Other Income Streams

One thing I have been doing recently (and of course, not posting very much here) has been to start getting together a small business plan to get myself a third income stream.

Currently I am working in a 40 hr salaried position which is of course my first and main income stream.

Secondly, I have a house up the coast which I am renting out. Even though it has been rented out for 4.5 years, I have battled through paying the extra interest and this year will (I think and hope) be the first year that renting it out will turn a profit. It’ll be small to start off with but hopefully progress as the years go on.

But something has been niggling me recently and I have decided that it was about time to start getting another income from somewhere else. After racking my brains, I have decided to go into business for myself and keep it as a part-time project which I can do in the evenings and weekends. I think I’m lucky that my day-job allows this since there are a number of others who also earn money in their non-(normal-)work time.

I won’t quite say what it is yet but it will tap into my IT knowledge and knowledge of systems around the world which I can also tap into. Suffice to say it will be a passive stream though that doesn’t mean it is without work, it just means that the income from it should be non-proportional to the time I put in.

ie. it is not my time I am selling, but a product independent of my time.

This is very important, especially for someone who still has a day job.

Posted: 08 May 2010

Is there such a thing as the Perfect Deal?

Over on Sweating the Big Stuff Daniel posted about Waiting for the Perfect Deal. It was something I could identify with mainly because in the past, when I wanted something I want it now!

As time as gone on however, I find myself easily able to resist buying certain things. I currently have a microwave in which the display doesn’t work. It’s interesting since I hadn’t owned the microwave from the beginning and only acquired it once the display was broken. As it turns out, it’s a complete pain to use. In fact, I have no idea how to turn the settings down so that it doesn’t cook on the “highest of the high, this will make iron melt“ setting.

Silly Sale Season

It’s time for a new microwave I think.

But still, every single shop in New Zealand has had at least three different sales since Christmas. The traditional Boxing Day Sale, the Sale Between Christmas and New Year Sale (the one no-one knows what to name) and of course we’re just had the New Year Sales! It’s crazy.

As it turns out I have seen plenty of microwaves during this time. 40% off, 50% off and even 60% off. Plain and simple, I figure 50% off is about as much as you’ll get during the course of the year. Every now and again they have 30% or 40% sales but not usually 50% or 60%.

So why didn’t I buy a new microwave.

Well, hmm, hard to say really. Probably because Christmas is always an expensive season hence January is usually clawback month. Also because the old microwave actually still works, if you know how to treat it right.

But in all honesty, the real reason I didn’t buy one is because of the types on offer. They all have those dastardly display. All I want is one with two dials on the front, one for power and one for time. Why? Because these don’t fail. Buttons, displays, alarms, roasting things, weird door catches, they’ll all fail I tell you! My old microwave had two dials and it was awesome. Small, but awesome. It lasted years (though I had to get rid of it, fully working – long story).

Patience is a Virtue

Then finally today, I saw one. Two dials, $250 minus 40% so about $150! It looked the job. It was the perfect deal.

I didn’t buy it.

Maybe I will later in the year. Maybe when silly season is over and my bank account looks healthier. Maybe when my current microwave dies a little more and maybe when it’s on sale again for a bargain price. We’ll see. Overall, I won’t worry too much and my one overriding reason for this is, it’ll be on sale again sometime later.

What have you been putting off buying for ages and why?

Posted: 06 January 2010

The Real Goal

I stumbled across a post over on Mighty Bargain Hunter – What is Financial Retirement? and I couldn’t help but agree with it.

Especially the following quote:

Retirement is about Money, not Age

I just wanted to write a quick post on this, since this says in a few words what I’ve been saying my plan was for a while.

I have variously described my plan as “Retiring at 40 but not actually stopping work“. That sounds ok but it’s a little confusing. Then I changed to something more like “Well, not actually retiring, but just not working for someone else.” It turns out all of these things are true.

The Real Goal (as SMART)

Watching the hundreds of blog posts about New Year Resolution’s (which I don’t do), I have come to think of these things as “Goals for this Year“. I think that describes best what most people actually do.

Instead, I will make a goal now for six years time. I just turned 34 so in 6 years from now (I’ll give myself plus or minus 6 months) I plan to retire :)

But to do that I need goals. This is a brave decision of mine but I am now planning on setting out the goals now for what I need to have achieved in six years time. The added bonus with these goals is so that I can set other smaller goals along the way.

To make sure my goals are SMART, here’s what they are defined as (along with numerous other variations):

* S = Specific * M = Measurable * A = Attainable * R = Realistic * T = Timely

By the way, I also plan on reviewing these goals every year since otherwise they may be horrendously out of date in a few years time (either due to health, money, technology advances or aliens).

