5 ways to get free money

Everyone likes free money. It’s my favorite kind, personally. I’m talking about the $20 bill lying on the ground. The birthday check from Great Aunt Winifred for $5. The extra 30 minutes someone overpaid on the parking meter that you get to use when you park there. It’s all good.

So why would you pass up free money? The problem is, there are plenty of opportunities, even in this day and age, to get money for nothing. Of course there is a price – you may have to fill out a form, or walk to a bank, or call an 800 number. But in practical terms, we’re talking about nothing. So where do you get this free money? Who is crazy enough to give it away? Your employer, the federal government, banks, credit card companies, airlines, supermarkets? The answer: all of them!

1. Not taking advantage of employer match in your 401(k). This is a biggie. If your employer offers a matching program for your 401(k), what they are telling you is for every $1 you put towards your retirement – up to a certain level – they will give you $1. You don’t have to stay later, or hang with the boss under the mistletoe at the holiday party. They’ll just put it in your 401(k) and walk away. It may take a year or two to vest fully, but it’s your decision to stay or leave. Don’t pass up this unless you feel that you don’t really deserve any more of your company’s money than they graciously give you in salary.

2. Not using a cash back rewards card. Credit card companies are not our buddies. They are not in business to make our lives more convenient – they are in business to trick us into running up big balances. What easier way than telling you that every time you spend $100 they’ll give you four shiny new quarters? The trick here is to turn the tables on them. Put all of your expenses on a cash-back credit card each month, then pay off the balance in full. They’ll probably be muttering and complaining in their plush credit card executive offices, but they’ll give you the money. I get cash back on my donations to charity because I do this. Think about that – I give money to charity but I use a cash-back card that pays me 1% back. If that isn’t free money, I don’t know what is.

3. Failing to join your supermarket ‘frequent shopper program’. Most big supermarkets have a “card” price on their store brands. If you use your ‘frequent shopper card’ they give you big discounts. All they ask in return is the ability to measure your buying patterns for marketing purposes. That may be a little creepy knowing that all that data’s being compiled about you, but hey! I’m not about to pay $1 for something I could pay $.50 for just by giving out information to Winn-Dixie that they probably can track in other ways, anyway. I may regret getting a flyer in the mail but most of these supermarkets let you opt-out of mailings.

4. Withholding too much. The federal government is a pesky creditor. Imagine if you went to a nice restaurant and while you were eating the waiter came by every 10 minutes to ask for another 1/6th of your bill. Annoying, isn’t it? Well, Uncle Sam can’t wait until April 15th to get your tax payment – he needs it now and he needs it bad. But he also lets you decide just exactly how much should be withheld from your paycheck every month. Imagine you’re back at the crazy restaurant. The waiter comes by and wants $10 every 10 minutes. Would you give him $15 each time and tell him to give you the change back after dinner? Why would you want him holding your money for you? Why do you want the government holding your money that could be in a high-yield savings account? Reducing your withholding can put some money in your pocket NOW instead of later.

5. Not joining airline/hotel/etc. frequent flyer programs. I know the value of a frequent flyer mile isn’t what it used to be, but if you fly they don’t charge you anything extra to put the miles in an account. I’ve paid for enough flights and hotel rooms over the years using points that I think it’s worth it. I would have paid for those flights and rooms otherwise. Using points is a hassle, I know, but it’s still something for nothing. The “something” is a little bit less every year, but it’s still there.

It’s all free money – who wouldn’t want some of that?

Private Mortgage Insurance: What You Need to Know

Unfortunately, if you don’t have at least 20% to put down on your mortgage when buying a home, you’ll have to buy private mortgage insurance. Also known as PMI, this insurance protects the lender when and if you fall behind on your mortgage payments. The insurance is almost always automatically cancelled when 20% of your mortgage is paid. If the lender doesn’t cancel it, be sure to contact them in writing. There are certain circumstances when the lender may not cancel your private mortgage insurance. If your home has gone down in value, they may not cancel the insurance. If you have another lien on the home, they may not cancel it.

