Before going into how I plan to make $5,000 in side income this year, I thought I would mention why. Why not just focus on making more at work? $5,000 doesn’t seem like much, why not $50,000 or enough to replace the income from my job?

First, I wanted to make non-job income so that it would be independent of whether I was working. Working hard and getting a big raise is nice, but what happens when you move? I want to find ways to make money that work regardless of where I am or what I do from 9-5.

Second, I chose $5,000 precisely because it was a more attainable figure than “make as much as I do at work” or “make $50 grand”. I didn’t want to give myself the excuse that “Well, it’s OK to fail at this goal because it’s so big. Really, I have so little chance that it’s hardly worth trying.” $5,000 in a year is less than $2 per day. On the other hand, investing an extra $5,000 annually adds up to $250,000 or so over 20 years (at 8% return). Not bad at all!

OK, that’s all well and good but first I have to actually make the money! I’ve decided on a two pronged approach. Prong 1 is the old standby of credit card arbitrage. A bit late to the party for me, but there are still 0% balance transfers out there, and since I have good credit I intend to take advantage of this. Projected income: $500-1000

Prong #2 is the real meat of the plan: I will start an affiliate marketing business with an initial budget of $250. I chose affiliate marketing because I’ve been interested in marketing and copy-writing for years, and it’s finally time to do something more than read about it! I will establish the business as it’d own entity (more on selecting and setting up a business structure later in the week), with periodic updates on progress and any helpful tidbits I learn along the way. Projected income: $4,000+

It’s going to be an interesting (and hopefully profitable) year!

Business, income | 1 Comment »

Wow, super busy week at work to start the new year, so I have to confess I’m behind in my reading of blogs. Thus, the links are a bit abbreviated this week, but I promise I’ll be back on top of things soon!

• As you may have noticed, the New Year started on Tuesday (and if you didn’t notice…wow. Just…wow). Most of the blogs in the blogroll posted resolutions, both financial and otherwise. Personally, I’m not a big resolution guy, but I did resolve to make $5,000 in side income in 2008. Monday I’ll start outlining just how I plan to make that happen.

• Oil hit $100 per barrel for the first time this week, and gas prices are back above $3/gallon here in Wisconsin. At Gen X Finance, Jeremy had a great article on how to invest to help offset increasing gasoline costs. Check it out and maybe next time everyone else is complaining about the increased cost of filling up, you can be chortling about the

• The start of a new year also means another chance to max out your retirement savings. But how do you decide which investment vehicle is the best place for your limited dollars? Free Money Finance chimed in on investing in a Roth IRA vs a traditional IRA or non-matched 401(k). I fall squarely in the middle on this one: I think there are enough advantages to investing pre-tax money (401k & trad IRA) and after-tax money (Roth) that you should have have both types, and invest based on your current tax rate and projected future needs. Have your cake and eat it too!

• Finally, Madison at My Dollar Plan had a great little collection of financial calculators. Don’t just guess about your savings, investing, retirement, or insurance needs, take advantage of these free tools and refine your figures!

Well, I hope everyone had a safe and happy first week of 2008. Don’t forget to check back Monday for the first outline of my 2008 extra income project!

Miscellaneous | 5 Comments »

Wow, hard to believe it’s already 2008. Time once again to see if my Michigan Wolverines can lose another bowl game (7-7 tie with Florida right now, so at least it’s not yet inevitable!) and start thinking about the year to come.

I’ve never been big on new years resolutions, but I did decide to make a financial one this year. I resolve to make at least $5,000 this year from sources other than my job. To some people this might not be much, but hey, ya gotta start somewhere! Over the next week I will be going into much more detail of how I plan to reach this goal, following each step I will be taking to find a business opportunity, select an appropriate business structure, and get started. Stay tuned!

Edit: Final score Michigan 41 Florida 35, Go Blue!

Miscellaneous | No Comments »

Well, Friday is here once more and with it, the last work week of 2007 is over! Time flies, eh? Anyway, here are some of my favorite posts from the holiday-shortened week.

