What spurred this blog post was an idea put forth by my friend at ESI Money in which he talks about how the first million is the hardest. ESI shares how his net worth growth has accelerated. The first million took 19 years of work (the clock starts when he started working, not at birth!) but the 2nd million took just 4 years and 9 months. J Money took this same idea and started at $100k, which took him 7yrs 11mos. Each of the next $100k milestones took close to 18 months each to reach.
Loss of your job as a physician often means an expensive relocation to another city due to non-compete agreements. It may also mean 6 months without income as you get a medical license, a DEA license, and/or go through the credentialing/privileging process. You may have to sell your house at a loss or even liquidate investments in a down market to tide you over through a period of lost income. Because of this, employers have an advantage over you in negotiations. But if you have multiple streams of income, you don’t have to play by their rules and you retain negotiating advantage. This is your F-You money because it allows you to say “F-You” to the employer and walk away from the job. You know there will still be money coming in every month even without your main job.
It seems like common sense but it’s so easy to rely on your day job income to pay for everything. I used to get paid a lot of money to go into work and sit at my desk for 8 hours a day and then go home. No manual labor required, no staying late hours(in my case at least) and a pretty low stress environment. I loved my job and without fail, every two weeks on the dot, a nice fat paycheck would show up in my bank account. All I had to do was show up at work every day and I was pretty much guaranteed to get paid.
François Quesnay further developed these concepts, and was the first to visualize these interactions over time in the so-called Tableau économique. Quesnay believed that trade and industry were not sources of wealth, and instead in his 1758 book Tableau économique (Economic Table) argued that agricultural surpluses, by flowing through the economy in the form of rent, wages, and purchases were the real economic movers, for two reasons.
I have a total of three CDs left. There is no way in hell I’m selling them after holding them for 4+ years so far to take the penalty. The CDs are for 7 years. That would be completely counterproductive. As a result, I feel very stuck with ever getting my CD money back if I wanted to. If the CDs were for just 1 or 2 years, I agree, it doesn’t matter as much. But combine a 7 year term with 4%+ interest is too painful to give up.
Given the growth in the sharing economy, your junk can start to pay for itself. For example, if you have some awesome vintage furniture inherited from your grandmother sitting in a storage unit, you can rent this out to photographers for their “styled shoots” which are becoming all the rage. If your furniture is more modern but you still can’t bear to get rid of it – perhaps a home stager will be interested.
Quick story: Remember that $1.18 I found in the couch? Even when that increased to $30 to $50 a day, it still wasn’t enough to live on. So I looked for other options. In August 2008, after people started to know who I was and how I could help them pass the LEED certification exam through my blog, I wrote an ebook. It included all the information I knew about passing this exam, and I sold it on my blog for $19.95.
Real Estate Crowdfunding ($9,600/year): Once I sold my SF rental, it was natural to reinvest some of the proceeds into real estate crowdfunding to keep sector exposure. I didn’t invest a lot in some of my favorite REITs because I felt a rising interest rate environment would be a stronger headwind for REITs. But if I could be more surgical with my real estate investments by identifying specific investments in stronger employment growth markets, I thought I could do better.
Stock dividends: Some stocks, especially stocks from big corporate standouts, pay dividends to shareholders based on the number of shares they own, and the percentage of the stock price on the dividend date. For example, if a company pays out 3% on a stock that's trading at $100 per share, you'll earn $3 for every share of that stock you own. Add it up and that can be good take-home pay as a passive investment.
The reading is organized as follows: Section 2 develops the concept of residual income, introduces the use of residual income in valuation, and briefly presents alternative measures used in practice. Section 3 presents the residual income model and illustrates its use in valuing common stock. This section also shows practical applications, including the single-stage (constant-growth) residual income model and a multistage residual income model. Section 4 describes the relative strengths and weaknesses of residual income valuation compared to other valuation methods. Section 5 addresses accounting issues in the use of residual income valuation. The final section summarizes the reading and practice problems conclude.
If you’d prefer to skip the startup phase, you might want to buy a blog that’s already built and earning revenue. This is actually pretty easy to do as a lot of people start blogs, and then get bored with them. Getting a blog going is a labor-intensive process, and it’s not uncommon for people to give up before they’ve reached their full potential.
Whoah – I haven’t read an entire post this long in awhile. That’s how hooked I was. It took me 5 income streams before I became a Millionaire. I now have 11 and it’s fascinating to see which ones are now generating the highest ROI 5 years in. My side digital marketing business is by far my most profitable, but also requires the most of my time. I have finally started automating 4 of these streams (websites I bought) and it feels great to make money not doing anything – well I do have to make sure that my credit card doesn’t expire on my hosting account! I really like your blog – just found it on the Rockstar Forum. I’ve added it to my regular readers. Looks like your crushing Pinterest – where do you make your images?