There are a variety of ways you can pay your private mortgage insurance. You can finance the cost of the insurance, paying an additional amount on top of your mortgage payment, you can pay the insurance premium in one lump sum each year, or you may be able to set up separate monthly payments with the lender or the private mortgage insurance company. If you don’t pay your private mortgage insurance in a lump sum, you will have to pay interest just as you would on your car insurance. The interest rates typically run from 1/2 to 1 percent of the total amount that is borrowed, although this number varies from lender to lender.The cost of PMI is based on your credit rating, the type of mortgage you have, and the length of the loan. The good news is, if you earn less than $100,000.00 a year, the private mortgage insurance premiums are tax deductible, although this amount is always subject to change because tax laws often change.Paying PMI can be eliminated if you have paid off at least 20% of your mortgage or if the value of your home has gone up.

If you have remodeled your home, the value more than likely has risen. If you built a garage or any other outside building, if you have installed a new furnace, new plumbing or electrical wiring or done any other remodeling in your home, its value has probably risen. An appraisal would be required to prove to the lender that the value of your home has gone up, then they can determine whether or not your private mortgage insurance can be cancelled.No one likes to pay higher mortgage payments because they have had to finance their private mortgage insurance. Paying the insurance fees once a year can be costly too, but there is a savings on interest. There are a variety of mortgage lenders and they each have their own set of standards regarding PMI. Be sure to check with your mortgage company regarding the cost and payment plans they have available.

 

faulkner grave

lacrosse and Russian

 

faulkner grave

 

I didn’t get that much out of college, other than friends, knowledge, life experiences, and the ability to blow up an opponent in lacrosse.  I majored in math, and now I’m a finance and systems consultant.  Related, fine.  But they are two different disciplines.  I studied linguistics, and while I’m able to speak several languages, I don’t really pay much attention to language, per se.  I minored in Russian, though, and that deeply, thoroughly, and massively affected my life – the choices I made, the places I lived, even all the way through to my spouse and (eventually) my kids.  So don’t assume college doesn’t matter… it just doesn’t matter the way you think it will.  I thought I would be a famous mathematician based on my time in college.  Nope.  But little did I suspect I’d become a Russophile and become “russkiy v sertsye” – Russian at heart.

From Good Financial Moves for College, Part 2:

But that’s not the biggest part of it. Without developing my Russian skills I wouldn’t have met, pursued and married my wife. Maybe if I had taken Japanese I would have lived in Japan, developed a fondness for all things Japanese. Hard to say. But I do know that the decision to learn Russian set in motion the life process that brought me to where I am today.

Photo LicenseAttribution Some rights reserved by Bridgman Pottery

free time and productivity

Time Spiral
If you’re one of those people who think that you could accomplish a lot more with your life if only you had more free time, you’re not alone… and you’re wrong. For years I blamed the long hours I worked, exhaustion after those long hours, or the “necessary” errands that consumed what little free time I did have.  I thought that if I ever had a job that didn’t consume my evenings and weekends I’d have the time to accomplish all the things I always dreamed I would do.  Yet when I look back over the years since I’ve scaled back my working hours by becoming a consultant, the peak moments of productivity – personally and professionally – have seldom been the moments when I had the most free time.  I am not now at my most productive, and understanding why has become one of my primary self-improvement goals.

Since 2006 I have seldom worked more than 38 or so hours per week.  Here are examples of some of the clients I’ve had both in New York and Florida.  Client A was a very short commute (less than half an hour), and what I’d call an “early office” – I made it in around 8:00 am most days and usually left by 4:00.  Client B was a long commute (almost two hours each way), and while I seldom worked more than 8 hours in a day I did stay late on occasion.  It was a “late office” – most of the people in my department drifted in around 9:30 or 10:00, so it was hard to justify arriving at 8 and leaving at 4.  Client C was a short commute (by New York standards) of one hour, and the client was very flexible about the hours, not really caring if I arrived at 8 or at 10.  It was very much a ROWE office.  Client D was a driving commute, about 45 minutes, depending on traffic (often much longer in the evenings) and required that you be glued to your desk every minute of the day.

