Set Goals to Create Additional Streams of Income

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

How many streams of income do you have? When my husband got laid off early last year, we realized that one stream of income just won’t cut it anymore.

Diversifying your income can provide you with more financial security which is why it’s a great idea to set goals to create additional streams of income this year.

Why You Need More Income Streams

Most millionaires have an average of 7 different streams of income. Whether you’re trying to be a millionaire or not, you can probably agree that the more income you have coming in from various different sources, the more financially secure you’ll be.

When my husband got laid off, he lost his entire income in one fatal swoop. Luckily, I was working at the time and freelancing on the side with more than 10+ different clients. It was safe to say that by me having multiple streams of income, it really helped up get through that rough patch.

Income diversification can not only help you feel more stable, it can also allow you to meet your other financial goals quicker and allow you to earn more money over time as well.

Here are a few ways to diversify your income this year.

Start Freelancing

If you can provide a service to others on the side of your full-time job, it can be a great way to create an additional stream of income. There are so many different ways to freelance whether you like to write, edit, design graphics, take photos, do customer service or data entry work and so on.

The best part about freelancing is that you can choose your own clients to work with and set your own rates and hours. You don’t have to work an extra 30 hours per week if you don’t want to or know you won’t have the energy. Once you build your network and start finding clients, you can maintain as little or as much work as you want.

If you want to perform the tasks you do at your day job on the side for others as well, that’s an option as long as your employer is okay with it. For example, if you work at a daycare and want to offer some of the parents babysitting services on weekends, as long as your employer is fine with it, you can earn some extra money that way.

I used to take my son to a child care center that allowed that and parents like me were relieved since the center was closed during evenings and weekends.

Back when I worked at a web design firm, I used to think about how much the graphic designers and programmers I worked with could have earned if they did a few freelance projects on the side.

A graphic designer can easily earn an extra $1,000 per month by taking on only 1-2 extra projects on the side.

Sell a Product

Want to sell a product your created or a product on the market that you believe in? Consider this semi-passive way to diversify your income.

If you like to create handmade products and goods, consider setting up an Etsy shop and selling your items online. You can also design t-shirts to sell, create an e-book, flip used items for profit by selling them on sites like Amazon and Ebay.

I knew a blogger who wanted to pay off her student loans so bad that she started buying gently used designer clothing at thrift stores for cheap then selling them online for a profit.

As another option, you can sell products through a direct sales company so you can earn commission from each sale. Companies like Avon, Stella and Dot, Beach Body and Premier Designs, are all great options but there are tons of direct sales companies out there depending on what you’re interested in.

You can show your product catalogs to family, friends, and coworkers and make extra money that way.

Invest

Investing is a great way to diversify your income by creating passive income streams. You can invest in the stock market or in peer-to-peer lending.

You can also invest in real estate. Crowdfunded real estate will allow you to share the costs of investing in commercial and residential properties if you don’t want to purchase a property entirely on your own.

However, if you do purchase a small home or condo, you can earn money each month by renting it out and allow your tenants to pay off the mortgage for you.

Start Brainstorming With This Master List of 20+ Ideas

As you can see, there are quite a few options for diversifying your income this year. Below, I’ve compiled a list of specific ways that you can create additional streams of income. With these ideas, you shouldn’t even consider having one job or a single income stream a possibility anymore.

  • Babysit
  • Offer a cleaning service
  • Buy a rental property
  • Drive for Uber or Lyft
  • Rent out your car when you’re not using it with Turo
  • Rent out your home or a property with Airbnb
  • Write an ebook that helps a specific target audience solve a problem
  • Start a blog and monetize it
  • Sell your crafts and creations on Etsy
  • Design T-shirts via Tee Spring to sell online
  • Become a freelance writer
  • Become a virtual assistant
  • Become a freelance photographer
  • Sell your images to stock photo websites
  • Sell clothes or books online
  • Tutor students online or in your community
  • Invest in the stock market by building a dividend portfolio
  • Flip a house
  • Become a peer lender
  • Buy website domain names then resell them online
  • Host direct sales parties

How about you all? How will you create additional streams of income this year?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/striatic/101594790/

How Millennials Are Avoiding Credit Card Debt

The following is a post by MPFJ staff writer, Toi Williams, who is a professional finance blogger for MarketBeat. She has backgrounds in personal finance, sales, and real estate.

Young Americans under the age of 35, who are often referred to as millennials, are increasingly avoiding credit cards and the debt that tends to come with them. Roughly 63 percent of millennials don’t have a credit card, versus only 35 percent of older adults, according to data from the Federal Reserve. The data also suggested that millennials are using credit cards less than people of a similar age did in the past.

