The Big Secret…

Big Secret

This week, I volunteered at my kids school for an event they hold twice a year called, The Reality of Money.  There were two sessions in the morning and two in the afternoon which covered about 400 participants total.  Each session was just over an hour and followed the same format.

The kids find their seats in the bleachers and listen to the MC talk about real life stories of financial ruin and triumph.  (Truly, most kids seem unimpressed). They were asked where they get money today and how do they spend it.  The usual answers came up, get money from a job or their parents and promptly spend it on food, shoes and clothes.

Then the MC tells them that for the next hour they will all be ’25’ years old and given a profile telling them if they are married, with/without children, single/dual income household, college or HS educated, type of job, pay, etc…  They are to go around to each of the stations (I was assigned to housing) and decide what they could afford for each of life’s needs.  Once they went to all the stations there final stop was the Next Payday station.  (No cheating and stopping here if they ran out of money too early – of course some tried.  😉 )

At housing, there were 3 options to ‘buy’ and 3 to ‘rent’.  If they came with ‘bad’ credit, they were only allowed to look at rent.  If they came with ‘good’ credit they could look at buying or renting BUT that would be decided by how much income they had.  On a side note, one of the renting options was to move back in with parents for $325/month.

As they would come by I would encourage each of them to 1. use a pencil when balancing their checkbook and 2. they could always go back to any of the stations and pick a cheaper option if they “ran out of money” due to paying too much for wants.

Now, there were a couple of twists that made this even more fun (at least, for the adults).  One, there were two teachers wandering around picking kids at random and hitting them with “stuff happens“.  The selected kid would pick one card from the “stuff happens” pile and add it to their checkbook.  Flat tire?  Kid sick?  oh no!  The flip side was you could always make ONE trip to the Dollars and Sense station to “earn” extra money.  (Though there was that one kid (there’s always one) who somehow went to the Dollars and Sense station FOUR times!  lol!  Hey man, if you can… why not? ha!)

The second cool thing was the Questions station.  There kids could work out different options for how to get housing, day care, car payments and groceries to fit on a $1,100 monthly net paycheck.  They were offered a few different options including a second job to make ends meet.

My son was one of the participants.  His profile was a single (no kids) bank teller with a high school education.  Good credit but only $100 in savings.  His net pay was $1,625.  He did pretty good, covering all of his expenses and had $309 left over at the end of the month.  (Yes, he made ONE stop at the Dollars and Sense station and earned an extra $50!)  When asked what was his big lesson in all this, he replied, “That I can never afford kids!”.  LOL.

The Results

As the kids would come by our station, it was interesting to see where, in their order of importance, housing fell.  Because really, the only station they could not go to (until the very end) was the Payday station.  Some kids would visit  housing at the end, only to figure out they would have to go back to the Clothing station, return their designer clothes and shop at a thrift store.  Or go back to the Transportation station and have their family live with only 1 car (and a bus pass).

Most kids were willing to live with their parents for another year or two.  Some said “No way I will go back to living with my parents because they say, “my house, my rules”, and I am an adult!”

One kid said his parents have put him on notice, once he turns 18 he is on his own.  So that option of living with his parents was very off the table.

At the very end, when most of the kids were sitting back in the bleachers teasing each other about their checkbooks and plight in life, this one kid came back to housing.  The profile he got was married with no high school diploma and 1 kid (1yr old) earning $2,000/month between him and hi wife.

He was working really hard to make ends meet and figure it out.  I have to say I was really impressed at his dedication.  He had all kinds of things crossed out on his checkbook.  It was obvious he had gone back to most of the stations twice.  Pointing at housing he looks at me and says, “I would like to change my housing from ‘renting apt’ to ‘move in with parents’.”  

Before I get a chance to go into my talk about how ‘moving in with parents’ when married with a kid is really not a slam dunk option.  It would require a long, serious sit down talk with your parents.  I don’t know that they would be willing to have THREE people move in especially when one is a 1-year old … you guys know where I am going with this…  anyway, he cuts me off.  I don’t get a chance to say any of that.

He continues to say, “If we can move in with my parents, I can go to night school and get my GED.  Then if we can stay for 2 years, we can go to college and get our Associates so we can get a real job and support our family.  If we could live with my parents, we can save the money to put towards having a better life.”

Holy poop!  I was blown away with this kid’s thought process.  I sat there staring at him for a few seconds.  I could hear all the other kids on the bleachers, chatting and laughing.  Finally, I said the only thing that any parent could say…

“If you were my son, I would let you and your family move in for 2 years because you have a plan and the drive to execute it.  I believe you when you say you will go back to school and make it work.  Yes, you can “move in with the parents” for $325/month which would make your budget work with a little extra cash left over.”