So when was I most productive while working? Client A was a horrific environment, with a no-wall cubicle farm, frequent last-minute meetings and a lot of work taking place on a trading desk.  If you’ve ever seen the movie “Boiler Room,” that’s the environment I was working in.  Client B was the exact opposite.  They gave me a quiet cubicle on the opposite side of the floor from the rest of the department.  They never had meetings, and email was the preferred method of communication.  Client C was back to the Client A world – a huge conference room shared by 45 consultants, all talking on mobile phones, yelling back and forth to each other and sitting two feet apart. Client D was extremely restrictive – quiet, with a boss who didn’t like hearing her staff socialize.  So where was I the most productive, both professionally and personally?  I was far more productive while working at Client B with four hours of commuting time than I ever was before or after.  Why?

Having so little free time while at Client B forced me to be organized and disciplined with my time while at home. It also made me focused at work, knowing that whatever tasks I could accomplish there would free up time at home.   I was focused on completing my work quickly and efficiently, and getting out as soon as possible, even if it meant working less than eight hours, because the commute was so long.   I did not spend endless hours reading Sports Illustrated or The New York Times during my commute.  I made good use of my time on the train by reading, and as any writer can tell you reading is the best inspiration.   Although we only had one child at the time, we didn’t have a babysitter and I seldom had any real free time until 9 or 10 pm.  So again, I knew I had to make the most of an hour or two late at night.

My busiest time was a time of tremendous productivity for me. Most of the “most popular” posts I wrote on brip blap were written during that time.  I was tired, and I felt like I had no free time, but everything got done that needed to get done.  While at Clients A, C and D, almost nothing got done.  The oppressive work environment meant that I was less productive professionally.  The noise and lack of space made it hard to accomplish anything.  Because I took longer to do my work, I came home and started writing, and it wasn’t good.  Because the commutes were short, I quit reading books and started listening to morning shock jock bits (this was before I discovered podcasts).  My personal and professional productivity took a beating.

Now, with more free time, you might expect to be more productive.  In my experience, I am not. I find that in a non-structured environment I have difficulty focusing on even the simplest tasks, which is surprising to me.   I have trouble reading.  I spend more time than I should with my kids, but not always in a focused or in-the-moment way.  I cannot get organized about my computer time – I check email again and again throughout the day, which is a terrible idea.  I waste time on Facebook and countless other nonproductive sites.

Some of us, despite what we like to think, need the structure of a job to be productive. Sometimes getting up and leaving the house forces you to be more productive whether you like it or not.  I have had to confront a simple fact:  everything I thought I knew about organizing my time has to be thrown out the window.  I have never been good about organization and productivity, because I was only organized and productive when forced to be by circumstance!  I have to relearn so much to be as organized as I need to be; but right now I have far more free time than I did in the past to do nothing but learn, so I have no excuses now.

Stephen King says in his masterpiece “On Writing” that the most important part of writing is learning to close the door. He’s a brilliant writer (if you think of him only as a hack horror writer, try picking up one of his books sometime – they are as well-written as anything you’ll ever read).  His point is that if you fail to close the door when writing, both figuratively and literally, you’ll never have a chance to succeed.  It is too easy to let the world distract.  Although he is talking about writing, he could just as easily be talking about cooking or exercising or almost any productive venture.  We have too much to distract us, and too little time to do anything well if we fail to concentrate on what we are doing at that moment.  The challenge is to learn that focus.

photo credit: gadl

elderly couple

What You Need to Know about Long Term Care

elderly couple

This is a guest post.

As millions of Baby Boomers approach old age, long term care has become a central concern for many families. Long-term care insurance is purchased to protect seniors and their families from the costs of home-based health care and nursing home costs, which are increasingly rapidly. Medicaid, which accounts for 43% of the cost of nursing home care, is already overburdened.  With the Obama administration dropping a long-term care insurance program (the Community Living Assistance Services and Supports program) created by the Affordable Care Act because it was too costly, most families should start considering long term care insurance earlier rather than later.