The number of Americans under the age of 35 holding credit card debt has reached its lowest level since the data was first collected in 1989. According to the Survey of Consumer Finances, roughly 37 percent of American households headed by someone aged 35 and under held credit card debt in 2013. That is down nearly a quarter from immediately before the financial crisis that began in 2008. The level has not fallen as much for any other age group.

 

Reasons For Avoiding Credit Cards

There are numerous reasons for millennials’ avoidance of credit cards. Some young Americans say that they are avoiding credit cards because they have lived through the damage such debt caused during the financial crisis. Others say that they avoid credit cards because they do not trust the financial markets. Some watched as consumer and small business credit lines were cut off in the midst of the financial crisis.

Some millennials are dealing with much larger student debt loads than previous generations. The Project for Student Debt found that student debt increased an average of 6 percent each year from 2008 to 2012. According to federal data, the average American under the age of 35 now has $17,200 of student debt. That is 182 percent higher than Americans of the same age had in 1995. These burdensome student debt loads make it hard for them to take on any more debt.

Laws passed after the financial crisis also make it much harder for younger people to secure credit cards. The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, mandated that borrowers must prove they have the means to repay the debt. The CARD Act also altered the lending landscape by restricting the ability of banks to market their products on college campuses. Today, many of the tents that credit card companies used to pitch all over college campuses to advertise their products have vanished.

Many young Americans believe the risks involved with debt outweigh the benefits. Credit cards offer the temptation to spend beyond one’s means. The idea with a credit card is you’re essentially putting money down that you don’t have and making a promise to repay it back with additional money for the convenience of having what you want right now. Some millennials simply prefer to pay for things as they go, without having to worry about paying a bill later.

Millions of millennials are using payment methods that do not involve debt for their purchases. Debit cards, which draw funds directly from a bank account, offer many of the same payment advantages as credit cards without the risk of accumulating debt. For online purchases, an app like Venmo or an online payment service like PayPal can be used.

 

The Consequences of Avoiding Credit Cards

Millennials’ avoidance of credit cards could prove detrimental in the long term, not just for them, but for the financial system as well. Historically, credit card use during the young adult years have made Americans more comfortable with making larger purchases with debt when they are older. Having a credit card also helped them establish a credit score, giving them more access to financial services later in life.

Having a good credit score is more important for this generation than previous ones because today, many more things are tied to credit scores. Credit scores are used to determine interest rates on mortgages and personal loans, may be used as a qualification for a rental home or employment opportunity, and may be used in the determination of insurance premiums. Those with low credit scores or non-existent credit histories find themselves paying more for the same financial services that others obtain at a much lower rate.

Fortunately, millennials don’t need to go into debt to get a good credit score. By paying off the credit card debt completely each month, they can still have good reports sent to the credit bureaus based on the open account. However, a survey by Bankrate found that only 40 percent of millennials with credit cards pay off their balances in full each month, compared with 53 percent of older adults. Millennials were also most likely to miss payments completely.

 

Finding a Good Credit Card

For millennials that do choose to use a credit card, picking the right card is key. Those just starting with credit cards should choose the card with the lowest annual interest rate without being distracted by offers for cash back or rewards. Until you have experience using the card, you will not know whether the rewards offered are worth it or even if you will spend enough to qualify for the rewards. You can always get an additional card with rewards after you have established your credit history.

Finding a credit card with a reasonable interest rate may be difficult for most millennials. According to Experian, the average millennial has a VantageScore of 628, which lenders largely consider subprime. Even for millennials with higher scores, the lowest available APRs offered on new credit cards topped 15 percent on average last summer according to CreditCards.com, marking a five-year high. These rates are expected to rise with future rate hikes by the Federal Reserve, as there are legal limits on certain card fees but no limit on APRs.

While choosing the best interest rate seems simple, it isn’t. Even after you have the card, it’s best to simply assume that the company can change your rate at any time for any reason. The key to ensuring that the rate stays as low as possible is minding the fine print and playing by the rules.

Be aware of when introductory offers end and what transactions they apply to. Review the information for all the fees that apply to the card, including annual fees, balance transfer fees, and cash advance fees, even if you don’t think you would ever use that service. There are many websites available online that will compile the information for several different cards into an easy to read format for comparison.

***Photo courtesy of https://www.flickr.com/photos/128185330@N03/17705922131/in/

Should You Really Give Up Your Latte?