The Big Secret

The big secret in winning the game has nothing to do with your income and everything to do with keeping as much of it as you can.

I shared stories with some of these kids, of doctors and lawyers with huge incomes but spend it all – giving them a net worth of zero, or worse, having a ton of debt.  Then I told stories of teachers with a less than a modest income, retiring with no debt at all, not even a mortgage and living a wonderful life in retirement affording all the things they love.

I reminded them that this is just a point in time nd to not be crushed by their small income, but to focus on spending little of it and always paying themselves first.  If they can master this one skill they will be further ahead than most.  I told them to grab their slice early in life!

If you could go back and give yourself that one piece of financial advice, what would it be?

A New Day

Where have you been Pie Lady FI?  You haven’t posted since April!

My friends, it is with heavy heart to share with you that my mom, at 73 years young,  lost her battle with a rare form of liver cancer, July 2018.

My last post, Got Crisis? An Emergency Fund Can Help With That, I talked about my mom and her battle with liver cancer.  How she opted for the surgery the first time.  When the cancer came back, March 2018, a year later, she opted for chemo pills.  If the chemo worked, doctors gave her a maximum of 12 months.  If they didn’t, 6 months.

Going to see her family in Italy was always something she talked about doing as it had been a few years since her last visit.  We talked about the two of us taking that trip together.  A mother-daughter trip for 3 weeks.  The doctors thought it would be great.  She was uninterested and would say “when I feel better, we will go.”.

Even now, its tough to write this post.  Our relationship in many ways was a typical mother-daughter relationship.  My teenage years we fought often and would make up right away.  It continued that way in my early 20s.  We would fight but by dinner time we were talking about what to make that evening… as if nothing happened and all was forgiven.

As I got older, had my own kids, our relationship got better.  Mostly because I was changing and I would like to think maturing.  Mom was tough, no question.  But during my lowest points, she was always there… calling daily to check on me and the grandkids.  She even flew here to stay and help.  She repeatedly asked me to move home, during my unemployment time.  But south Florida had an even worse time to find employment.  She would periodically send me money when I couldn’t make ends meet, even though she was on fixed income.

Mom and I were raised very differently.  She was born and raised in a small town in Italy.  She never got past elementary school and went to work very young.  By 20, she dated my dad for about 2 years before they got married.  My dad got a call for work in Florida.  Once he established himself, almost a year later, he called for my mom to join him.  Neither of them had lived anywhere except their little town in Italy.   They were poor.  I mean poor.  Not just financially poor, but only spoke Italian and didn’t know anyone except the shop keeper they worked for poor.  Mom was depressed and home sick.  Early on, she didn’t like living here at all.  It was the late 60s.  It must have felt like she moved from earth to mars with all that was going on in the US at that time.  She didn’t like the food and lived on hamburgers.   She worked for free since she was learning a new trade.  The hours were very long.

My dad was the one who wanted us to go to college and in fact I was the first on both sides of my family to graduate from college.  My brother was second.

If you are a first generation American then you will understand when I say mom and I (only the mothers and daughters seem to go through this) had a love-hate relationship.  And its not just Italians, really any country.

No question, mom loved me.  She was proud of me and what I had accomplished.  She knew her sacrifices played a big role in who I am today and for that I am very grateful.  But there was also hate.  Hate because, somehow I robbed her of her life that she could have had.  A life that now I was living.  Now please don’t get me wrong, she never hated me but hated that when she looked at me and my life, she was reminded of what could have been.

Mom would tell me “Raising children is like buying a car.  You can either spend a bunch of money in the beginning and buy brand new or spend a little up front but then spend (time and money) along the way repairing it.  Either way, you are going to spend that money so you are better off paying up front.”

Raising kids, same thing.  You spend your time and energy when kids are young, when you are their world and sole influencer.  When they start high school, your influence is cut to 50% and that is IF you have a solid relationship.  It is at this point, when we think back as parents, “Did I give them a solid foundation on which they can make good choices?”  If you did, then that 50% wont scare you as much.

Mom was always great about advice.  Kids, money and food, she was always experimenting in the kitchen.  She was an amazing cook and loved a good party – complete with dancing.  Dancing as in move-the-furniture-out-of-the-way-and-let’s-go.  We had great parties.  40-50 people would show up with wine, food and music.  They would play all kinds of made up games and even truth-or-dare.  So crazy when I look back.

In July 2018 mom passed.

In August, we had the funeral service.  It was her wish to be cremated.

In September, my boyfriend of 7 years, asked me to marry him.  October brought my 50th birthday.