Long term care providers offer either assistance with the activities of daily living, also known as ADL, or they offer skilled nursing care. Those who help seniors with ADL help seniors with dressing, bathing, ambulation or help with taking medication, while skilled nursing care includes assistance to those who need more advanced care with all of their needs. This senior may have a chronic medical condition such as dementia, Parkinson’s, Alzheimers or advanced arthritis.

Seniors who require skilled nursing care find that the costs are high, often more than they earned and more than they have in their savings account. Most are over 65 years of age and have worked hard all of their lives. Failure to plan ahead for long term care can result in financial disaster and this person may lose their home to pay for long term care. Purchasing a long term care insurance policy aids in the high costs and can be purchased from organizations such as AARP. Medicare, social security, and medicaid may not cover all of the costs, so a supplemental long term care policy can help.

The cost of long term care rises around 5% each year and ranges from $1200.00 a month to thousands of dollars each month, depending on the long term care facility. Assisted living facilities often have a skilled nursing facility on the property, offering aid to those who may need more extensive care than those who need help with their activities of daily living.

There are alternatives to living in a skilled nursing facility. Some of the elderly choose to stay at home and hire a nurse to come in or a loved one may care for them. When it is no longer possible for a loved one to care for them, nursing home care is often sought out. Nursing home care provides physical therapy, speech therapy and occupational therapy in addition to help with medications and ADL.

Some seniors require round the clock nursing care while others need assistance with transportation to the store or doctor. They may only need to have help with household chores or they may need a friend to talk with. Long term care ranges from help with the activities of daily living to round the clock nursing care. This person may or may not be a senior. More than 40% of those receiving long term care are below the age of 65.

The time to start thinking about long-term care is not when you need it.  The time to start thinking about long term care, for yourself, your spouse or your parents, is now.

Photo LicenseAttribution Some rights reserved by Jan Tik

angel of business

you may not be an entrepreneur

angel of business

 

I’ve often fantasized about becoming an entrepreneur. It’s an easy thing for someone who works in the corporate world to do. I made a halfway move: I’m a consultant. I don’t really live ‘in’ the world that my corporate colleagues do, but I do physically sit in the same place and enjoy the same pleasant fluorescent-filled days they do. But you’ll find in this corporate world that many employees dream of a future, full of boss-less days, exciting work and endless financial rewards. Here’s a wakeup call.

If you are an entrepreneur, nothing will stop you. I had friends in college (and in high school) who were entrepreneurs. They not only didn’t want to take a job while they built a business – they NEVER wanted a job. The very idea of a job was antithetical to the way they thought. I have relatives like this, too. They would rather live in a dump than take a ‘job’. They might work at at gas station for a while, or a temp job, just to put a roof over their heads. But they never, ever would engage in the kind of corporate jobs many people accept for granted. They wouldn’t give up the time when they could be building a business to sit in a cubicle and wait.

That’s not an indictment of corporate employment. It works for some people. But I don’t like the idea that within ever corporate employee there’s an entrepreneur waiting to bust out. That’s possible, but not likely. Most of the entrepreneurs I’ve known were uncontrollable maniacs – they had to get out there and build something. They were never going to settle for sitting at a desk.

It’s hard to admit what you are, sometimes. I wasn’t an employee – that was an easy admission for me to make, after I made the switch. What was tough for me was admitting that, other than my side income through my blog, I wasn’t an entrepreneur. I’m not. It’s not my skill set – I’m technically savvy but I’m a terrible marketer and salesperson. If you want to be an entrepreneur, you’ll do it as soon as you have 30 days’ worth of rent money saved up. You’ll be ready for the risk. If you don’t? You’re still a good person, but you’re probably better off leaving the business-building to someone else, and concentrating on your job.

Photo LicenseCopyright All rights reserved by sangyul

should you tip?

If you’re careful with your money, you probably face an occasional dilemma of how much to tip various people in service positions.  Tipping ranges from the $3 slipped to a doorman who hails a cab to a couple of hundred for some guys who move your stuff cross-country.