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

What’s your guilty pleasure expense? For many hardworking adults, it’s their daily latte or cup of coffee.

Almost everyone has a guilty pleasure expense and it’s often a smaller expense you may hardly even notice.

Maybe yours is the discount section near the checkout at Target, picking up a freshly baked bagel on your way into work in the morning, or grabbing a scratch-off lottery ticket at the gas station.

For the sake of this post, I’m going to be offering a new perspective on the latte factor since many people drink coffee and it’s understandable how that small expense can add up quite a bit over time.

Breaking Down the Latte Factor

How much does a typical cup of coffee cost? In most areas, it can run you anywhere from $2-$5 on average depending on the size of the cup whether you’re grabbing a cup at the gas station or at your local Starbucks.

If drinking coffee is a daily habit for you, that means you can spend anywhere from $10-$25 per week just on your lattes if you pick one up each week day.

While that may not seem like much, that could be gas to fill up your car or go toward a smaller monthly bill.

If you buy coffee on your way to work each morning, you could spend anywhere from $40-$100 per month and that’s if you’re not a repeat offender who picks up a second cup in the afternoon.

Needless to say, your daily latte habit which seems so small can really add up over the course of the year.

If you have financial goals to pay down debt, save more, or stop living paycheck to paycheck, it could seem like you’re wasting your money on an unnecessary expense that you need to cut ASAP.

Before you think about giving up the latte completely so you can become a debt-free millionaire, here are a few reasons why you shouldn’t.

How is the Latte Helping You?

Before you give up your guilty pleasure expense, first determine if and how it helps you. My example of purchasing items from the discount section was a bad example because it’s not the best idea to keep buying things out of habit.

However, if you were looking to decorate your home for the season or pick out a birthday gift for your coworker or niece, you might find some good deals which could help you save money.

If your daily latte helps you wake up and focus, it could increase your productivity throughout the day so you get more done.

You May Not Have to Go Cold Turkey

If buying the latte is your thing, you might have a hard time trying to go cold turkey and cut it out completely.

If you try to cut out your habit too quick, you might pick up other bad habits that cost you even more money and provide no real benefit to you.

This is why I believe when smokers try to quit, they find better results if they work on weaning themselves off cigarettes first.

In the case of coffee, you don’t always have to purchase it at your local cafe. You can brew your own coffee at home or wait until you get to work if your employer provides coffee for free.

I’m not much of a coffee drinker myself, but my husband is and we pick up cappuccino drink mix at the grocery store so we can make coffee at home each day for less.

It costs about $4 per small container and that container makes about 17 cups so we save a ton of money with this DIY hack.

See if you can find more affordable hacks for the expenses you’d like to keep so they don’t deter you from reaching your goals.

Going After Big Wins

Finally, the most important reason why you may not want to give up your latte is because it’s still a small element in the grand scheme of things.

Yes, it’s important to cut unnecessary expenses especially when you’re trying to manage your finances better or get out of debt. However, you may find it difficult to cut out everything.

And if you do, you’ll realize that there’s not much else you can do to lower your expenses once you’ve cut out several categories.

What you should do is focus on going after big wins instead of focusing so hard on the small wins.

Scoring a raise at work, establishing an additional stream of income, or selling your car for $7,000 are all big wins that can have a profound effect on your finances.

When I was working a traditional job and started freelancing on the side to generate more income to put toward my debt, I earned an average of $2,000 per month after taxes essentially giving myself a $24,000 annual raise which was huge.

I committed to bringing my lunch to work most of the time but at least once a week I’d eat at a restaurant or order takeout because I like dining out and it was a great way for me to relieve stress from work and get out of the office for a little time.

The $5-$10 I spent on lunch once a week didn’t deter me from meeting my debt repayment goals for the year given that I was bringing in $2,000 from side hustling each month.

So Should You Give Up That Latte?

Only you can decide what’s best for you since you know your situation best. You should take all these factors into consideration and try to find a balance between cutting back on the small stuff and going after big wins.

Making small adjustments to reduce your expenses can definitely add up and help, but big wins provide a faster, more satisfying result.

How about you all? What small adjustments in your spending have you made that have really helped (or not!) your budget?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/akane2011/14330276248/

What I’d Tell My Teen-Aged Self About Money

The following post is by MPFJ staff writer,Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

I’m turning fifty this year. All in all, I’m happy about fifty. Life is good and I’ve learned lessons that have helped us overcome a massive financial mess. But along with the many good decisions I’ve made, I’ve made my fair share of mistakes along with way – many of them financial ones. If I could go back in time and talk with my teen-aged self, here’s what I’d tell her about money.