I am grateful that I spent mom’s last week by her side.  I am grateful that we all got to visit with her over the summer while she was still mobile.  I am grateful for all the good talks we had.

Even with all that, I would give anything to talk to her one more time.

Love the ones you are with.  Make time for what is truly important.

Instead of presents this holiday season, why not give the gift of time and an experience that will one day turn into a fond memory to be carried in your heart.

Got Crisis? Emergency Fund can help with that.

My mom was diagnosed with liver cancer and lives a 2 hour plane ride away.    No one ever wants to think that something like this can happen but… it can and … it did.

March 2017, a week before mom’s 72nd birthday, she got the news that she had a large tumor in her liver.  Doctors said she was lucky because it was contained.  All she needed was surgery (no chemo) and her life would go back to normal.  Ever since that day it has been anything but.  The first time I flew home was for 10 days to help with her pre and post surgery preparation.

In short, the next few months was a whirlwind of flying back and forth, while mom went into and out of the emergency room a total of 5 times (twice almost dying).

Then, finally, a break in the chaos, she finally stabilized.  Doctors proclaimed her “cancer free”.  The tail end of 2017 was uneventful and we were grateful for the monotony that comes with the everyday.

March 9, 2018, mom called me crying.  She had a doctors appointment earlier that day and it was our routine that she would call me after each doctor appointment.  She said the cancer had come back and that I needed to call the doctor.  I couldn’t believe it.  My first thought was that she must have misunderstood and I told her it was going to be ok.  The doctor and I finally touched base at 5:00pm that day.  He confirmed what my mom was trying to tell me.  The latest scan showed 3 new tumors in her liver.  He went on to explain that she was ineligible for surgery a second time due to the number of tumors and the amount of liver left from the previous year surgery.

This time mom decided to go with chemo pills.  She doesn’t leave her house because she sleeps all the time and has lost a considerable amount of weight.

Mothers Day, I will be going home for what I know will be our last time together as a family.

I don’t know how many more times I will need to go back and forth to help mom in the months to come or how much her care will cost as the cancer progresses.

I am eternally grateful for the lessons she taught me in managing my finances to always “keep a little put away for just in case”.  “Just in case” is here and now I can be there for her.

Thanks mom for teaching me the patience and discipline that comes with building and keeping an emergency fund.

For most, emergency funds are not thought about until its too late.  Life can be stressful enough, no need to add a financial stress on top of everything else.

Grab Your Slice!

Pie Lady FI

 

 

 

Are you ready for the next recession?

Forget politics, recessions are part of economics.  In the United States, we have had as many as 47 recessions.

According to the National Bureau of Economic Research (NBER), an American private nonprofit research organization, a recession is “a significant decline in economic activity spread across the economy, lasting more than two quarters which is 6 months, normally visible in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales”.  Its not a matter of IF we will have a recession but WHEN.  Are you ready?

Its not a matter of IF we will have a recession but WHEN.  Are you ready?  

If you lost your job, could you still pay your bills?  Do you know how much money you would need in savings to cover 1 month of expenses?

If you answered ‘no’ to the questions above then its time to take inventory of your life.  Here’s how:

1. Got to know where your money is going.

Its not enough to guesstimate how much you are spending on groceries, dining out, entertainment, car, home , utilities… you have to know exactly where your money is going.  No more excuses, start recording every spend.  Organize them by category per month.

2. Emergency Money… Got some?

Most Americans are literally a paycheck away from homelessness.  Don’t be that person.  You deserve better!  Change your direct deposit to put 20% in a savings account and the rest in your checking.  This will do 2 things: 1. discipline yourself to live on less and 2. build that emergency fund.  Note to self, a vacation fund is NOT the same as an emergency fund!!

3. If disaster strikes be prepared to go into “one-ply” mode.

Bring the budget down to basics.  Eat at home, find free things to do with your friends, shop for necessities only, purchase 1-ply TP to remind you that its time to tighten the budget belt.

4. Got debt?  Get rid of it.

People ask me all the time, “Should I focus on paying off my debt or built my emergency fund?”  Its really a personal question.  But as a general rule, in the best circumstance, I would say to do both in parallel because the last thing you want to happen is be almost debt free only to have a big unforeseen expense come up and not be prepared for it.

Don’t be afraid to make a list of all of your debts.  Don’t wait until you “have a better paying job”.  Its not about the paycheck its about what you do with what you have.  I have read countless stories of school teachers retiring after 10 years and movie stars having million is debt.  Stop making excuses.  Take control of your life today.  You deserve the best in life.