Varolo is an advertising campaign that allows major corporations (like Coca Cola, Lysol, and others) to reach their target audiences with a high return on investment. Major corporations are desperately trying to find new ways to advertise to people as the newspaper continues to decline in demand and in an age of DVR. Varolo is the newest opportunity that actually pays you, the one being advertised to, to watch their advertisements. You can join the campaign and earn a little extra spending money by viewing and rating commercials and even trailers for major motion pictures. While the trick is to devote 5 to 10 minutes of each day rating what you see, you should also be motivated to invite others along through Facebook, Twitter and other social media so that you can increase what you profit each week.
Peer-to-peer lending means loaning money to other people. Specifically, you lend money to people who don’t qualify for traditional financing. Companies like Lending Club and Prosper offer returns in the range of 4-10%, which are a lot higher than a typical saving account. You will be able to select the right investment for you, based on your risk assessment strategy.
The main leakage from this sector are imports (M), which represent spending by residents into the rest of the world. The main injection provided by this sector is the exports of goods and services which generate income for the exporters from overseas residents. An example of the use of the overseas sector is Australia exporting wool to China, China pays the exporter of the wool (the farmer) therefore more money enters the economy thus making it an injection. Another example is China processing the wool into items such as coats and Australia importing the product by paying the Chinese exporter; since the money paying for the coat leaves the economy it is a leakage.
"But for our jobs, for how we make money, I think many of us — most of us — have one way we make money. It can be very risky. I've really come to believe, and have done a lot of research over the years, that one of the best ways that we can create real, legitimate professional stability for ourselves is by choosing to cultivate multiple income streams.
If you love design and you are an artistic person, selling digital products on Etsy could be a great way to earn passive income. Digital products require little maintenance, your customers will simply receive a link to download them (which means you don’t have to worry about shipping and returns handling). All you need to do is spend time upfront to create beautiful artwork! (Easy right?)
The legendary investor, Warren Buffett rightly said that if you cannot create a second source of income by the age of 45, then you have really done injustice to yourself. If you are in business or if you are an independent consultant there are multiple streams that you can consider. But what if you are employed and your existing contract does not allow you to take up other work? Also, your pressures at your workplace may be tight enough to leave you with little spare time to worry about how to create a second stream of income. That is when you have to make money work hard for you. Let us look at two such approaches.
Learn, learn, learn: Develop new skills that you can eventually turn into a side business. Acquire knowledge that you can use to start up a side business or that can help you intelligently invest your money in assets that generate passive income. Passive investments include: residential rental properties, commercial rental properties, TICS, triple net leases, seasonal rentals (beach areas, ski resort areas, lake front areas), equity investments (stocks, bonds, mutual funds), annuities, permanent life insurance, royalty-generating property (timber, oil and gas), boat rentals, etc.
Thanks for writing this Mr. Samurai. I just got over the student loan hump but I feel pretty good about it at 27 having a graduate degree and being 100% debt free. Now that I’m on the other side it is good for my brain to absorb some of your knowledge regarding passive income investments. I love gleaning wisdom from older folks who have been there and done that. Mentors rock!
There are plenty of viable options you can use to create passive income online, right now. You have many different choices, but my personal favorite is affiliate marketing and selling products on Amazon. I maybe spend…3 hours total a week. It’s almost 100% automated, except the fact that I am obsessed with tweaking my product page haha. I am going to give you pretty decent advice. Becoming a millionaire is so much harder if you're doing it by working a 9-5 job. Think LONG-TERM. Having a job is a great way to start making some cash flow, but you should use it to actually start a business. A job isn’t scalable. You only have 24 hours in a day. You have a limit or a cap on how much you can make with a regular 9-5 job. Having access to the internet is all you need, you can see that attention is now the new way to becoming successful. The more exposure your brand gets (whether that is from posts, social media, websites, etc) the more opportunities you have to monetize off your traffic. When you have a lot of people's attention, and you create a product, you’re likely to make a sale. This is scalable. Anything you put out on the internet compounds, continually getting more and more traffic that gives you a chance to make a sale.
Why did P2P lending get a liquidity ranking of 6? It is quite possibly the most illiquid investment option you listed. You said you rank liquidity by “difficulty level of withdrawing your money without a massive penalty”, and for Lending Club notes, it’s not only difficult and extremely time consuming to sell all of your notes in their super illiquid market, but you would have to sell your notes at large losses to hope to get others interested in buying your notes. On top of that, it is impossible to withdraw your money any other way other than just waiting for interest/principal to pay off every month until maturity in 3 to 5 years. You can’t just one day tell Lending Club “I want to quit, please give me my money back.” One can even argue that it is less difficult to sell a home (in order to “withdraw” the money invested) than to withdraw all of their money from a P2P loan portfolio because it is very possible to sell a home before 3 to 5 years.
There is also an idea that we should work to build a passive income asset and then sit on the beach relaxing for the rest of our lives. The truth is that most people would get extremely bored with this scenario and will be eager to find something to do. That’s why the world’s billionaires continue to work… they love what they do and it stopped being about the money a long time ago.