give everyone an update on my income situation.

My salary is currently closer to $60,000 than it is to $50,000. I won’t disclose the exact figure¬†because I work with people who read this blog. As for my side incomes, they have gone up as well. ūüôā¬†I’m leaving out rental income below because I use the rent to pay my farmland mortgage¬†so it’s basically a wash.

Gross side incomes per year.

  • Part time job – $10,000
  • Dividends – $8,000
  • Interest – $3,000
  • Freelance – $10,000

Total side incomes = $31,000/year

If we put all the numbers together we see that I am making in the rough range of $90,000. Sweet sassy molassy! I believe this means my income is no longer considered middle class anymore. I am now part of the trendy upper middle class. ūüėČ

In any case, I’m earning more than $75K/yr, which is a very important psychological hurdle. According to the Wall Street Journal, the magic income level for maximum satisfaction is $75,000 a year. “As people earn more money, their day-to-day happiness rises. Until [they]¬†hit $75,000. After that, it is just more stuff, with no gain in happiness.”

Retiring Early on a Modest Salary

It’s rare for graphic designers such as myself to ever earn a six figure salary. What this means is that I have to implement a different strategy for FI/RE than someone else who’s a doctor or engineer. To make up for a lower salary, I boost my earnings by moonlighting,¬†and also by increasing my investment returns by taking on more calculated risks. The extra income streams essentially increase my income by $31,000 a year right now and should continue to grow over time. They should also make¬†the eventual transition to retirement easier. And by using leverage to invest in¬†growing companies and other profitable¬†assets like farmland and high yield bonds, my total portfolio has continuously brought high¬†returns since 2009.

This method of choosing individual investments is admittedly more risky than the passive, Boglehead market indexing strategy. But I’ve also been compensated with higher returns, at least so far. I can’t say this plan is guaranteed to work for everyone or that it’s sustainable long term. But I started investing in my early 20s. Today I’m almost 30 years old, and my passive income is about $1500 per month, while my expenses are about $3000. So it’s working out for me. The only issue is I don’t know how my leveraged portfolio will perform in a bear market or recession, which hasn’t been tested yet.

I believe in the next 12 to 24 months it’s very likely that I will be making $100,000 per year including all my income sources. Wow. Never in my wildest childhood dreams did I expect to earn so much. I know six figures isn’t what it used to be but it still feels like a huge amount of money to me.

Many other high income earners¬†claim that they don’t feel $90K or $100K is a lot of money. I don’t know if they’re just being modest, but I certainly do¬†feel much more privileged and happier¬†now than many years ago¬†when I earned only $40K.

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I used to believe that you have to be smart to make a lot of money. But apparently I’m living proof that someone with an average intellect can do so as well. I modelled my financial plan based on the brilliant minds that have already figured out the formula for success.¬†All of my investment ideas and strategies can be boiled down to one simple philosophy; Do what other successful people do. ūüôā That’s it!

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Jul 282016
 

University Grads Make More Money Over Time

According to a recent study from¬†the University of Ottawa, the cost of higher education is still worth it. University degrees are linked to higher salaries almost regardless of the subject. ūüôā

The study published this week looked at income data for 620,000 graduates of 14 different universities and colleges between 2005 and 2013, spanning an 8 year period to gauge progress over time.

On average, graduates from universities in 2005 made $45,200 in inflation-adjusted income in their first year after school. This number increased every year after that, growing by a total of 66% to $74,900 in 2013, which covers an 8 year period. But college graduates started off somewhat lower. The average income for a new college grad was $33,900 in 2005. After 8 years it has grown by 59% to reach $54,000. These numbers only represent the average. Individual results of a college or university education can be very different from one person to another.

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A¬†closer look at the study’s findings reveal a big difference by gender. Both men and women start off making about the same after graduating university. But 8 years later, those averages diverge. The typical male university graduate who started working in 2005 was making 91% more money by 2013. His female counterpart who graduated with him saw her income only increase by 42% from 2005 to 2013.

I think there are a couple of main reasons for the gender discrepancy in income growth.

  1. Men and women tend to choose different majors. STEM fields, particularly technology and engineering, are pursued more by men than women. These fields also consistently offer lucrative career paths.
  2. Many women tend to take time out of the workforce to raise children. This is¬†due to¬†a fact of nature. Nearly every research has shown breastfeeding increases a baby’s intelligence.¬†Men¬†can’t give birth or breastfeed.