When I started my journey of financial independence, I was about $130,000 in debt (not including mortgage).  It felt awful to look at that.  But acknowledging is half the battle.  Just by admitting to myself I was in financial hot water, I was able to take control and build a plan to get myself in a better place.  That was many years ago, today I have only mortgage debt and a solid emergency fund.  I also max out my 401k, ROTH and HSA accounts every year.  It wasn’t easy but I did it… and if I can do it you can to!  I have faith in you!  You deserve it!

Grab your slice!

Pie Lady

 

 

Got Extra Cash? What to do with a Pay Increase and Tax Refund

Finish this sentence:   “If I had a bigger paycheck/big payout I would… 

(pause and think about your answer)

This year, most people will see a bump in their paychecks due to the changes in tax laws.  In addition to a paycheck increase, over half of Americans will get a tax refund.

Got Refund?

According to Credit Karma Tax Survey of 2,000 participants, the top 10 things people will spend their refund on are as follows:

10. Buy a gift for that significant other, 2%

9. Give it to a family member, 3%

8. Pay off Medical Debt, 3%

7. Pay off Student Loan, 6%

6. Buy Myself a Gift, 6%

5. Put towards a Major Purchase, 10%

4. Buy a Vacation or Wedding, 11%

3. Pay off Other Debt, 16%

2. Pay off Credit Card Debt, 16%

1. Buy a Rainy Day Fund, 20%

Two-thirds of those surveyed will either be paying off some kind of debt or saving it.  Pretty impressive!  Spending a refund on a vacation, themselves or their loved ones, is not a mistake necessarily.

Food for Thought

Refunds are not and should not be considered “found money”.  Tax refunds are made up of your hard earned money, that you worked for (think paycheck).

Refunds are really you paying the government extra paycheck money on top of the taxes already taken out.  The government is of course, all too happy to have the extra pay and invest it to leverage compound interest.  (Compound interest that you will never see because the sharing only goes one way).

One way to keep more of your paycheck is to take a look at the newly updated W-4 form and withholding calculator on the IRS website, due to be made available at the end of February 2018.  Calculate your “pay increase”.  Here are some suggestions for handling the extra money.

Got Pay Increase?

According to ADP, single filers grossing between $46,000 and $162,000 will see an increase between $40 and $190 per paycheck.  Married filers grossing between $51,000 and $167,000 will see an increase between $30 and $172.  This is before you even adjusted your paycheck withholding.

Between the tax adjusted pay increase and adjusting your tax withholding, you should see a nice overall increase in pay.  All pay increases should be treated the same.

1. Pay off credit card, auto loan, medical debts.

Make a list of all debts.   (include the following information for each debt: monthly payment, interest paid, pay off amount, name and type of debt).  Check out: 3 Ways to Pay off Debt.

2. Build up a Rainy Day fund.

The amount of a rainy day fund depends on many things, most importantly how quickly you can find another job with the same or better pay.  Other factors include: how much are monthly expenses, if you have kids, rent/own your home and your level of comfort with risk.  Rainy day funds can be anywhere from 3-9 months of expenses (not pay).

3. Invest the extra income.

In order of importance:

1. Max out your 401k (or at least grab the company match).

2. Max out your Roth IRA (the younger you are the better).

3. Max out your HSA account (triple the tax free fun).

Got all that under control?

4. Invest in mutual funds, rental property or whatever your interested in that can generate passive income.

At the end of the day, its not having a bigger paycheck that will make you financially independent, its what you do with what you have.

Change your money mindset.  Today, you have more.  What are you going to choose to do with it?

Grab Your Slice,

Pie Lady.

Get Your Slice

 

9 Things to Know to Become Financially Independent

My middle schooler came to me the other day and said, “mom, I have a classmate who wants to learn to be financially independent.  I told her you could teach her.”  At first I thought she was pulling my leg.  I mean, Wow!  How often do you hear a middle schooler think about such things.

For years, I have only been approached by adults who have run up literally $1,000’s in debt, with hardly any savings and very little (if any) investments.  Basically, people who are paycheck to paycheck.  Together we build a plan to get back on track or start over as the case may be.

It got me thinking if I had the opportunity to talk to my teenage self, what would I teach them?  These are my lessons learned:

9. Success Takes Work.

The average millionaire is self made.  They started at the beginning, with nothing and worked their tails off.  Nothing was handed to them.  They took every opportunity and learned from every mistake.  They pictured themselves being wealthy and the freedom it would buy them.  They also remember that money doesn’t buy happiness, so when they did spend, they spent wisely.

8. Build Multiple Streams of Income.

To reach financial independence within 15 years, you need multiple streams of income to grow your money exponentially.  Saving will get you there but only after 30 or 40 years.  There are hundreds of ways to achieve this from investing, real estate, blogging and publishing a book are just 4 off the top of my head.

