Tag Archives: income

Making Your Money Your Employee

Each of us wears different hats through our life, including each day.  We January be a spouse, parent, kid, sibling, friend, neighbor, customer, and other roles as well.

I’ve been giving some thought to the notion that most of us also play the role of employee.  Now, reaching financial freedom sounds great, in that we might not be reliant on others paying us wages in order for us to financial survive.  Until that day arrives, many of us act as employees that work for other people.

Just as our employers get value out of us, having a full-time employee to help out with making our lives profitable could be really helpful!  Especially when that employee can be trusted, and won’t talk back to us, and will always be loyal.  Don’t worry, there is no undue pressure on the employee; after all, it’s not even a person.

It’s our money!

Yes, you can get your money to work for you.  Most of us probably do already, in one way or another.  If we have a 401(k), or other investments, our money is at work.

Money makes more money for us.   To the extent that we have more of it, we can use it to make even more for us.  The earlier in life we start to make money, the bigger the impact compounding can have on increasing our wealth.  Ultimately, it means that our money works for us.

I think there are 2 broad tracks that we can take:

Track 1: We work for our money for many years

  • Get a job, and make money
  • Make enough money to pay our bills and hopefully set something aside
  • Work as long as our mind and body allow, or as long as we’re employable, in order to pay our bills and get by
  • When we can’t work any more, we live on whatever modest savings we have and then get help from others

Track 2: We work for our money and also let our money work for us

  • Get a job, and make money (same as Track 1)
  • Make more money than we spend, deliberately making saving as much as possible a priority as early in life as possible
  • Keep working and saving, concurrently investing the savings to earn a rate of return that exceeds inflation as we let our money work for us
  • Stop working when we and our money have worked hard enough to build enough wealth for us to comfortably live on
  • Enjoy the rest of our lives with financial freedom and time to focus on what we enjoy

Januarybe it’s a matter of viewing money as a teammate, rather than an employee :)

Anyway, the bottom line is that the sooner we start saving and investing money, and the greater the amount we do this with, the less we have to work. When thinking about types of income, it means that we can focus on investment and passive income instead of employment income.

Readers, do you ever think about how to make your money work for you instead of having you work for it?

3 Types of Income

I think it’s safe to say that most of us like to make money.  Who wouldn’t?  The more money we make, the closer we are to achieving our financial goals, provided we save it.

So clearly, as we’ve explored here, income is important.  From paying bills, to building an emergency fund, all the way to saving for retirement, we need income.  The thing is, I think many people pay attention to only type of income, while not thinking of the others.  Let’s explore three types of income here:

Income from Work

One can call this job income, salary income, or perhaps more broadly – earned income.   Regardless, this is money that you are actively working for.

This income is easiest to obtain when we’re younger.  Frankly, when I was younger, it was really the only income I thought about.  It was all about finding a job, and making money.  Naturally, this is the path most people end up taking, even though some January have trouble finding work in this economy.

Anyway, this doesn’t have to come from a job.  It can also come from being self-employed or from running a business.  Whatever the case, it’s money that you can earn quite easily, depending on your standards as well as your goals.  If you want to make a minimum or low wage job, you don’t require a whole lot of monetary investment to get these jobs.  If you want a better job – and more importantly, a career – it usually requires an investment of money and time in a college education. In many cases, it might require graduate school as well.

I think that this is the foundation of our finances for most our life, and it’s also the source of other types of income.

Investment Income

This type of income comes from assets that own.  Generally, we have purchased these, or invested in them.  This can include stocks, and capital gains from them.  It can also include money such as interest income on checking accounts – no matter how minuscule!  It could also include real estate income, and other alternative sources.

The thing is, in order to get investment income, we have to make money first, right?  How do you invest in stocks unless you have money to invest?  So we must make money, and then save it.  Once we have saved enough, we can get decent cash flow from investment income.

Passive Income

I think passive income is not as clear cut as many people think.  Just to pick out one example, some folks might call blogging income passive income.  Well, you still have to keep on producing content as well as engage your readers.  If you stop writing, and stop interacting, any income won’t last long.  Bottom line is you have to work for it.

The thing is, I think that income which is passive, or near-passive, really entails very little work.  Januarybe this is royalty income, or rent money you earn as a landlord after paying someone else to manage a property.  What it comes down to is this involves making money with little current effort on your part.

The line between passive and investment income might be gray in some cases.  I like the concept of passive income, because who wouldn’t like incoming cash flow with very little effort!  But either way, both investment income and passive income can be really great to have later in life.  If it could help reach the goal of financial freedom, all the better!