• At The Simple Dollar, Trent has a great list of 6 great financial education resources. Knowledge is the key to success with money (as with anything else) and I don’t think anyone can claim to know everything they could ever need to regarding personal finance and investing.
• Free Money Finance had a good article on how to make sure your boss thinks you’re doing a great job. For most of us, our job is the main source of the income we’re so concerned with saving and investing, so it is definitely wise to make sure the boss lets you keep it!
• Continuing the “what is your time worth” theme from the last FLH, Jim at Blueprint for Financial Prosperity wrote about one easy way to calculate the value of your time, assuming you think your job pays you what you’re worth!
• In some sad but really not surprising news, Jeremy at Generation X Finance wrote about a study showing that teenagers are not saving for retirement. This part seems blindingly obvious, but what I found really interesting was that the study also estimated that 35% of today’s teenagers will never put money into a 401(k) or similar account, due to a combination of ignorance and not having the option in their jobs. It amazes me that will all the uncertainty over social security and the loss of employer pensions so many people in my generation will not take action to help themselves. This just begs for some kind of basic finance class in middle or high schools!
• And on a social security related note, Jonathan at My Money Blog had a story about what it takes to live exclusively on Social Security, with a variety of quotes from people in that unfortunate situation. The fact that they can even come close to getting by with so little really makes it hard to sympathize with those poor schmucks who can’t save even on $250,000 a year, doesn’t it?
• One of the (great) non-financial blogs I read is by Seth Godin. He had a great post asking what have you been doing with your time so far in the 2000’s? I thought it was a great call to action. If you’ve been waiting (like me) for the right moment of inspiration and circumstances to try starting a business, changing careers, or pursuing a dream in any form, it’s time to start taking action. Understanding that the world is constantly changing, you can’t wait for the right moment, you have to start moving and make that moment!
• And finally, with New Year’s Eve fast approaching wine lovers should check out the money saving advice from Lazy Man & Money and Blueprint for Financial Prosperity for help finding the perfect vintage to ring in the new year without breaking the bank.

Have a great weekend!

Miscellaneous | No Comments »

Over on Get Rich Slowly yesterday, Daiko posted about how you can often get fees waived, interest rates adjusted, prices reduced and more just by asking. Since banks figure prominently in the list of places to ask for favors and I work at a bank on the receiving end of such requests all day long, a few ways to increase the potency of your requests and likelihood of your success came to mind. My examples are mostly bank related, but apply anywhere!

1. The importance of “Nice”

This should go without saying, but based on the people I deal with daily, apparently it needs to be said. Repeatedly. You absolutely will have more success with any request you make just by smiling and using a friendly tone. Shocking, isn’t it?

Now, this doesn’t mean be a pushover and take the first “no” you hear. It is perfectly possible to be both pleasant and persistent, but most people aren’t. Use that to your advantage. Personally, and the same is true for everyone else I’ve know in a service position, I will do absolutely all I can to help a nice person. The rude, demanding @#$%’s are the ones that get turned down if at all possible.

 2. Plan first, ask later

Before you ask for something, make a plan. Have a specific goal and a reason for your request. Don’t just ask if the bank/insurance company/store can “do something” about that fee, rate, or price. Be specific, aim high but be willing to compromise.

Specific requests help me as the representative, because I know right away whether I am personally authorized to do what you want. If so, I can do it immediately and you can be on your way. If I can’t, I’ll need to talk to a manager, who’s first question will be, “What do they want done?” When I have a specific request, they can either say yes or counter offer, again saving time and hassle for me and you. And of course, starting high gives you room to negotiate if I can’t do exactly what you wanted. But with that in mind…

3. Be reasonable

Feel free to ask me for the stars on a necklace, but don’t be surprised or upset when I propose something a bit more down to earth. And know this right up front: reasonable is relative. If you are a customer who’s been with the bank for 20 years and has $50,000 in 6 accounts, it might be reasonable for me to refund the full $150 in overdraft fees they incurred due to some freak coincidence. On the other hand, if you’ve been a customer for 8 months with $50.00 in a single account, refunding that $150 in fees you racked up for the third time is not a reasonable request. Have an idea of where you are negotiating from!

4. Choose the right target

A well planned, eminently reasonable request asked in the nicest manner possible will get nowhere if you’re asking the wrong person. Whether you’re talking in person or over the phone, be specific about what you want to discuss with the first person you speak to. Ask them to direct you to someone with the authority to help you. Trying to keep your business secret from the receptionist or service representative will only waste your time and mine when it turns out I’m not the person you need to see.

These are a few things that would make me (or anyone!) more likely to give you what you ask for. What other tactics have you used to get a “yes” instead of a ”no”?

Tips | 2 Comments »

So I went to see “I Am Legend” last week with my brother and the wife. I’d been looking forward to it pretty much since the first trailer and while the ending didn’t have quite the same weight as the book, I definitely liked it.