7. Money and Opportunities are everywhere.

To be alive in this day and age is amazing.  Never in our history have we had so many opportunities to make money and be come financially independent.  Our world is changing at an unprecedented rate and with that are opportunities.

6. Read More.

I wasn’t always a reader.   As a kid I was more of a tom boy, always outside, riding bikes, running around and climbing trees.  Today, I read every night.  Every day I make a point of reading something that betters myself.

5. Wealthy people are not necessarily smarter.

We are all given opportunities.  What separates the wealthy from the rest is the fact that wealthy people take every opportunity and run with it.  They have passion for their work.  They set goals and work to achieve them.  Each time they make a mistake, they learn from it and work harder.  There are no excuses.

4. Surround yourself with successful people and mentors.

Boy did I miss the boat on this one.  As a kid and young adult I had ZERO self confidence.  It took many years, of self help books and soul searching to get me on the right track.  Today, I look for mentors that I can learn and grow from through their experiences.  My time with them is valuable and make every effort to come prepared with questions or topics to discuss.  My friends are awesome, our conversations are more of a 2-way street where there is ample time to learn and grow together while being supportive and having fun.

3. Be frugal.

Sometimes I think I should bump this to #1.  As a young adult, I would easily spend most of my money on clothes and entertainment.  What was I thinking???  I wasn’t.  Like most young people I never thought about getting old (too far away).  If I did more investing and less spending, I would be retired today.  Compound interest is your friend.  Leverage that early and often in your younger years.

2. Spend Smart.

If I have said it 1,000 times, its “it doesn’t matter how much you make, its what you keep.”  The doctors, lawyers, professional athletes, and movie stars that make millions doesn’t mean they are wealthy… maybe rich, for a little while, but not necessarily wealthy.  More and more I see people with modest salaries, like teachers, that retire in 10 years.

And my number 1 piece of advice:

1. To be successful one must be disciplined.

As a young adult, I though success and wealth were for the few and lucky.  Today they are known as “the 1%”.  This is a lie!  The truth is to be successful you have to be DISCIPLINED.  Bring 150% effort, every day in everything you do.  Success is not free and no one is going to hand it to you.

So there you have it.  Without discipline nothing else will work.

Discipline will get you focused on your passions and grow your mind.  To be wealthy you need multiple streams of income.  To build multiple streams of income, you need to focus on peoples problems, how they can be solved and build a business around that.

So today, not tomorrow and not this coming weekend, TODAY, think about you and your passion and your life tomorrow and all the days that follow.

What is the one piece of financial advice you would give your younger self? Get Your Slice!

Reasons Your Goal Setting will be an Epic Fail

92% of all goal setters fail to achieve their goals and give up.  92%!  That is a big boat of people.  It got me thinking, what are the other 8% doing that the majority of us are not?

When I started trying my hand at goal setting, I was in the 92% and I mean DEEP in 92% land.    In fact, most of the time it was an endless loop of set, forget, find and fail.  This loop reinforced what I was already thinking.  I am not a goal oriented.  Sound familiar?

After years of self educating and talking to other goal setters … what successful goal setting comes down it is:

1. Goals need to be SMART

SMART is an acronym for Specific, Measureable, Achievable, Relevant, Time-Bound.  Right off the bat, knowing how to write a goal is literally half the battle.  Without a well written goal, it is very likely you will fail.  Here is an example of what I am talking about:

Not SMART Goal: Go to Europe.

SMART Goal: May 2020, go to Rome, Italy for 2 weeks, with a budget of $5,000. Save $200/month for 25 months starting March 2018.

2. Read them on a daily basis

Once the goal is written, it needs to be in our face, daily.  We need to be thinking about it at least once a day.  Without that daily reminder, we run the risk of forget, find and fail.  This time, that wont happen.

3. Break big goals down

A goal can feel overwhelming if its too big.  Like the old saying goes, “How do you eat an elephant?  One bite at a time.”

Lets take that the trip to Rome, Italy for example.  Unless you have $5k and 2 vacation weeks it would be difficult to go within the next 6 months.  Thus, setting yourself up for failure.

Big goals need to be broken down into daily or weekly action items that will get you to the bigger goal.

4. Support your passion or an overall purpose

This should go without saying but your goals should reflect what you are passionate about or a big goal that is important to you.  For example, buying a car, house, rental property, or taking a big trip.  Whatever it is, be true to yourself.  Enjoy you life.  Set your goals up to support the lifestyle you want to live today and tomorrow.