Before I was married, I used to have a “local” watering hole in my neighborhood in Manhattan.  I would drop by after work with friends and the bartender would have my usual drink set up before I even took a seat.  The waitresses would stop by to chat, and I knew them by name.  I would get the best seat in the house ahead of tourists waiting in line if I came in a group.  The manager let me stay after hours, and invited me to special events.  Did I tip?  You bet I did.

If you have a situation like this, big tipping is tough to avoid.  You get to know people and they provide you in return with great service on a constant basis.  I never left less than a 20% tip even on the rare occassions that I was dissatisfied.  I got so many free drinks that often I would just take the amount I was given gratis and just hand it right back over to the waitresses or bartender.

Contrast this with stopping at a diner on an interstate trip.  You get ho-hum service, perhaps, and ho-hum food.  Do you leave a 15% or 20% tip like you would at a “local”?  And if not, why?  Would it make a difference if you knew that the cook got a fresh batch of salad out for your salad – and would it make a difference if it was just coincidence that he got it for you?  And in a sense, why wouldn’t you leave far less?  You’re not going to return, right?  Personally I feel guilty, but really – it’s not like you’re coming back, is it?

Tipping is an odd case of getting a service, then paying for it.  If you hired a plumber to work on your house and said “you know what?  I’ll pay you what I think it’s worth when you’re done” he would probably knock you over on the way out the door.  Restaurant workers (and maid services in hotels, etc.) do the best they can to provide good service, not knowing if you’ll be the one-in-a-million person who leaves 10 $100 bills tucked under your check or the jerk who asks for 15 martinis and a steak done JUST SO before leaving a 3% tip.  Imagine working at your job that way – if every payday you got a minimal base salary plus a “tip” depending on how happy your boss was with your work.

It’s hard to balance tipping with being a frugal person. 
I don’t like tipping.  I wish everything was a flat fee.  I wish waiters and waitresses were paid minimum wage.  It’s easy if you’re a regular somewhere to be generous.  If you live in Manhattan and have a super or a doorman, it’s easy to realize that you need their help, and they’ll give it whether you pay or not, so you SHOULD reward them for their help.  It’s trickier when it’s the guy delivering the new couch.  You’ll never see him again.  He did his job.  But it’s hard work, and maybe – just maybe – he could have dinged a wall or tracked in mud, but he took a little care not to.

I don’t know the answer.  I generally tip generously at restaurants but not so generously when it’s “slipping cash” to someone, mainly because I’m embarrassed about it being too much (looking like a rube) or too little (looking cheap) so I often just pretend I “left my wallet upstairs – this is all I have.”  What I do know is that in general in life you’ll be a lot happier if you mentally price your tip BEFORE getting the service and then pay it that way after you get it.  Think to yourself “I’ll tip the waiter 15% unless he ignores our table or gets an order wrong or forgets to bring us water,” or “I’ll tip the housekeeping service $20 per day as long as the room is cleaned to a T,” or “I’ll give that guy $50 to move the couch in unless he dings the wall or messes up the fabric,” and so on.  Tipping is an uncomfortable activity for most, and even more uncomfortable for someone who relies on them for a living.

monopoly money

Teaching Children About Finances

monopoly money

It seems that most parents are always lecturing their children with the old adage that says “money does not grow on trees” whenever their children seem to be asking for too many things. Money certainly does not grow on trees, but how are children supposed to know that? To all intents and purposes, some children do not have any idea about finances and how their parents are able to get money for all their ‘needs’ and ‘wants’. It is therefore important that parents take the time to teach their children about money when they are old enough to grasp financial concepts.

Educating children about money will empower them to become financially savvy when they grow up. They will know the importance of getting a savings account as well as making sound financial investments when they become adults. Below are some great ideas for financial education for kids.

1. Explain How Mommy And Daddy Earn Money:

The concept of work and pay has to be explained first and foremost. Children need to know how their parents get money to take care of family needs such as food, accommodation and clothing. Explain to them that parents get paid for the job they do at their workplace. Make them understand that some of this money is used to take care of all the family needs, and the rest is placed in a savings account for future needs.