(I don’t think I mention anything below that isn’t shown in the trailers, and it’s been out for two weeks now, but consider this your spoiler warning, just in case!)

If I had to summarize the lesson taught by the movie, I might say, “Watch out for vampire zombies spawned from cancer curing viruses run amok.” However, being the money geek that I am, I also noticed a few good financial points tucked in between firefights and eerie shots of the long grass in Times Square being grazed by deer.

1. Watch out for vampires

No, I don’t mean the blood sucking, brain eating varieties. (If those are a real concern for you, money is not your main problem!) Financial vampires are the costs that suck the returns from your investments and drain the balance in your checking account. Things like mutual fund loads, bank fees, and finance charges.

Get away from these money monsters before your finances end up as a pale, lifeless shell of what they could be!

2. Diversify

Ok, if a global cataclysm leaves you as the sole survivor of the human race, no amount of diversification will help you (and you won’t care anyway). But to ride out smaller disturbances (like a sub-prime loan crisis that pounds the stock market perhaps?), diversity in your investments is key.

Now, I don’t mean diversity as in “owning more than one mutual fund”, “having exposure to different industry sectors”, or even “having stocks, bonds and cash in your portfolio.” No, I mean really diversifying. That means diversifying across asset classes and global markets (as much as possible). Ideally, your millions would be spread globally across stocks, bonds, real estate, and commodities like timber, oil and gold. Of course if you’re like me, “millions” is better read as “thousands” and you don’t exactly have the available funds to buy enough different stocks, bonds, investment properties, oil futures, gold bullion, and timberland.

For those of us who are faced with such financial restrictions, there is still hope! There are numerous funds that invest in various asset classes, both directly and indirectly. Shares in these funds give you exposure to more exotic investments without actually needing a safe full of gold and a partnership in an oil field in Alaska. Check out some different model portfolios for more details on how to prepare your portfolio to weather (almost) any crisis.

3. Financial security is not total security

There’s a scene in the movie that takes place in a ruined bank. Money is piled everywhere, but the camera (and Will Smith) barely notices. Millions of dollars in cash, enough for a lifetime of luxury, are not nearly as useful as a loaded M-4 and a degree in molecular biology.

“Great,” you say, “but the point is…?” Don’t spend all of your time learning money skills. Yes, knowing how to balance your checkbook, analyze a stock, and maintain a well diversified portfolio are important. But staying healthy and knowing some basic self defense, first aid, and survival in different circumstances are at least as important. Preparing and learning to take care of yourself and your family in difficult situations isn’t being paranoid, it’s being prudent. After all, what good is a healthy bank account if you can’t enjoy it (or live to use it)?

So what do you think? Is Robert Neville as much financial adviser as action hero, or do I need to stop thinking so darn much and just enjoy the movie?

Tips | No Comments »

I was reading an article on Market Watch today which made and interesting argument for why housing prices will continue to fall at least 20%. Basically, he argues that prices will fall until median home prices are a smaller multiple of the median family income.

Today, median home prices are 3.5 times the size of median annual family incomes. This may be down from the recent peak of 4.2 times incomes reached last year, but it’s way above the 2.8 times that home prices averaged during 1984-2000, when lots of homes were bought, sold and built.

And if you think 2.8 is low, check out the early 1970s. That was when home prices were only 2.3 times median family incomes, and housing was selling like gangbusters.

He goes on to say that for prices to get back to 2.8 times the median income they would have to fall another 20%, and to reach the 2.3 multiple would require a price drop of 38%, which he doesn’t think is out of the question.

Definite food for thought, but I have a couple of problems with the conclusions overall.

1. First and foremost, I can’t get behind any arguments based on nationwide medians. The housing market is just too granular for nationwide statistics to be meaningful. A 40% drop in an expensive market like Florida will push prices down even if less inflated areas, like Texas, continue to appreciate. A nationwide statistic is useless to buyers and sellers in both markets.

2. For better or for worse, people want more in a home now than in the 1970’s, and they are willing to pay for that. According to the National Association of Homebuilders, the average home size in the US increased from 1,400 square feet in 1970 to 2,330 square feet in 2004. (Yes, I know what I just said about nationwide averages, but I would argue the trend towards more size in housing is basically universal, it’s the price you pay that varies.) So while the median house currently costs 3.5 times the median income, an increase of about 52% from the 2.3 multiple in 1970, the median home size has increased about 66% in that time!