5. Stop multitasking

If you haven’t already gotten the memo… multitasking is for computers, not humans.  So stop it.  Make a list of what needs to get done today.  The things that are important but not critical, knock those out first thing in the morning.  That will free up your day to focus on the critical stuff.

6. Prioritize

Try as we might, we can’t do it all.  So don’t waste your time trying.  Everyday I have a long list of tasks to achieve.  I pick out the top 3 things and work on that.  If I have free time, I may get a 4th or even 5th thing done.  I started doing this last year.  It’s a tip I picked up from, Automatic Wealth by Michael Masterson.  This is my secret for how I keep things moving forward.  Try it for a month.

True story

I started out like the 92%, writing my goals for the year, New Years Resolutions, convincing myself, this year will be different.  By February, I was back to my regular day to day.

What changed was my attitude towards myself.  By leveraging what the 8% have known all along, it has turned this non-goal oriented person into a Goal Advocate.  You know what else?  When I am having a down day, I look back on all the things I have achieved and it gives me a little boost.  Like a self given hug.  Can’t beat that!

So go ahead, start writing a few goals, put them someplace you know they will be read daily, check off the ones completed with a date and add more as the list gets completed.  (You don’t need to wait for New Years to come around.)  😉

Grab your slice … today,

Pie Lady

How to leverage Passive and Active Income?

The brutal truth is you are never going to make it to early retirement if your only investment is a company retirement fund and social security (and its debatable if social security will even be around in another 10-20 years).

Its on you to fund your lifestyle.  This is where passive income comes in.

What is Passive Income?

Passive Income is any money that comes your way without actively working for it.  Its a kind of set it and (almost) forget it mindset.  I say “almost”, because it does require some effort.  Passive income is a key component to any successful early retirement goal.

To secure financial independence, you need to secure 3-5 streams of passive income.  This approach works especially well if the streams are diversified.  This way when one stream is hit with hard times you still have others that can cover you.

What is Active Income?

On the flip side, active income producing jobs are things like your 9-5 or a small/side business that requires you to be present.  Active income streams definitely have its place when working to achieve financial independence.  Once you have achieved financial independence, you now have options.

Do you want to continue at your 9-5 or move on to something else?  That is what passive income can give you that active income cannot.

Other types of active income producing side businesses could be: a virtual assistant on Upwork.com, Social Media Consultant, Influencer, and Web Site Developer, etc.

The pros to having your own side business are a) setting up your own hours and b) picking our own clientele.  The pros to having a 9-5 are a) health benefits and b) steady paycheck. But as with any active income, the moment you stop working, so the money stops too.

How do I get Passive Income?

There are literally hundreds of ways to generate passive income.  Below is a short list to inspire you to Get Your Slice of financial independence and in many cases, have some serious fun doing it.

Here are just a few ways to start generating Passive Income:

1. Get Your Slice of Cash Investments:

a. Pre-tax cash investments:

1. Invest in your company 401k.

2. Invest in a Roth IRA.

b. After Tax cash investments:

1. Invest in an Index Fund.

2. Purchase dividend stocks.

3. Invest in a Money Market (Make this your Emergency Fund).

4. Pay off Your Credit Cards.  save that interest and penalty payments.  Get 1 cash back credit card.

2. Get Your Slice of Real Estate.

a. Bricks and Mortar:

1. Purchase properties to flip.

2. Purchase properties to rent.

3. Rent out a room on Airbnb.com

b. Real Estate Cash Investments:

1. Invest in a REIT.

2. Look into RealtyMogul.com: where investors meet equity investment opportunities.  Good for all skill levels.

3. Clear the Clutter.

Sell your unused stuff (that used to be money).  Have a neighborhood garage sale, list your stuff on Craigslist, Fulfillment by Amazon, EBay, and for electronics try: thegoneapp.

And for stuff no one is going to pay for (but too nice for the trash): Freecycle.org or Listia.com.

4. Not ready to part with your stuff?  Rent it out.  Bicycles, parking spots, and household goods.

5. Sell. Sell. Sell.

Photos online: ShutterStock, istockphotos,or Pexels

Physical product to sell? Try Shopify.

6. Start a Blog.  Have something interesting to say or want to teach others, this is a great way to showcase that talent.

7. Write a book or e-book or audio book.  Publish the same book 3 different ways.  Give your audience options to suit their lifestyle.

8. Create an Online Course on Udemy or Teachable or YouTube Tutorials.  Research what is popular and see what works.  Put your own spin on it.

9. Want a business but not the overhead?  Try peer-to-peer lending.  Invest in people or their business via Funding Circle, LendingClubProsper, and Harmoney.