So let’s start.

The Goals

# be able to live in/move to a house in which I pay less than $1000/mth to live in # be working for myself, whether that is contracting, earning money from sales, adverts or referrals # have no other debts (apart from my rental house which will be self-sufficient by this year’s end)

Some clarifications necessary.

# This includes mortgage, insurance, tax/rates, some maintenance, all bills (electricity, gas, telephone, internet, misc) # ie. have no immediate bosses who say “you must do this“ # Apart from my rental house which will be self-sufficient by the end of 2010.

Ok, that’s a first stab. I’m not sure I have covered everything but I think those things are SMART.

What do you think? Are they realistic? Specific? Measurable? Any other suggestions for other goals I may need to consider?

Posted: 02 January 2010

Basics: What does Personal Finance Mean to Me?

Welcome to my new series of posts on the basics of Personal Finance. I know many other bloggers have done their own series, but it’s such a personal thing (no pun intended) that it’s good to go over it every now and again.

On that Wikipedia page, they certainly go some way to trying to define it in monetary terms. For example:

“Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit.”

For me though I find that Personal Finance is as much about a way of life than it is just about money. I’ll try and define it in terms of the way we live, rather than the fact that it’s about money.

Over on Twitter, I come across a good quote every now and again and this one can help us define Personal Finance too. From inexpensively:

“Frugality is all about changing the way you spend money, not changing the way you live!”

I do agree with this to the extent that you shouldn’t go without but I don’t think it says everything. In fact, I do think it is a way of life and whilst it shouldn’t force change on your life, it does affect it.

A Way of Life

As I said earlier, it’s about a way of life. I think some of these points also sum it up very well, for me at least:

* being content with what you have, and not wanting more * enjoying life, no matter what the weather * not being excessive in the cars we drive, the houses we live in and the things we consume * trying to be self-sufficient as much as possible * making good decisions in everything we do

… but most importantly …

* getting to the stage where you are comfortable, happy and healthy (whether this is work, home or money related)

I know this has been a rather short intro on Personal Finance, but I hope it has been an interesting and slightly different perspective on the matter. Let me know in your comments what Personal Finance means to you.

Posted: 01 January 2010

New Outlook for 'Retire at 40'

Over the past year, many things have changed. I have grown up a little and maybe matured a little too. I have also been pretty busy with lots of other things. One of which was work. This wasn’t good.

I’ve also had a rethink about this here blog. I think having it’s own domain name (www.retire-at-40.com) was good but I think I need to start putting all of these things in the same place. I’ve always had lots of interests and that site ended up being in the peripheral vision.

Instead, I’m bringing it in to my personal site, one where all of my interests are catered for. I like writing (as you can tell) and having sections for my other interests just make it a whole lot easier. Easier to manage, quicker to post and more likely I’ll keep it going.

!2 chilts.org

The new chilts.org is hosted on Google AppEngine which is awesome since it’s free! And you know what free means when you’re trying to retire at 40 :)

It also means I can flex my own programming talents and finally write the site/blog software I’ve always wanted. I don’t need the complexity and clutterness of WordPress or any other blogging system. I don’t need plugins to help me do things since I just want the basics. I actually want slightly different requirements too, and Lollysite (the software I wrote for AppEngine) now does 98% of what I actually need.

!2 Letting Go

Finally, I have decided to rethink the best way to present Retire at 40. On the old site, I was too caught up in statistics, subscribing people, advertising, commenting on other sites and everything that goes with it. It was a right pain.

Instead, I’m just going to let all that go. I’m going to write for the enjoyment of it. Maybe, yes, I want this blog to make money in the future but for now I’m just going to let it grow naturally.

Now, I’m just going to concentrate on writing good articles for my audience. Which is the right way forward.

Posted: 30 December 2009

Financial Balance and Doing What Makes You Happy

Many articles I have read over the years talk about Financial Balance. Many give you various percentages which you could (should?) follow and others break it down even further. For example, one thought is to break your net income into the following areas:

* up to 50% on NEEDS * up to 30% on WANTS * the rest (20%) on SAVINGS

Breaking these down further can lead to more complex solutions and that is something you should decide, but before even trying to break it down, consider why you should do this.

Being Happy

Most of this blog, as well as others I read, is about being happy. It’s not just about personal finance, saving money or being thrifty, it’s about doing what makes you happy. When you realise that having the freedom to do what you want because of financial independence that is a powerful thing. And whilst you might not be in that situation now, but heading towards it over the next few year, means that whatever you do, will make you happy.

Making homemade jam, wooden toys from the ends of spare planks in the garage, pizza dough freshly made in the kitchen, a crayon pocket for the kids and a sock puppet from old worn out socks are all very enjoyable and also cheap and easy to make. The thought that a homemade toy says rather than a plastic thing from the shop is very satisfying.

