Showing posts with label Multiple Streams of Income. Show all posts
Showing posts with label Multiple Streams of Income. Show all posts
Can money really buy happiness?

Can money really buy happiness?

Many researchers say no, even though the research says yes. The contradiction has to do with what they choose to see in the numbers their studies produce.

Back in 2006 this issue was in the news, with headlines that went something like this: "Science shows that money can't buy happiness." However, if you read the story, rather than watching the abbreviated coverage on television, you only needed to read down a few paragraphs to discover some interesting and more enlightening statistics.


The research showed, as similar research has before, that people generally were happier as they moved from poverty to higher income. One study showed that in the United States, people are happier with more money up to about the level of the average household income - around $44,000 at the time of the study. Beyond that level of income, gains in reported happiness from higher income taper off. Another study demonstrated that people who made $50,000 per year were twice as likely to be happy as those who made $20,000, while at $90,000 there was little or no increase in happiness compared to the $50,000 level.


The research showed, as similar research has before, that people generally were happier as they moved from poverty to higher income. One study showed that in the United States, people are happier with more money up to about the level of the average household income - around $44,000 at the time of the study. Beyond that level of income, gains in reported happiness from higher income taper off. Another study demonstrated that people who made $50,000 per year were twice as likely to be happy as those who made $20,000, while at $90,000 there was little or no increase in happiness compared to the $50,000 level.


Money Made Us Happier

We were living on less than the average social security check when my wife and I started out. With no debt, this isn't as bad as it seems, but our income was low enough to limit our options. Better food would have been nice, for example. A warmer place than Northern Michigan would have greatly improved my wife's mood as well. We also wanted to travel more and to visit my wife's family in Ecuador more often than once every three years.


Six years later we are living in Colorado, near the mountains we love, in a warmer place. Healthier food and more meals out are part of our lifestyle now, as is dancing and travel. This lifestyle costs several times as much as before, but are we happier now?


Yes, absolutely, and it isn't just because of the things that we can buy. The lack of money worries makes for a much more relaxing life. No more wondering if we'll have enough money for dental work, or to go to Ecuador to visit family. No more walking past the healthy foods in favor of the cheaper ones. We spend a few hours of work at our business each day, and then do what we want.


There certainly are examples of people who have made themselves more miserable despite a higher income. After all, money alone doesn't even help with financial problems if you don't know how to use it. If you aren't clear about what it can and can't do, it won't help with happiness either. Many people will spend even more than any increase in income, and increase their debt and stress. We spend three times what we used to, but make four times as much, so this isn't a problem.


It is also true that money won't eliminate your bad habits. If you overeat, over-spend, or choose the wrong people to spend time with, having more money is likely to mean more trouble. Then again, money can buy the time and knowledge to overcome bad habits - if you choose to use it that way. It can help you be healthier and it can even put you in places where better friends might be discovered. But it won't make these decisions for you.


This is our own experience: We are happier to be able to help people. We are happier to be able to afford going out and socializing more. We are happier to be comfortable at home, with extra cash always available in the checking account. Money can increase your happiness - if you use it right.

How To Survive The Hard Times In Life

How To Survive The Hard Times In Life

The keys to surviving during hard times are not so much about eating cheap noodles or becoming a survivalist as they are about self control and smart planning. That's what the following tips are based on. As I write these words job losses are still growing, but whenever you read this you'll find a good guide to preparing for personal hard times.

Let's keep this in perspective though. Maybe we are entering another great depression, but it's worth noting that at it's worst last time (in the 1930s), there was only 25% unemployment. I am sure some of you are saying "only!?" I don;t mean to suggest that those who were and are unemployed don't matter, but that statistic does mean 75% of people who wanted jobs had them at the time.


The first step for surviving hard times then, is to try to be in that 75%. Actually it's more likely that 85% will retain their jobs this time around, so your odds are better. What if you work in an industry which is likely to face large job losses? Start looking around at what else you can do before you lose your job. Go get educated or learn some new skills if necessary. You should have an idea or even a list of places where you'll immediately start applying for jobs if you lose your current one.


Be valuable to your current employer. The one employee who knows how to run some machine or fill out some forms or do any other obscure task which is essential, is less likely to be laid off. Perhaps find ways to save the company money. One way or another, be the employee that management can't afford to lose right now.