And so much more….  but I think you get the picture.

Where do I start?

No question, it can be overwhelming with all the choices.  I would recommend starting with the basics.

1. Max out your 401k (or at least get the company match).

2. Max out a Roth IRA.  The younger you are the better this is because of compound interest.

3. Pay off your credit cards.  This does come under passive income because it frees up additional cash that is not going to credit card penalties and interest.

4. Build that Emergency fund with a Money Market account.

5. Get rid of the clutter either though selling or renting, or just giving it away to someone who CAN use it.  Giving stuff away may not add to your bottom line but it does give you back time and feel good brownie points (and who wouldn’t want those?)

6. Pick your next passive income venture.  What will yours be?  Write it in the comments below.

One-Ply and the Road to FI

How can toilet paper help anyone achieve financial independence?  We all have ways to save and invest.  Our house holds family meetings where we talk about … all things that impact our family.  When we go over budget, and we do every so often, we handle it by holding a family meeting and talk about the fact that we need to have a spending hiatus for a month or two… or until we are back on track.

Recently I talked to a friend who had a different approach.  Whenever they would over spend, they would switch all the TP in the house to 1-ply until they were back on track.  Honestly, I thought this was the funniest thing but brilliant at the same time.

We have a family meeting, talk  about it and then really don’t talk about when the spending hiatus is over.  The switching of the TP not only signals where the family is with their finances but also gives everyone a friendly reminder of where the family finances are.  Once the hiatus is over, the family celebrates with cushy 2 ply TP.  I think this brilliant.  Everyone is working towards the same goal.

When I was growing up, my dad paid the bills.  Every month he would sit in the living room with piles of paper sitting in front of him.  Armed with his checkbook he would pay each bill one by one.  As I got older I would sit with him and even write some of the checks.  (English was my dad’s second language.)  Like most families, we never really talked about money except to say to follow the 50-30-20 rule  (50% to rent/mortgage and utilities, 30% for clothes/fun, 20% for savings).  I don’t ever remember taking a spending hiatus, but we didn’t live an extravagant life either.  It was simple, filled with lots of dinners and parties for all kinds of things (i.e. “Its Thursday, lets have a party!!”).

How do you keep the family on track?  Do you take spending hiatuses?  Share your tips below.

Grab Your Slice,

PieLady

 

3 Steps to Reaching Your Goals of a Lifetime

FULL DISCLOSURE: This is my second most favorite topic to talk about.

Congratulations!!!  You have made it through “Get Real”!  Working through the exercises in the Get Real section can be a little scary.  Remember where you are today is just a starting point.  Now comes the fun stuff …  DREAM BIG !!  Where do we want to be?  The sky is the limit!!!

I do want to take a moment and give a shout out to all my non-goal oriented friends out there.  First of all, stop groaning and rolling your eyes!  Yeah I can see you from here.  🙂  Believe me when I say a properly set goal can be life changing.  No exaggeration!  Goals are personal achievements we work towards.  All I ask is that you give it a chance.

Step 1: The Dream Big List.

In Mark Twains, The Adventures of Tom Sawyer, I love the scene where Tom and his friends come back to town to witness their own funeral.  They listened to what their friends and family had to say about them (until of course they jump out and surprise everyone).

What would you want people to say about you at your funeral?  Are you living a life to reflect that?  Would you have regrets? What would you want your lifetime achievements to be?

Dream Big!  Make a list.  Nothing is off the table AND your lifetime goals shouldn’t only  be  financial.  Remember, a whole pie is made up of many slices (big and small).  The Dream Big list should be specific as well as growing and evolving, so revisit it often.  Add to and mark things off the list as you accomplish them.

Financial goals are unique in that they touch on all the other goals.

Financial goals are unique in that they touch on all the other goals in a supportive way.  Want to own a home?  That takes money and time.  Want better health?  A financial house in order will give you peace of mind and lower your blood pressure.  Which brings me to Step 3, Setting up your financial kitchen with the basics.

You become financially free when your passive income exceeds your expenses.  – T. Harv Eker

Step 2: Set up the “financial” pantry with the basics.

The secret behind any great chef is an organized pantry stocked with lots of yummy goodness and great tools.  In order to do that, we need to take inventory of what is currently in the pantry.  At this point, you should have the following in place:

1. Credit Report & Score (From Get Real Section)

2. Budgeting tool for daily record keeping (From Get Real Section) or skip this and leverage Plan B the Lazy Persons way to budgeting.

3. Lifetime Dreams list – must be written down and as specific as possible.  (What our end kitchen will look like.)

4. Identified your top 3-5 dreams to focus on and track progress.  As each accomplishment is met, so we add other goals… the best time to do this?  Now!  Why wait for Jan 1?