2. Teach Them About The Exchange of Labor for Money:

To better help children grasp the principles of work, parents should employ them when they are old enough to do simple tasks around the house such as vacuuming, sorting the laundry or taking the trash out, for which they get paid. Parents can also encourage children to work at odd jobs once they are a bit older: starting up a neighborhood business raking leaves is a great example.

3. Teach Them About Saving Money:

Buy a piggy bank for them and encourage them to save some of the money they’ve earned from working at home. When children are trained to do things in a certain way, it never departs from them when they grow up. Open a savings account in their name if possible. They will feel a sense of pride when they see the statement addressed to them.

4. Investments And Life Insurance:

Let children know that investing in bonds and real estate are some long-term means for making money. Buy bonds in their names if possible, to instill that education in them. They will do the same for their children in future. Also let them understand the importance of life insurance. If parents happen to have a policy (and if you have children you probably should), they should educate their children about the purpose of life insurance as soon as they are old enough to understand the concept of life and mortality.

5. Teach Them About Needs And Wants:

Help children understand the difference between the things they need and those they want. They should know that certain things are just frivolous and though they can be indulged in occasionally, those indulgences should not become a habit. This will stop reckless spending when they grow up. Teaching frugality at an early age is critical, because once children start school they’ll be surrounded by other kids who won’t have been taught the same lessons. If your kids haven’t learned to be frugal at home, they certainly won’t from their peers.

Photo LicenseAttribution Some rights reserved by p e e p e r

happy cat

How coaching can help you out of a rut in your corporate career

happy cat

 

It’s amazing what a little time off can do for your attitude towards work. It’s why so many of us love to jet abroad for a week-long getaway each year: we come back feeling refreshed, relaxed and ready to tackle the weeks ahead. But if you don’t have a holiday planned in the imminent future, and would like to get that same energized enthusiasm for your career, there are other ways to do so. Coaching is an increasingly popular way to achieve this.
Although there are often negative connotations associated with the word ‘therapy,’ the two are not all that dissimilar. A good coach can listen neutrally to you, help assess your current situation and make positive changes in your life.

For those who feel like they are in a career lull, bored of the same everyday routine, a new challenge could be what awaits you – and don’t worry, even those with the most fulfilling careers can feel like this occasionally.

Here are 3 key areas that coaching can help you with, whilst helping you get out of that rut and enjoy working again:

1. Helps to build confidence.
If you have been in one position or industry for a long time, the thought of leaving that familiarity can be very daunting. Sometimes it can feel more secure to stay in your accustomed bubble. But, more often than not, all you need is a confidence boost to make the changes that you want in your career.  A coach can offer the encouragement required to believe in yourself- whether this is through interview techniques for a new position or the courage to speak with your superior and re-negotiate your current contract.

2. Become objective about yourself.
A coach can offer objectivity. It’s difficult to accurately review ourselves. Similarly, when a partner, friend or family member offers advice or an opinion, it is often biased in the hope of being supportive. But, to break old habits you will need tough love. Acknowledging your strengths and weaknesses can give you a new sense of direction, and an outsider is the best way to achieve this.
Not only can this new awareness help you differentiate between your desire for a new routine or a new lifestyle altogether, but it can mean you have the opportunity to make effective alterations to inject more happiness into your daily humdrum activities. We spend the majority of our days in the workplace so you may as well make the most of it.

3. Set achievable goals.
Experience with business clients gives coaches the knowledge to know what goals are feasible within a set time frame. Aiming to ‘turn your life around’ in a fortnight is not only unrealistic, but can leave you feeling deflated when it doesn’t happen – despite being impracticable in the first place.  Emotions can often overwhelm us and trigger impulsive decision but having an objective person for support can ensure that you don’t throw in the towel without a proper plan.

When you’re in a rut in your career, it’s always a good idea to evaluate your current situation, look at where you want to be, and what you’re capable of. Then it’s just about receiving the push to get it done. This is what coaching is ideal for. The renowned philosopher Albert Schweitzer famously said: “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.”

Finding what you love is half the battle. Learning how to implement it is the other. In this sense, life coaching may not be imperative for your career, but just like a sunny day, although it might not always be needed, it sure makes a different when it’s there.