So where does all this fit in with the percentages above. Well, making all these things at home is way cheaper than buying them from the shop, so firstly they help with actually saving money. That goes towards your 20% savings.

Secondly, doing all of these activities is fun! Either by yourself, with the kids or for other people, they all give lasting satisfaction which means you feel good. It also helps fill in your time instead of watching TV, doing retail therapy or just generally being lazy.

Finally, you can fill your time with wants which are fun and cheap, rather than wanting expensive DVDs, chocolate or expensive hobbies. Of course, there is nothing wrong with all of these things if they are in balance with the rest of your life and your way of life. Better to be happy and healthy, than rich or broke. Finding that balance can help keep you on track to financial independence as well as on track to enjoying your life.

Posted: 30 December 2009

Spending Your Way Out of a Recession

I know people were talking about this a few months ago but finally I found some common sense. By a bank of all things.

Earlier this year, I saw people interviewed on the TV and they said things like:

I'm spending our way out of the recession


Yeah, it [the recession] is not affecting me. I just keep spending

And I would think "wow, these people have no idea".

Trying to Change the World One Person at a Time

Sometimes, changing the world one person at a time can work but pretending that your spending will help us get out of the recession is a bit silly.

The amount of money that you are in control of is such a tiny fraction of what is required, you'd need the whole world to think and act similarly.

Instead, you should be worried about your future, have an emergency fund and be a little more sensible with your money.

Because you never know what's down the road.

Posted: 18 June 2009

Paying off my Mortgage in the Current Economic Climate

At the moment, the economy doesn't seem to be too great. Of course, many people are saying that they haven't felt any impact at all ... but these are the lucky ones who's jobs are relatively stable.

So far, I'd say that I was one of the lucky ones. To me all of four things has happened in the past year:

  1. I got a pay-rise
  2. I cut my spending
  3. there has been tax cuts
  4. there has been interest rate cuts

Therefore, with all these things going on, I am able to pay off more of my mortgage since I am currently on a floating rate.

The Plan

Since I have split my mortgage into a revolving and a repayment mortgage, I am able to pay a little more on both at the present moment. There will be no penalties since they are both on floating rates.

The overall plan is to eventually fix the larger of the two amounts (the repayment part) and keep paying a little extra on that. I shall also keep adding as much as I can afford to my revolving mortgage since that also acts as my emergency fund.

Attacking on Both Counts on Both Mortgages

By attacking both mortgages I am able to start bringing down the principal a lot faster than I ever have and because some of it is my revolving mortgage, I don't have to worry about having it disappear since that acts as my emergency fund.

I'm also attacking the larger of my mortgages on two counts too, since my interest has come down and I've upped my repayments.

All in all, I'm currently on track to repay my home loan in just less than 8 years. That would take me to a total of 11 years since the mortgage started.

Not a bad saving on all that extra interest I'd otherwise have to pay.

Posted: 16 June 2009

Paying Bills per Month Rather than per Year

There are two trails of thought in my head these days. Firstly, the idea that I will retire at 40 once I am financially independent.

The second is that of simplifying and downsizing my life and my needs.

The funny thing is, sometimes these ideas aren't quite orthogonal and one influences the other, sometimes to it's detriment.

Paying Bills per Month

Recently, I changed banks. I did it for a few reasons, one of which was that I could do more of my banking online or over the phone. I rarely - if ever - need to go to the bank now and in fact they don't even have premises since they are physically inside Post Shops.

This bank switch has made my life simpler and easier and I like it.

Whilst I was switching though I also decided to change a couple of other things too. The main one being that where possible, I decided to change from paying some bills quarterly or yearly to paying them monthly.

The reasons for doing this I will come on to in a second but firstly, let's see why this is now a disadvantage.

Going Against My First Plan

Becoming Financially Independent means being careful and clever with your money. Yet paying for things monthly may go against the being clever bit.

For example I have to pay my rates quarterly. They are due at the start of the 3rd month of each quarter, therefore the money for the first two months sit in my account earning money for me. But by changing it to monthly payments means that I no longer get that advantage.

Also for other bills that are paid yearly, I may have to pay everything up front but usually you earn a slight discount for doing it that way.

Therefore in both of these cases, switching to a monthly payment plan is probably not the best thing to do financially speaking.

Going With my Second Plan

Overall however, paying these bills monthly makes things a lot easier and therefore makes my life simpler.

That is, instead of putting money aside into a Freedom Fund and having to calculate how much to put in it each month and then paying it at the beginning of each year I instead have a Bills Account which receives the correct amount every single month.