5. Clear out the cluttered “financial” pantry of stale debt and stock a rock solid emergency fund.

Got debt?  Get rid of it.  Especially BAD Debt.  Bad debt is like expired food taking up much needed space in an overflowing pantry.  Things like a car loan (throwing good money away on something that is depreciating every time your drive it), personal loans (the kiss of death), or credit card debt (silently killing your dreams).

Got emergency fund? Now that we have cleared out the debt, lets start building a proper emergency fund.  A properly stocked emergency fund (3-6 months of expenses – not income) will keep you from derailing your goals.  This is a very important part of planning your FIRE (Financial Independence Early Retirement).  Do not underestimate the importance of a properly stocked emergency fund.

An emergency fund can keep your financial focus even when out of the blue expenses come up … and without losing a wink of sleep.

These small bites don’t seem like they will get you to eating a whole pie, but with each bite is one less to eat in the future.  It is THE strategy that will get you to eating whole pies in no time.

This next part is building the AWARDING WINING Pie.

As a rule of thumb, every $250,000 in cash investments can generate about $1,000 a month in passive income.  Stay with me.  Don’t freak out.  It does sound like a lot of money because it is a lot of money if you had to come up with it say, tomorrow.  My point is, you don’t.  We have 15 years to build our FIRE.

So, take a deep breath and go through our recipe for success:

Step 3 Pay Yourself First.

Pay Yourself First with Pretax Investments (The Pie Crust).

Pretax money comes out of your paycheck before you get taxed.  This pretax money has more buying power.  It also lowers your overall tax bill for that year.  Win-Win.  However, when you withdraw the money (age 59 1/2 or older) it will be taxed. Here are a couple of ways to do that:

a. Max out your 401k (or at the very least start out with the company match – aka free money).  If you are starting out with the company match, every 12 months add 1% to that until you max out your 401k.  No 401k?  Open an IRA.

b. Max out an HSA account (or at the very least take advantage of any company match).  Triple threat: Pre-tax, no tax withdrawal, no tax on interest.

Pay Yourself First with After-tax investments (The Pie Filling).

This money doesn’t have the buying power that pretax money has but it is equally important.  Because the money has already been taxed, when you withdraw it, it is not subject to tax.  So … to keep your overall tax bill in check you could leverage money in these accounts to offset your tax bill year after year.  Opportunities include:

After maxing out your pretax investments, leverage your company direct deposit from each paycheck.  Just like taxes, we will divide your remaining paycheck into several accounts but still depositing money into your checking account to cover monthly expenses.  Its important to leverage direct deposit before you get paid.  Unlike taxes, this money will be put to work for YOU leveraging compound interest (key ingredient).  Here are some options.

Roth IRA: Do you have a Roth?  Are you maxing out your contributions here to provide leverage in retirement?  Its a post-tax investment but the compound interest accrued is tax free.  These are great for those who are young and in a lower tax bracket, to get the biggest bang for buck.

* Mutual Funds:  Do you invest regularly in mutual funds?  Vanguard Total Stock Market Fund, VTSMX, is the largest and inexpensive to invest in.

* Annuities: This is an option if you have already maxed out you 401k and Roth.  GoodFinancialSense has a great article that talks more about who this would work for and when.

Pay Yourself First with a Side Business (Pie a la Mode):

In todays day and age there are literally TONS of ways to generate passive income.  Below are just a few ideas.

* Other people’s businesses or education.  Know someone who is crowd funding to start the next Google or Facebook?  Or maybe you know a kid who could be the doctor to find a cure for cancer.

Social Security: In 15 years, will you have reached the age to social security?  That could be your first stream of passive income.  (not that I am saying to rely on it being available when you get to that point).  We are just painting a picture.

* Blogging: If you enjoy writing and have a topic in mind you enjoy sharing, this may be a good side business for you.  Passive income can be generated through Advertisement, Brand Ambassador, etc…

* Real Estate: This can be a great way to add passive income while growing your overall net worth.  The property value increasing adds to your overall bottom line as well as collecting rent that can add to your monthly income.

* REITs (Real Estate Investment Trust): Maybe buying property isn’t your thing but you still want to jump on the real estate bandwagon.  REIT’s is one way you can do that.

There are literally hundreds of side hustles that can generate some additional cash or at least too many to list here.

So there you have it.  Goals of a lifetime in 3 steps.  Life is so much more than one slice of pie.  I encourage you to take a step back and look at your life as a whole, the good and the bad.  We are but the sum of many slices.

What are some of your lifetime goals?  I would love to hear from you.