Bev James is the managing director of The Coaching Academy who trains and mentors life coaches across the UK. Bev enjoys her life as a successful serial entrepreneur, coach, and business mentor.”

Photo LicenseAttribution Some rights reserved by Ari Helminen
lazy cat

the only real sources of passive income

lazy cat

Years ago when I read Rich Dad, Poor Dad, the idea of passive income lit my brain on fire. I had never thought of making money for nothing.  I assumed that money was achieved only due to the hard-pressed exchange of time for money.  Kiyosaki, the author of RDPD, assured us that passive income was the key to wealth.

Where is the passive income?

I plunged into research. I identified rental income, investment income and even creating original content as “passive income.”  I had visions of checks flowing in, one after the other, landing in a pile on my desk.  But after time, I realized that the pursuit of passive income was nearly impossible through these routes.  How can you really make passive income?  Inquiring minds want to know.  These are the top 8 “real” ways to make passive income, but even they have a catch – all but the last one.
1.  Pick up spare change off the ground. You do have to bend over, but you probably do that at work every day, so you’ll at least be getting something out of this transaction.

2.  Marry someone rich. You’ll have to do some work, true, but if you aim high enough we’re talking about a huge return on investment here.

3.  Hook up with someone rich and desperate enough to pay to keep you around – the classic “sugar daddy/momma” scenario.   Granted, you may have to do some (unpleasant) work here… but I’ve seen this work out where surprisingly little effort is expected in return.

4.  Have someone else do the work for you; a nice trick if you can manage it.  Ask your buddy the web designer to create a website for you – for free.  Why would he do it?  The exposure?  The joy of being taken advantage of?  Don’t worry – you’re getting passive income!  This makes up about 90% of the “advertising” inquiries most bloggers get:  “hey, we’ve got a new service that’s just like Mint.com only shinier!  Please write a post/link to us/give us free advertising because it’s great news for your readers!”

5.  Win an office lottery pool. OK, you risked a few dollars, but someone else went to the bodega, bought the ticket and checked the results.  You didn’t put much sweat into your share of the Mega Millions, did you?

6.  Gamble. There is, of course, a potential downside here.  But if sitting around sipping free martinis while playing a game and winning (that being the key component) isn’t as close to passive income as possible, I don’t know what is.

7.  Invest in dividend-paying stocks. This point is a cheat.  You have to earn the money that you use to buy the stock.  On the other hand, everything that happens after you buy it is gravy.  That income becomes close to truly passive – so the trick is to use windfalls (an economic stimulus check, for example) to invest in dividend-paying stocks.

8.  Be born rich. Yes, you have to be nice enough to great-aunt Milfred to avoid getting cut out of your trust fund, but let’s face it:  this is as close to passive income as you’ll see in this life.  It’s worked like gangbusters for many of our politicians.

Don’t think you’ll get rich without working for it.  Everything you can generate wealth from takes effort.  Writing a book is hard work.  It may create a wealthstream for years to come, but that’s what you should be aiming for:  wealthstreams, not passive income.  Don’t imagine that there’s a magical key to wealth that doesn’t involve either hard ongoing work or a good bit of upfront work.

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moscow

money from the sky

In 1986 I was living in (then) West Germany as an exchange student. I was lucky enough to get a visa to visit (then) communist East Berlin with my German and American classmates. Exchange rules were very strict, and the amount of money (and type of currency) you were allowed to change were very tightly controlled. I changed a fair amount of Deutschmarks, not knowing how much I would need for a day trip. We had to return to West Berlin each night – presumably for security or because 16-year olds posed a threat to the regime.

mayakovsky moscow

So after paying the equivalent of $1.50 for a massive lunch and buying the few souvenirs we could find (I never did locate any good t-shirts with the logo “I went to a Warsaw Pact country and all I got was this lousy t-shirt”) I was left with a fair pile of change. Because of the currency exchange rules, it couldn’t be changed BACK into West German currency, so as we boarded the train our chaperone came around and told us we’d better not be holding any currency, because we’d get in trouble with the border guards. Since I had already endured one frightening yell-down from the East German guards while crossing back into West Berlin because of my (apparently banned) souvenirs, I decided to comply.