3. Remember that in the 70’s and 80’s inflation was much higher than today, and interest rates were consequently higher as well. For example, the National Average Contract Mortgage Rate Index (an average of rates for purchasing a single family home) in October 2007 was 6.5%. In October 1981, that rate was 15.47% (source). On a 30 year $100,000 mortgage the payment at 6.5% is $632.07, and the payment at 15.4% is $1,296.49. If you could afford a $100,000 mortgage at 15.4%, you could afford a $205,000 mortgage at 6.5% (disregarding the likely higher taxes and insurance). Focusing on the housing cost/mortgage balance misses the point that the monthly payment is what really determines affordability.

4. In the same vein as #3, there are a lot more financing options available today than in the 70’s and 80’s. Because those high interest rates made payments unaffordable (even with a median price only 2.3 times the median income!), new products were developed and mortgage bankers began appearing to offer them at competitive rates. These new products and increased competition contributed to making a home purchase affordable for more people. This eventually was taken to extreme and led to the current sub-prime meltdown, but the overall increase in accessibility remains.

All this is not to say that I don’t think prices will continue to fall in overheated markets like California, Florida, and the East Coast. But saying that a 20%+ nationwide price correction makes sense based on historic figures just isn’t realistic.

What do you think? Is a nationwide crash still in the offing, does it depend on your neighborhood, or is the worst already over?

Real Estate | 3 Comments »

I’ve added Mrs. Micah and My Dollar Plan to the blogroll. Both are recent additions to my subscription list as well. Check them out!

Miscellaneous | 2 Comments »

Better late than never, that’s what I say. So, on to the weekly recap!

• Probably my favorite post of the week was a guest post by Millionaire Mommy Next Door  on Get Rich Slowly called How I Became a Millionaire While Working in my Pajamas. She talks about how she and her husband started young with a small income and achieved financial security by starting a business. Talking about saving money and cutting spending has it’s place, but stories like this one show why I believe that entrepreneurship and increased income are the real key.
• On a related note, Mrs. Micah wrote about determining what your time is worth when it comes to different ways of making money, particularly online. She mentions things like paid surveys, which can seem like good money but often work out to a very low hourly rate. I do like surveys for a little spare time cash, but her point of knowing how to focus on profitable use of your time is well taken.
• Continuing the income theme, No Credit Needed wrote about how just $10 a day can add up to $750,000 over a 50 year period with only a 5% return. Two points here: 1-Even a small investment really adds up over time, and 2-time is the most important factor, so procrastination is costly.
• Shifting gears, My Dollar Plan has a good list of 10 tips for holiday shopping online. I know that the convenience and lack of crowds has converted me to shopping online almost exclusively, and this list has some good tips to get the most out of it.

Finishing on a holiday note: 10 days till Christmas, are you ready?

Miscellaneous | 3 Comments »

The last few months have not exactly been kind to bank stocks. Sub-prime mortgage losses have hammered banks that made such loans, and even brought down banks with no direct exposure. Analyst downgrades and investor pessimism have been the rule.

While the past week has brought a small reprieve with rumors of another Fed rate cut on the way, many banks are still hovering near their 52 week (or longer) lows. While analysts are mostly saying “sell” or “hold”, I am looking to buy.

Why?

In a word - dividends. Banks tend to have high dividends, and plunging stock prices have pushed yields to almost ridiculous levels. Citigroup is currently yielding over 6%. Bank of America - 5.6%, Wachovia - 5.8%, US Bank - 4.8%, Key Corp - 5.7%.

Slightly smaller; National City - 8.3%, Huntington Bank - 6.5%, or if you feel brave, Washington Mutual currently is yielding 11.7% with most people betting that the dividend will be cut next quarter.

With large established banks like this paying 6-8%, it really is a tempting situation. Of course, as with any stock, the price can continue to go down, particularly if more losses show up at that bank. But on the other hand, with prices so far depressed compared to historic levels and the risk of total default so low (do you really think Citigroup will fail?) the upside just in terms of income seems pretty solid. There is also risk of dividends being cut (like WaMu is widely expected to do), but companies generally avoid this if possible, because it is a big signal of financial weakness.

Bottom line: do your homework, but as an income play, banks are worth a look!

Disclaimer: I am not a financial advisor, and I don’t recommend any particular stocks or investment strategy. The above is just my own thoughts and speculation.

Edit 12/11/07: And as expected Washington Mutual has slashed its dividend (by 70%!) Cross that one off the list…

Investing | No Comments »