Still, whatever you do, your job can be lost. A company might just go out of business after all. And if you lose the job at the worst time it may mean months before you can find work. You need to prepare for this possibility. You can start by taking the three basic steps outlined below.


1. Stock Up On Necessities

Stock up on food and other household necessities. If you really don't have the money to buy two months worth of supplies just start buying a little bit more than normal each time you shop. Stock up on everything from toilet paper to canned peas, and have enough food and other items stashed to survive a loss of income for a couple months.


2. Save Money

Is this the right time to start saving money? It's almost always the right time. That savings account should be built up until you have enough to live on for at least several months. It is also not too extreme to have a few hundred dollars in cash hidden in your basement. Banks have failed before, and it can take a few weeks for the FDIC to sort things out and give you access to your money.


3. Reduce Regular Expenses

One of the most important steps you can take is to cut your regular expenses. For the sake of an example, let's suppose you're living on $2,500 per month from a job that's not easily replaceable. If you lose it you'll have to take a $7 per hour fast food position. That sounds awful, but you can handle it if you cut your basic expenses in half before it happens.

Start by paying down any debt you have as fast as possible, starting with the highest-interest debt. That will be your credit cards most likely. Rolling such debts into a home-refinance means you essentially convert short-term debt into long-term debt and pay far more in interest as a result, so this is not normally a good idea. On the other hand if losing your job seem likely, you may want to reduce your monthly debt payments in this way, and you might even lower your house payment.

Consider every single thing that you regularly spend money on and find ways to reduce the cost. Install fluorescent bulbs to cut electrical costs, turn down the thermostat when you are out of the house, buy a low-flow shower head and cut to basic cable if necessary. You could even decide to cut back to one car instead of two, even if you own them outright. It still saves you the costs of insurance, plates and ongoing maintenance.


Surviving Hard Times

Become indispensable at work, explore other job options, learn new skills and have a contingency plan or two for worst-case scenarios. Fill your cupboards, start setting aside some money for hard times and pay down debts as fast as possible. Learn to live on less. Take these steps to either keep your job or lose it without that becoming a disaster.

That's not only a recipe for how to survive hard times, but it will also make you more financially secure in any economic situation. And if your job is secure but you take the steps outlined above anyhow, you might soon have enough excess income and saving to take a nice vacation or pursue other goals.


Your Personal Finances

Your Personal Finances

Do you have control of your personal financial situation, or are you are still in debt and without a plan? Either way you can use this simple six-step plan to get you headed (or keep you going) the right way. One caveat though: like any other tips you have read, these will only help if you if actually used.


Step One - Track Expenses

Spend two months writing down what you spend every penny on each day. A simple exercise like this can enlighten you as to where large chunks of your income go. It can also show you very clearly how little things add up to a lot. It's even possible you'll be spending less by the end of the first month, just because you're so aware of the money going out, so you naturally cut expenses. Categorize your expenses and see how much is going to "eating out," "renting movies," "electric bills," and any other areas.


Step Two - Cut Costs

Once done with step one, you can use the information gathered. Start finding every way you can to cut those expenditures one by one. That may mean giving up a few things which are less important to you than your financial future. It may just mean finding better ways to do things, without sacrificing much at all. To turn down the heat while at work doesn't hurt. Find cheaper insurance, groceries, restaurants and more.


Step Three - Apply Savings to Debt

Once you're spending less, you should have some money left over each month. Apply it to any debts you have, starting with those that are at the highest interest rate. Once one debt is paid, apply that "extra" money towards paying off the next one. Do this right and you'll be living just as well, but spending less to live that way, and getting out of debt at the same time (assuming you weren't living too far beyond your means to begin with).


Step Four - Find New Income Sources

Look for new ways to make some extra income, starting this search while you're working on step three. Take an extra shift at work each week or two, ask for a raise, look for a better job - or a fun second one. Why fun? There has to be some motivation to make this work.

This could also mean starting a small business on the weekends or in the evenings. Consider your skills, connections, knowledge and things you own or control. For example, the rent from an extra room in your house could provide an extra $4,000 per year, or if you are single you might cut your rent in half by sharing your apartment - this is like having extra income.