 

Money is Always Available…Somewhere

I always had this thought growing up that there was a set amount of money in the world and that either you had it or you didn’t. I grew up believing that whether you were rich or poor was largely out of your control, and we were on the poor side. I’ve learned through side hustling that money is always available somewhere if you’re willing to go out and find it and work for it. The want ads are bustling with opportunities for work, as are sites like Upwork and Craigslist.

The work opportunities out there may not always be pleasing to one’s palette, but they are available. If I could go back and talk to my teen self, I’d tell her not to cling to her job as if it was the only one available, because there’s always other opportunities to earn money for those willing to work to find them.

 

Mindset Affects Wealth

Since I grew up poor and was taught (inadvertently) that we were destined to be poor, my mindset was that there was no use in trying to change things. I believed this up into my mid-forties, and then I found personal finance blogs.  As I read the stories of dozens of people climbing out from under their debt, I realized that we could too.

From there my husband and I began a long process of figuring out why we were always broke, and we learned that we were self-sabotaging our money management because we’d both been under the false belief that we would always struggle for money. We were piddling away our money on small, useless things like drive-thru meals and cable TV, not realizing the impact those “little” spends were having on our bank account.

We were so lack-minded that we’d start to feel panic if we had a little bit of money in savings. It just didn’t feel right. I know that sounds odd, but when you’ve lived with a belief long enough – no matter how wrong that belief is – anything contrary feels wrong.

We had to teach ourselves that, more than deserving “stuff”, we deserved financial security.  This is what I’d tell 16-year-old me: How you view money affects how much money you’ll have.

 

Popular Opinion Doesn’t Matter

Growing up poor in the public school system is not fun. I remember being teased about my two-dollar canvas tennis shoes and thrift store jeans. These memories convinced me that “stuff” meant acceptance. When I got my first job in fast food at 15, I spent nearly every dime I made on clothes at the local County Seat (give me a shout if you’re old enough to remember that store J ).

Eventually – but not soon enough – I learned that the pursuit of the approval of the Joneses is fruitless. If I could tell my teen self that, she’d be one rich woman right now.

 

Thinking Bigger Will Get You Bigger Results

When we were struggling for money and deep in debt, we could never think beyond making it to the next payday and hoping we’d have enough money to pay the bills. If we ended the month in the positive (which didn’t happen very often) it was a good month.

Once we started to pay off our debt, save money and manage our lives differently, we learned to think bigger. Our original goal was to simply have enough money to make it through the month. Then our goal changed to paying off some of our debt. Then we wanted all of our debt gone. Our new goal is financial independence – for the purpose of helping others.

The great thing about learning to think bigger is that it allows you to take others into consideration besides yourself. We now give away more money and “stuff” than we ever have before. We’re making an impact for good on others and aren’t so focused on ourselves. If I could go back in time, I’d tell my teen self to expect more out of life than just making it to the next payday. I’d tell her to think BIG and allow herself to imagine a better future – one where she could journey toward success and help others in the process.

How about you all? What would you tell your teen self about money?  

***Photo courtesy of https://www.flickr.com/photos/goodncrazy/4833445750/in/

How You Could Be Saving 33 Percent More This Year

The following post comes from DJ over at My Money Design, a blog that is completely dedicated to the idea of living a better life through finding financial freedom. You can also check out DJ at his new website, 1,000 Ways to Save. Enjoy!

If you’re looking for something truly powerful to do differently with your money this year, and you really want to ramp up your savings, then look no further than your 401(k) (or whatever tax-deferred savings plan you use)

Follow this simple advice: Max it out!

I’m serious.  Though it won’t necessarily be easy, by maxing out your savings, you could be pocketing an extra $4,500 this year.  ($9,000 if you’re married).

Here’s how it all works.

 

How Tax-Avoidance Saves You More

One of the things that is hard for people to really wrap their heads around is the idea of just how much money they are actually saving by using a tax-deferred retirement account such as a 401(k).

When taken to the extremes, the results are phenomenal! Let me illustrate.

The classic way to save money is to simply do the following:

  1. Earn money.
  2. Pay taxes.
  3. Get a paycheck for whatever is left over.
  4. Save some percentage of that paycheck.

Let’s say for simplicity that your gross (before taxes) bi-weekly pay is $3,000.  This means that:

  1. Earn money: $3,000 gross
  2. Pay taxes: If you’re in the 25% tax bracket, then roughly $750 of your money goes to the tax man.
  3. Get a paycheck for whatever is left over: $3,000 – $750 = $2,250
  4. Save some percentage of that paycheck: Let’s say you save 10%. That means that $2,250 x 10% = $225 goes into your after-tax account.  This leaves you with $2,250 – $225 = $2,025 to do with as you please for your normal, everyday living expenses.