Higher Education in Universities

As with any report¬†we have to consider¬†any hidden agendas. A university study that concludes going to university is a good¬†decision is like a real estate agent¬†advocating for home ownership. It doesn’t mean they’re wrong, but we should be aware of the bias. ūüėČ We can also keep in mind¬†that university graduates have¬†been pre-screened to have¬†certain qualities like being smart or¬†ambitious enough to attain¬†high grades in high school. These personality traits¬†often lead to higher earnings regardless of attending university; correlation¬†‚Ȇ causation.

Higher¬†education isn’t for everyone. Some folks excel at formal education, while others do better with a trade or entrepreneurship. The important¬†thing to remember¬†is that learning¬†is a lifelong process¬†and we can pursue it in many different ways. ūüôā

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Random Useless Fact:

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May 232016
 

The Problem with Vertical Structures

I once applied for a job at McDonald’s. But I soon¬†got myself¬†into a pickle when I couldn’t cut the mustard answering some¬†tough interview questions. ¬†I’ve always admired how quickly fast food workers can be promoted to manager if they work hard enough.¬†When most people think about their careers they imagine themselves moving up the ranks, or climbing the ladder, which are both vertical analogies. In today’s corporate world, the idea of a hierarchy is not only a way to organize a company, but it also dictates how people think about relationships, contribution, accountability, and power.

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But in a fast changing economy that requires communication and interdependence across multiple¬†disciplines, locations, and specialties, the top down method of management often isn’t flexible enough to deal with every situation. Instead, a sideways approach that aligns the values of same level workers might provide more value. ūüôā

Let’s pretend there is a boat in a lake. If we want to raise the boat higher, we could¬†try to lift it out of the water. But that would take a lot of energy and sooner or later the boat will¬†drop back to its original level. But if we add water to the lake the boat will eventually rise on its own. This is the essence of the horizontal approach to financial success.

A big impressive job title doesn’t trump a good idea. The best value-creating initiative can come from literally anyone in an organization. In fact, the person who most understands the processes, concerns, and responsibilities of a software engineer isn’t his or her manager. It’s other software engineers. ūüėÄ Real influence doesn’t come from controlling others that report to us. It comes from our ability to add value across the field we’re in.

The horizontal approach has seen success in real life situations. Valve Corporation develops video games such as the Counter-Strike and Portal series. It also operates Steam, a popular digital distribution platform with over 125 million active users.

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According to its employee handbook the company has no managers or bosses. The company employs about 300 workers. There are different roles and disciplines within Valve but everyone is treated as equals in terms of their job positions.

Horizontal Approach to Everything

Branching out horizontally to find success can be applied to pretty much anything.

  • One¬†way¬†to become the best¬†point guard on a basketball team is to play other positions. By adding skills horizontally instead of aiming for one specific goal¬†we can develop a better¬†understanding of¬†how the entire game is played.
  • One way to become a good parent and have a healthy relationship with our kids is to be more supportive to our spouse. By helping to lift each other up the family bond will become even stronger.
  • One way to become the best pastry chef is to study¬†a wide variety¬†of other culinary baking skills to gain inspiration and unique ideas.
  • When it comes to personal development, meditation and positive thinking is important to create¬†a¬†happier and healthier¬†state of mind. But doing these things alone may not be enough. Instead of focusing 100% on spiritual enlightenment, we could also extend our efforts horizontally to other aspects of our well-being such as¬†eating a cleaner diet or¬†getting more exercise. A healthy body will help to create a more fulfilled¬†mind and spirit. ūüėČ

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May 162016
 

The Enemy of Success is Delusion

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Author and public speaker Steve Siebold has helped many people with their careers. His clients include Fortune 500 companies and his books are considered by many to be the gold standard in the field of psychological performance training. One important distinction that Steve notices between the middle class and the wealthy is in how they think.

“The average person believes they are far more competent at what they do for a living than they actually are. Many people believe they are overworked and underpaid, but this is rarely true. In a free market economy we are normally getting paid very close to what we’re worth.” ~Steve

I happen to agree. An employer probably¬†wont pay someone $30/hour if the labor is only worth $20/hour.¬†Workers are¬†replaceable. If a company consistently overpays its employees then it won’t stay in business for very long, assuming all other market conditions being equal. The employee can make the same choice. If a pharmacist¬†is being paid $20/hour but believes he is worth $30/hour then he is free to offer his professional services to another company. Since the labor market is based on supply and demand, it’s important to consider both sides when thinking about compensation.

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