Step Five - Start Paying Cash

Things are cheaper when you pay cash for them. You can negotiate a better price initially when paying cash, and you also don't pay interest. You may have to wait and save for some things (like the next car), but you live on less, or get to buy even more of the things you want in time. A credit card can be convenient, but if you do use one pay it off every time the statement comes in.

Step Six - Invest

By controlling personal expenses, generating new income, getting out and staying out of debt, you should have a more coming in than going out each month. Invest this money. Even if you're not comfortable with investments like mutual funds or stocks, at least find the highest-interest bank account you can. You can save the money to start or invest in a business as well.

These ideas probably aren't new to you. But if you actually follow a simple plan like this with your finances, you'll certainly be more financially secure and more relaxed in the future - and the future isn't that far away.


Mind Over Money or Money Over Mind?

Mind Over Money or Money Over Mind?

People naturally hope they can think their way to wealth. In stock investing this can be seen in efforts to use the power of the mind to gain an advantage over the market. Investors think that if they can gather enough information and develop a system they can predict where prices will go. But just as often we are mislead by the things going on in our heads.


Let's look at an example of how easy it is to think we know more than we do, and how our minds can limit our access to more information that we need. The following description (including all the stock quotes) comes from a piece I wrote a few years ago when I was actively investing in the stock market (I am not now). I had begun to think I had a great strategy using covered calls, which are options that I would sell on stocks that I own. A call option gives the buyer the right, but not the obligation, to buy the underlying stock at a given price by a certain date. This should become clearer as we continue...



Sunoco (symbol SUN) is selling at $23.42 per share. It's a solid company that analyst say is selling for about 8 times next years projected earnings. It's relatively cheap, in other words. If I buy 200 shares I'll invest a total of $4,689 ($23.42 times 200 shares plus a $5 commission).

As soon as I buy I can sell 2 options contracts (each one covers 100 shares) giving someone else the right to buy the stock from me at $24 on or before the third Friday of next month (32 days from now). The options buyer is gambling on the stock going higher, and the market price is $85 for each option right now. After the $7 commission for selling the options I would get $163 deposited into my account (2 options sold for $85 each minus the commission). In other words, I will really only have invested $4,526 total as of today ($4,689 for the stock minus the $163 I was paid for the options).


Now, suppose the stock rises to $26 by the time the options expire. The option holder, who has the right to buy my stock for $24 per share, will certainly exercise those options, and so give me $4,800 ($24 times 200 shares). He can immediately sell the stock for $5,200 (the current price of $26 times 200 shares), for a gross gain of $400. After commissions he has more than doubled the money he invested in the options, and in about a month.

As for myself, after the $10 assignment commission I get $4,790. That's a profit of $264, or a return of 5.8% in 32 days ($264 divided by $4,526). What if the stock doesn't go above $24 by the expiration date of the options? I'll still own my shares, and at a net cost of only $22.63 per share because of the option income.

Think about this for a moment. It's a company I like and I either make 5.8% in a month or I get it for .79 per share less than the current price. If I wasn't "called out" I could also sell 2 more options to make more money while I hold the stock for another month. It is possible to make 30% or 40% in year by repeatedly selling options, and so be ahead even if the underlying stock drops in value. By the way, these kind of opportunities are available all the time in many different stocks.

I've been making money doing this, but the market has been up recently, making it easy for almost any strategy to show a profit. Now, I like to think I'm careful in how I think about these things, so I asked the question "What if the high option price means there is a greater probability that the price will rise?" If that's the case, is it a better strategy to just buy the stock when the options selling for a high price? After all, in the example given I would have done better holding the stock as it went to $26 per share.

But there is no evidence that anyone can consistently predict what the price of a stock will be a month from now. And since they can go down, I like the protection of that .79 per-share discount (the net premium I received for the options lowered my cost). Sunoco could lose 3% of it's value (70 cents) and I would still have a small profit.

My theory then, was that if stock prices in the near term are no more predictable using option prices than by any other means, and I can either get a better than average return for the month or get the stock cheaper than the current price, this has to improve my odds. I figure that most option buyers are essentially gambling and pushing the prices of some options beyond any value based on the true odds. If the odds are then bad for the buyer (and most options do expire worthless) they must be good for the seller; so I want to be on that side of the deal. And if the price of the stock drops a lot, I can wait for a rebound that usually occurs with solid companies.