Good effort!  But you’re missing out on an opportunity; a 33% more savings opportunity to be exact!

How so?

Follow the same math but use a 401(k) plan this time.  Here’s how it’s different:

  1. Earn money: $3,000 gross
  2. Save some percentage of those earnings. THIS TIME, because of how a 401(k) works, we get to save our 10% up-front!  Now, instead of saving $225, our same 10% savings works out to $3,000 x 10% = $300!
  3. Pay taxes: With only $3,000 – $300 = $2,700 leftover, now your 25% taxes drops down to $675.
  4. Get a paycheck for whatever is left over. Look at that!  Your net paycheck works out to $2,700 – $675 = $2,025 just as it did in the first example.

Do you see how that works?  You net the SAME amount of spending money in the end, but your savings went way up!

By how much? 

($300 – $225) / $225 = 33% more!

How is that possible? 

It’s simple.  You paid yourself instead of the tax-man.  By taking full advantage of a tax-deferred savings account, for every dollar you save, you’re NOT sending off 25 cents of it to the IRS.  You’re hanging on to it; keeping the full dollar for yourself.

Though that may not sound like a big accomplishment, when you really take advantage of this opportunity to the fullest extent, its true potential is revealed.

The IRS will allow you to save all the way up to $18,000 this year in your 401(k).  Using the same numbers as before, that could end up being a total of $4,500 MORE that you save for yourself (instead of handing over to the government).  If both you and your spouse do the same thing, then it doubles to $9,000 more for the two you!  That’s an incredible amount of savings!

How do I get there?

First off: I completely understand that deferring $18,000 into your 401(k) is not something that is going to happen over-night.  For most people it’s a struggle, and it certainly was for us.

However, once you recognize how powerful this savings tool is, it can become like a deal that is too good to pass up.  Over time, you’ll want to make every attempt imaginable to save money where you can so that you can take advantage of this opportunity more and more.

 

More Ways to Squeeze More Out of Your Savings

As if taking full advantage of your 401(k) and getting 33% more savings wasn’t cool enough, you should also know that tax-avoidance doesn’t have to stop there.  There are plenty of other tricks at your disposal to use as well.

IRA’s.  IRA’s are great because they are like a 401(k) but you have a lot more control over where the money gets invested and how you handle it.  No matter whether you prefer a traditional or a Roth, make every effort available to try to max out these accounts as well.

Even if all you qualify for is a non-deductible traditional IRA, remember that you can always convert it over to a Roth at a later time.  Then you’ll enjoy tax-free spending on the back end!

Employer Contributions.  Does your employer contribute money to your 401(k)?  If so, that’s ALSO tax-deferred money that you get to keep!  Find out from your HR exactly what the rules are and do whatever you have to in order to max this out.  If not, you’re leaving free money on the table!

FSA’s.  If your employer offers a flexible spending account (FSA) for dependent care or health care expenses, this is another golden opportunity for you to save hundreds of dollars in the process.  FSA’s allow you to save a portion of your gross income for special needs before the taxes are taken out.   Here’s an article from the IRS about how they work.

For years, my wife and I would contribute the IRS maximum of $5,000 into our FSA .  That money would simply be turned around and used to pay off our daycare expenses.  But like the example above with the 401(k), had we NOT used the FSA, then after taxes that $5,000 would have really only been $3,750.  The FSA effectively gave us an extra $1,250 to use on our kids.

Now that the kids are older, we still use the FSA for our health care needs.  Though the IRS maximum is lower, we still end up getting hundreds of extra dollars to use on our medical bills that would have normally went away to the IRS.

529 Savings.  If you’ve got kids and would like to set money aside for them to use for college, then a 529 savings plan is one of the better ways to go.  A 529 savings is similar to a IRA, but instead of the end goal being retirement, you use the money to help pay for higher education needs like tuition, room and board, etc.  You can see what kind of 529 plans are available in your state with this website here.

We’ve been contributing a very small amount of money to our children’s 529 funds for years.  Every year when I receive our statements, I’m amazed by how much the money has grown up to in just a few short years.  Thank you compounding returns!

Readers – What are some of the ways that you take full advantage of tax-deferred savings?

***Photo courtesy of https://www.flickr.com/photos/68751915@N05/6355261479/in/