Entries Tagged 'Standard of Living' ↓
August 6th, 2008 — Diversification, Financial Security, Income Streams, Investing, Long Term, Money, Personal Finance, Standard of Living, passive income, retirement
One of the hottest concepts right now is the premise of creating multiple streams of income. While everyone wouldn’t mind making a little extra cash, there are even more benefits that can be reaped from having more than one source of income. Let’s go over just a few of them.
1. Help save for retirement.
The average person needs to have more than $500k put aside for their retirement in order to live in comfort and without worries. Unless you have a job that pays incredibly well, this is going to be a pretty daunting task. You cannot rely on social security payments to secure your future. Whether you’re 25 or 55, it is never too early or to late to put aside money for your retirement. Unless the thought of working until you drop dead appeals to you, you’re going to have to find ways to supplement your current income.
Multiple income streams can be incredibly beneficial not only for retirement planning, but later in life. Smart investments will continue to reap rewards for many years to come and you’ll have that nice supplemental income that will make your life easier far past the retirement age. A good concept to try to is put all of your multiple income streams into a high interest account to make even more money for your future.
2. Layoffs and downsizings happen every day.
No matter how secure you think your job is, there are still chances that you could get laid off. There are very few guaranteed jobs in this world that provide lifelong security. If you are relying solely on the income for your job to pay your bills and make ends meet, you are literally one paycheck away from financial ruin.
It’s a stark reality that all of us face. However, if you have multiple streams of income coming in, you won’t have to worry so much. You’ll have a cushion that will tide you over if you do get laid off or lose your job. In some cases, lucrative streams may even replace the need for your job entirely.
3. Accidents happen.
Even if you have insurance – what would happen if you were injured today and no longer able to work. Could you pay your bills? This happens to thousands of people every year and they risk losing their homes, bankruptcy proceedings and worse. By having that extra cushion with several different streams of income, you are reducing your reliance and making sure that no matter what happens, you’ll be ready to face it.
If you don’t have health insurance, it’s even more vital to have steady streams of income coming in each month. You may be the picture of health right now, but what if you get hit by a bus on the way to work tomorrow? Unless you have thousands of dollars in savings, the answer isn’t pretty. Even if you do have a savings account do you really want to use it for that? What will happen when it runs out? The best kind of insurance you can have is a steady stream of extra income.
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July 21st, 2008 — Budget, Money, Personal Finance, Standard of Living
Right now, it has never been more important to manage your bills and get your finances under control. The economy is going through a particularly rough patch, food and gas prices are going up and it can be pretty hard to make your paycheck stretch each month. If you’re finding it difficult to keep up, now is the time to start making some changes before you get in over your head.
Most people really don’t realize how much they spend every single month. The vast majority of Americans do spend more than they make, and many of these expenditures are for non-essentials. There is one very important thing that everyone should do to determine whether or not they over spending. For a period of one month, keep a log of absolutely everything you buy or pay, from that pack of gum to the bills you pay.
At the end of the month, add up everything to see just how much you spent. Chances are you may be pretty surprised at just how much is going out the door. If you are spending more than you are making, or if you are not putting anything in a savings account or investments, you need to figure out how to cut some of your costs.
Go through your month’s log and split everything up into two columns. The first column should be your essentials, such as rent, utilities, car payment, insurance, phone and groceries - but not eating out. Total all of this column to see how much you have to spend every month.
Now put everything else in the second column and total this one up as well. This will be the amount where you can start cutting some expenses. Go through the list one more time and check off the things you don’t think that you can do without. Put these in a third column. Everything else should be examined in that second column and reevaluated. For example, if you are spending $100 every month eating out, you can easily cut this in half and put $50 aside.
All of these little expenses add up quickly and before long, we’re overspending without even realizing it. Once you have everything divided up into three columns you can determine what kind of budget you want to work with. Your goal should be to put as much money aside as possible.
Once you free up some of that cash, you’ll need to work on creating more income so that you don’t have to live quite so frugally. Consider using this to create another stream of income through an investment or opportunity. This can help free up more money that can be spent on non essentials, or that income can go back into another income stream. If you don’t have any available cash to do this, consider leveraging a loan to create an income stream to take the pressure off of your paycheck. This can really make a difference in how much money you have coming in every month.
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June 4th, 2008 — Financial Security, Money, Personal Finance, Standard of Living, Wealth, retirement
As millions of aging baby boomers start contemplating how they are going to survive when they’re no longer working, retirement planning has hit an all time high. Whether you’re just starting out in the workforce, or you’re staring 62 in the face and wondering where the money is going to come from, it is never too late to start planning for your retirement.
There are many ways that you can start putting money aside to help you in your later years. First, you’re going to need to figure out how much money you need every single year to survive. Take 10% of that and add it on for emergencies. You’ll need to extrapolate a bit when it comes to how long you plan to live, but most people shoot for at least 30 years of retirement money. So, take that amount per year and multiply it by 30. This is the amount that you’re going to have to put away.
Pretty frightening isn’t it? Now, take that figure and divide it by how many years you plan to continue working. This will give you an idea of how much money you need to start putting aside every year. Subtract any savings or 401K plans that you have and you’ll have the bottom line. As an example, to illustrate this process, let’s say that you need at least $45k a year to pay all of your bills and live comfortably. You’re currently 35 years old and you plan to work until you are 65. This means you’ve got 30 years to save money.
To be on the safe side, we’re going to put away enough to last 30 years. Even if you don’t live that long, you’ll have plenty put aside for managed care or other health expenses that can crop up. In total, you’re going to need to put aside $1,350,000. Add in that 10% cushion and you’re at just under $1.5 million. Ouch! You’ve got thirty more years to save, so you’re going to have to put aside $50,000 every single year to meet your goal.
(Editor’s note added after publication: As pointed out in a comment below, I left out the power of compounding interest… but I also left out taxes and inflation… If you think you could live on 45k a year now you will need to adjust for inflation as well… Personally I think I will have a hard time living on only 45K per year. I don’t think I was misleading, but perhaps I was oversimplifying.)
Unless you make an incredible amount of money, chances are you’re not going to be able to put aside this much money. Even the best 401K’s rarely perform that well. So, in order to make sure that a soup kitchen isn’t in your future, you’re going to need to look into some investments and alternative streams of income. If you don’t have a lot of free income as it is, debt leveraging may be in order.
If you’re not familiar with this term, it basically means going into debt in order to take advantage of opportunities that will create new streams of income. When managed wisely, this is a very easy way to put aside more money. The key is finding the best opportunities or stocks and being cautious at first. With proper management, debt leveraging is in an incredibly powerful tool that can be used to secure your future.
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