Now to get back to how the mind works, what tried to enter my mind unsuccessfully for weeks was the nature of the way the stock market delivers returns. My mind told me that it has an upward bias, of course, to the tune of about 7% annually. So making 3% in month (or 36% annually) on stocks that nobody can predict with any certainty will go down seems like a good bet. Even though there are bound to be losses, the gains should outweigh them. Unless...

Stocks may average 7% returns annually, but they can rise and fall that much in a week (in fact the market was up 7% last week). And by using those options I am limiting the upside. The most I can make on Sunoco in the example is $264. This is true even if the stock went to $40 per share, making thousands of dollars for those who didn't sell options on their shares! Meanwhile my losses are limited only slightly. Even a good company can have its stock price drop in half in a month for a variety of reasons. If that happened in the example above, and the price did not rebound over time, I would lose a couple thousand dollars, which wipes out a lot of $264 gains!

I hope that my strategy continues to work. I have experienced some losses, but the gains have outweighed them so far. But then there is another factor which I did not anticipate. When a stock drops in price and the options I can sell on it are no longer high-priced, it is very difficult to generate much option income as I hold and wait for a rebound (which may not come). But I don't want to bore you with more details of stock trading.

The point is that I thought I knew more than I did, and my mind in its infatuation with that investing idea didn't easily allow contradictory information to enter for quite a while. In fact, I clearly recall a moment as I was shaving when the idea of the potentially large losses versus limited gains started to present itself to me, and I recall that I quickly moved on to other thoughts! Only later did I make it a point to think about this possible flaw in my theory.


Mind and Money Lessons

We don't know that we don't know, which is a very difficult concept to really integrate into our thinking. Our unacknowledged ignorance allows for some big mistakes. Of course we have to make decisions at some point even with incomplete information. But we should keep in mind that no matter how certain we feel about what we know, our knowledge is always incomplete. If we do not understand this, the money we might make might temporarily boost our confidence and so encourage us to do more of the same. But the confidence is largely false, and the success somewhat random, so confidence can simply increase the risks we take without increasing our investing skill or business acumen. The money affects the mind, in other words, possibly pushing us to make even worse decisions.

To counteract this we should make it a habit to look for the flaws in our own thinking. The mind wants to hold up an image of itself as more than it really is -- our ego at work. The result is an unconscious screening of inputs so that only evidence which confirms our thinking is allowed in easily. Facts and ideas that suggest we might be wrong are easily ignored, leaving us very vulnerable to making big money mistakes. To combat this universally human problem, we need to become more aware of how our minds are working, and we need to habitually look for the biases that are there and where those may be leading. In other words, we need to constantly challenge and doubt our own minds to use them most effectively.

Still, decisions need to be made. Should you buy that stock, start that business, or take that job? We can never have all the relevant information in any situation, and we can endlessly analyze our own thinking processes. We face what has been called "decision paralysis." What's worse, some research shows that decisions get worse when we gather too much information -- even when it is all accurate. So if you want to exercise the power of your mind in the pursuit of money, try this formula:

1. Set a deadline for making a decision.

2. Gather a limited amount of the most important information.

3. Do your analysis.

4. Watch for and adjust for any selective evidence gathering and biases in your thinking (and analyze everything all over again if necessary).

5. Make a decision and act. Don't move that deadline too easily either; you will never have all the relevant information and your fears will remind you of this causing procrastination or outright inability to do anything (decision paralysis).

6. Adjust course as you learn more.

This is about the mind and money, but of course it might be applicable in other areas of your life as well.


Be a College Advisor

Be a College Advisor

One of the most gratifying professions you can have is that of helping children to decide where they should go to college. That's what a college advisor does and it's a very interesting job which can be quite rewarding, if you treat it as a calling rather than simply another 9-5 job. In essence, you'll be helping to shape people's futures. Here's what you need to know:



A college advisor works in a high school and basically helps the students to decide on their best path post high school. This means that you need to be able to evaluate the student's grades as well as her SAT scores and help her decide on exactly which colleges if any she has a realistic chance of attending.


You need to also be someone who can listen to students and understand what it is that they are interested in doing with their lives so that you can suggest appropriate venues for their education where they will get the kind of training that they need in order to go on to the career of their dreams. It's really quite an important and fulfilling role because you will in many cases be responsible for shaping the future of these students.


How Much Can You Make?