Thoughts on all 3 income types

Realistically, we can’t work forever, regardless of the overly optimistic thoughts of too many people.   So we need to first work to earn money, and then make sure we save it.  Then, we can invest this money, earn good rates of return, and grow our nest egg.  Ultimately, such income can provide us with cash flow later in life when working is more difficult or less of an option.  To the extent that we can have passive income, all the better!

I’m still in the working and saving phase :)

Readers, do you ever think about income types, and how it might require earned income to get other income sources?  What income sources do you count on now, and what do you hope to have in the future?

Searching for a Job Online

job searching onlineWhen it comes to job searching, many people often say it’s who you know that matters.  Quite often, I would agree with that.  Networking is really a fantastic use of time, sometimes a more direct path to a credible introduction to someone who is in a position to hire.

Having said that, it’s not the only avenue to finding the right job.  We can also peruse job boards and apply online to positions that interest us.  Frankly, I know a number of people who have landed jobs this very way.  While the competition January be high in terms of applicants for desirable jobs, searching online can often be an expedient way to sift through opportunities.  After all, income is important, and we need to do what we can to secure it.

Here are 2 of the sites that are my favorites:

1) Linkedin. 

Literally, I have used this to find two jobs.  Actually, two.  One was through applying to a job that was listed on this site.  The second was by being found on the site, with a recruiter calling me after seeing my profile.

The advantage of Linkedin, many people believe, is to keep in touch with people and network.  That is true, I believe – in terms of being one of the real benefits.  However, it’s not all.  I think that Linkedin is a good way to be found by those looking for someone for a position, depending on what you do for a living.  Your skills and experience are there to be found, and people searching by keyword or through other avenues can stumble upon the right candidates for positions with some searching.

Also, Linkedin allows you to search people who work at a company, and figure out the backgrounds of the people working in different roles there.  It can give a sense as to what kind of fit you might be there, as well as good information that can help position you to get noticed and even prepare for an interview if you get one.

2) Indeed

This search portal seems to have a broad reach in terms of the volume of positions that it shows.  Simply search by keywords (or title, company name) and location (city name, zip, or state) and you can quickly get a large set of positions that in some way match your criteria.

This is a great way to get targeted lists of positions that meet your stated search interests.  You can scan through lists of 10 at a time, which almost reminds me of searching the web.  Get the search results that are most relevant early on, then go to page 2, page 3, etc.  Or, you can sort by date instead of relevance.  This provides flexibility in terms of what you see in your search.

Bottom Line: In the past, I would have looked much more closely at Career Builder or Monster.  Now, if I were to look at a job board site, it would be these two.  Time is precious, why not spend it efficiently.

Readers – have you ever searched for a job online? If so, how did it go? What do you think the best ways to find work are?

 

Income is Important!

Do you like pinching pennies, cutting corners, and saving money in general? If yes, I’m not surprised. After all, many of us who read personal finance blogs (and own them!) like to save money.  It’s a big part in helping us build up savings and ultimately our net worth.

However, how can we save money if we aren’t making money? I know that we can and should live within our means, and that should probably apply to people at most income levels. But again, if we aren’t making money, we aren’t saving money!  Clearly, having an income is important.

What happens if we don’t have income? Here’s a sequence of events that can happen:

  1. Bills don’t get paid.
  2. Our basic needs don’t get addressed.
  3. Our wants…well, forget about those!
  4. We are raiding our emergency fund
  5. If the emergency fund is depleted, we are raiding our savings or retirement
  6. If savings or retirement funds are depleted, we are borrowing money
  7. If we borrow money, we are digging ourselves in debt that will require income and even more savings to help out from under the debt.
  8. If we can’t borrow money, we’re begging for money
  9. If we can’t get money by begging, we’re out of luck
  10. If we’re out of luck, we’re…..well, I guess we can’t go further than this!

I think you see where I’m going with this!

Certainly, most of us won’t face a continuous straight line down this path if we lost income for a very short period of time.  But it can be painful to do so.  Losing income wreak havoc with our plans to increase our net worth, and to reach the financial freedom goal that many of us are aiming for.

You can’t save, or build net worth, if you don’t have income.

This is why I think it’s important to:

  1. Get a good education (that is a good value, not one that’s overpriced).
  2. Find marketable skills
  3. Build a career

This means acquiring income, growing income, and even protecting it.  I know, it’s easier said than done in these economic times.  But if we don’t pay attention to our income generation efforts, the rest won’t fall into place.

The exception to this could be later in life when we have accumulated enough savings to survive losing income, and might even not worry about it. At that point, our income might even come from our savings.  Hopefully it will! But to get to that point, we need to save money – and to do that, we need to make it!

Readers, what is your first priority in terms of your finances? Is it making money, or is it saving money?