We hurriedly bought Fanta and assorted snacks but still had some change left. We then noticed that there was a throng of people shouting and gesturing at us on the end of the platform, yelling at the train. We noticed a shower of glittering coins flying out of the windows ahead of us. Assuming this was the thing to do, we chucked our coins out the window, too.

This was the first intimation I had, despite East Berlin’s immaculate, clean and very pleasant appearance that communism’s rosy presentation of economic stability might be a false front. Today, it also gives me pause when I reflect on the fate of one of the world’s mightiest, and shortest-lived, empires.

When I first returned from Russia I was invited to give a lecture on the Russian economy at a local university. At the time I was considered somewhat of an “expert” (please take careful note of the quotation marks) on the accounting theory surrounding foreign currency translation – particularly regarding the ruble – and the difficulty in making a true “translation” of Russian accounting information into Western accounting standards. For this class of beginning accounting students, I started with an anecdote: imagine if you walked into your local McDonald’s today and bought a Big Mac for $3. Your salary might be, say, $40,000 per year.

Now imagine you walk into that local McDonald’s a year later and a Big Mac now costs $200, but your company upped your salary to $2.6 million per year to keep pace with hyperinflation. You can still manage a Big Mac. Two months later your salary is still $2.6 million – the company’s not going to readjust monthly, only annually – but hyperinflation continues apace. Now a Big Mac costs $25,000. It has become an impossible luxury, almost 1% of your gross salary. That’s as if it cost $400 when you were making $40,000 per year. And your savings? Your lifetime savings of $2 million are now barely enough to pay for 80 Big Macs.

Does that sound ridiculous? Yes, but that’s exactly what happened in Russia in the early 90s. Prices changed daily, even hourly. Savings effectively disappeared. With private ownership of land impossible, all net worth other than STUFF disappeared. A good TV was a better investment than a savings account. A freezer could preserve more value than a bank. Banks were offering 100% interest rates or more and it wasn’t a good deal.

That can never happen in America, could it? Chances are it won’t. But if you think about it, the conditions that created hyperinflation are possible in the US. Don’t believe me? Imagine another oil embargo. How much will your food cost if the trucks that deliver it have to pay $12 per gallon for gas? What if a terrorist attack in a US port causes the US borders to be closed? Many of the fruits and vegetables in your local supermarket this time of year are imported from Latin or South America. How much will a tomato cost if the borders close? What happens if major institutions like Citigroup start collapsing? Do you think it’s impossible for the US to attack Mexico to gain access to its oil? I know you are picturing me wearing a tin foil hat, but bear with me.

This is the worst possible case. For the record, I don’t believe it will happen. But then I remember my friends in Russia, who grew up during the last years of the Soviet Union. When they were children the twin cancers of a bloated, inefficient and incompetent central government and a disastrous, expensive foreign war were eating away at the core of their nation. The Soviet Union was a country so powerful in the late 1960s that the United States felt it had to fight wars all over the globe, not to stop but just to slow its spread. The “evil empire” had gone from a backwards agrarian dictatorship to the second-most advanced military and technological power in human history in two generations; there was no reason for the average Soviet citizen to doubt that rate of advancement could last forever. They heard it on the news – calming words from the central government that it could avert a depression. The total collapse of their country in less than a decade caught every single person in the former Soviet Union (and in the world) by surprise. I don’t think even the most optimistic anti-Communist hoped for this in their fevered dreams. Today only the most rabid anti-American would hope for a collapse of the world’s largest economy, but now I think it is imaginable. I hope history will not repeat itself, but that hope has been futile since history began.

When I think of my friends in Russia and their hoarding of US dollars under mattresses and their almost complete and utter distrust of every single financial institution, I also remember that odd sensation in East Berlin in 1986. I remember throwing money out of the window, almost seeing it melt into nothing as it flew through the air. I hope I never see that again, but I particularly hope I never see it in my own country.

photo credit by me)