According to Salary.Com, a college advisor makes anywhere from $33,000-$50,000 per year depending on experience and location.


Ways to Make More | Related Opportunities | Tips

The most important thing for a college advisor to be is a good listener. You need to help guide students in the right direction while also making sure that you are clear on what they can and cannot expect to get out of college. For example, a student with an average GPA and a 1080 on his SATs is not likely to get accepted to Harvard and thus you need to be prepared to help that student to find the kind of schools where he will feel comfortable that he is getting a quality education while being realistic about getting in.

You also need to be prepared to help students to choose their preferred professions as many kids simply aren't sure what it is they want to do when they go to college. This may mean interviewing them about their interests as well as reviewing their academic records to see what areas they happen to be strongest in.

It's also useful to keep in mind that while the title may be either college advisor or academic advisor, you will in some cases need to recommend that students don't attend college but instead attend a trade school which may give them a better shot at actually landing a spot and a decent job when they graduate.


Qualifications / Requirements

Generally, you'll need at least a bachelors degree yourself in order to become a college advisor. It can be helpful to have a master's degree as well in order to ensure that you have the grounding in schooling that is necessary to help the students to understand what college will be like.


First Steps

Start by earning your bachelor's degree and then looking into different college advisor positions. These can easily be found online. Be sure to check on the specific requirements that they have. You may need to take some additional college courses in order to work as a college advisor in some states. If so, do that as well.


Why Multiple Streams of Income?

Why Multiple Streams of Income?

You can easily see the value of having many different streams of money flowing into your life. Like a town that has more than one source of water, you are more secure if you have many sources of income. Any one of them can go dry and you'll still be okay, unlike the employee who has just his paycheck (or the town that relies on one unpredictable water source).

That much is easy to understand, even if you haven't yet started working on developing those multiple streams of income. But the other part of the metaphor is found in the nature of the stream itself. It flows automatically according to gravity, bringing an ever fresh supply of water. This is very different from a lake or pond, isn't it?

Imagine for a moment if you are a farmer and you had to water your fields by carrying a bucket at a time of water from a pond. There would be a severe limit to how much you could grow. There are only so many hours in a day to work, after all, and you can only carry so much.

Now imagine if you could divert a stream to irrigate your land. It would take a lot of work perhaps, to build a ditch and install the necessary equipment. But once you did that the water would come automatically, allowing you to grow much more, and freeing your time to develop other ditches and so grow other crops.

That idea of irrigation is essentially the same concept as the idea of residual income. Just like water comes without additional effort once you do the right kind of work initially, so does money come in with little or no additional effort once you do the right kind of initial work. In case you doubt this, let's look at some examples of these streams of income.

Examples of Multiple Streams Of Income

I used to play chess with an insurance salesman who was retired at 50 years old. How was he able to quit working at such a young age? By selling policies that paid him a commission every time the holder renewed them. Every year people renewed their policies and he got a percentage. He probably worked hard to get to that point, but then the income stream flowed without additional work.

At the start of 2005 I built a website on how to remove carpet stains, putting in one long hard week at the computer (I had been a carpet cleaner at one time). I mostly ignored the site in the years that followed, and still only spend less than a dozen hours a year maintaining it. Meanwhile almost $20,000 has flowed into my bank account from this site and it still comes in at the rate of more than $500 monthly.

My wife and I sold a mobile home on a lot a few years back. We are taking payments on it, which allowed the buyer to get into it more easily (he bought it as an investment and is renting it out). Selling it that way allowed us to get a higher price, and we get good interest as well. The money comes in every month. We have to renew this income stream eventually, of course, perhaps by buying another property and selling it for payments again.

I get a newsletter from a man who buys high-dividend stocks. He doesn't worry about where the prices of the stocks go from month to month, because the dividend checks just keep coming in. The work here is in the research necessary to find solid companies that are unlikely to cut their dividends. Then once you invest a chunk of money the stream flows without much additional effort (occasional research and new investments are a good idea).

Rental real estate, dividend paying stocks, secured loans, renting a room in the house, making automated websites, selling things that pay ongoing commissions, writing a book, licensing an invention for royalties - these are just some of the ways to develop multiple streams of income. A job works too, but that is perhaps the most insecure source these days. Keep the job for now, but why not start creating a few other streams of income that flow your way?