I know that a Freedom Fund isn't the hardest thing to do and I still have one for those bills I can't pay monthly but I also like the idea that I'm paying for something as I need it.

In Conclusion

Whilst paying for some bills quarterly or yearly may have a financial advantage, the ease and simpleness of paying them monthly outweighs pure monetary gain.

This may or may not work best for you but how do you do it and why?

Posted: 12 May 2009

Shaving those Expenses: 10 Things to Think About Cutting Down

After a few weeks trying to cut a number of expenses, I hereby offer you 10 things you can think about where you might be able to cut your bills or your monthly outgoings.

1) Lowering your Cable TV/Satellite Subscription

Or indeed, cutting it out completely. Think about it, how much time do you watch TV anyway. Not much? Then you don't need either Cable or Satellite. Watch it alot, then you probably need to cut down anyway.

I used to have Cable TV in a previous house which was about $60 a month, now saved.

2) Monthly Insurances

House insurance, contents insurance, life insurance, car insurance, income protection insurance, the list goes on. Every month you give money to someone else such that they can help you out if things go wrong. But how often do you check to see that you're paying the lowest price. You'd be surprised to learn you haven't reviewed your insurance in years.

I am planning an appointment with an insurance broker soon and I suspect I'll get to save somewhere between $20 and $30 each month on my insurances.

3) Utility Bills

With the shake up of most countries power over the past decade or so, it's pretty easy to find great deals on your electricity and/or gas usage. Just shop around and you'd be surprised at how much the smaller suppliers are charging compared with the old incumbents.

I've just change providers and will be saving about $25 a month.

4) Moving to a Lower Internet Plan

If you're not using your internet plan to the fullest, then you probably want to downgrade to the next plan down. This is especially true if you're not downloading lots of large files. You're probably using nowhere near what your plan allows you to.

I realised I was on a 20G plan and in only 2 months in the last 6 did I reach 8G or 9G. I've now lowered my plan to 10G and will probably look at the 5G and just pay for excess bandwidth if I use it. A saving of $25 a month right there.

5) Switching Banks

By switching banks you may be able to save various chunks of money here, there and everywhere. From service fees, withdrawal fees, other bank's ATM fees and a myriad of other fees which all add up, you might save a few bob.

I just switched banks, mainly for my mortgage, but by switching my current account and credit card too, I'll be saving $12 a month on account charges and about $15 a month on not getting credit card insurance. Also, $20 a year on the credit card fee and about the same to be in the rewards program. It all adds up.

6) Switch to Low Power Devices

Switching to low power light bulbs is an easy win, but think about switching your other devices to a low power one too. The washing machine and fridge would be two worth looking at.

Maybe it's not worth it if your current devices are still happy and working but when you have to replace them, it'll be well worth the time investigating the low power options.

7) Switch to Pre-Pay on your Mobile/Cell phone

Switching to pay only for what you use is a pretty good option in most cases. I know people who have switched to metered water and who are now saving a good chunk of money (people who would have in the past been subsidising the people who waste water unnecessarily). Why can't you do the same for your mobile? If you don't use it much switch to only pay for what you use.

I shall be switching to Pre-Pay soon and going from paying $20 a month subscription (+ calls) to paying $6 (to get a special offer) + what I actually use. I'm sure to save around $20 a month.

8) Lowering your Rent

Moving to a smaller place means you'd probably end up paying less rent. You might also have to get rid of some stuff that has been dragging you down the last few years. An increase in savings and an increase in life simplification will work wonders for your stress levels and your daily energy.

Moving from a three bedroom, to a two bedroom and now a one bedroom place has made me open my eyes as to what is important in life. Having stuff and clutter is not on that list. Also saving $220 a month isn't bad.

9) Moving to somewhere close enough to walk or bike to work

By moving somewhere where you can walk or bike to work means you get to save money and you'll probably end up saving time too (since biking is pretty quick once you get used to it). No buses or trains to wait for and no being angry at crazy and unreliable timetables.

Moving into town has meant that I not only have more money to save due to not having to bus ($100) but I also save now that I have sold my car. My fitness levels are up and my savings are bigger.

10) Anything else you regularly pay for?

Whatever you have that you pay for regularly is ripe to be analysed and figured out how much of that particular thing you actually need. Almost everything can be shaved slightly to give you those few extra dollars in your back pocket.

And as always, and for those of us who have seen the light about all of this, you know that shaving off a little of each bill here and there makes no difference to the quality of life but an enormous difference to your bank balance once added up.

So, get cracking on those regular payments and make sure you shave each of them and save a bit every month. By the end of the month, you'll be surprised at how much you're keeping instead of slipping through your hands.

Posted: 24 March 2009