Posted on March 19, 2008 by Dana Kunz
Passive income is often defined as making money while you sleep.
- Passive income is the opposite of active income.
- Passive income is value earned that is disconnected from time spent.
- Passive income comes productive assets, from owning interests in business, real estate and intellectual property.
- Passive income comes in the form of interest, dividends, capital gains, and business income.
- Passive income can be cash flow now (interest, dividends, and business income), capital gains later (increases in value), or both.
Filed under: Definitions, Productive Assets | Tagged: Family, income, Productive Assets | No Comments »
Posted on March 18, 2008 by Dana Kunz
Eight Ways To Slow Spending And Capture Seed Capital
- Focus on capturing seed capital with two accounts. Use reverse psychology and set-up a ’spending’ account and a ’seed capital’ account.
- Seed capital account: Have your payroll check deposited here. Make sure that it earns a interest and/or is invested monthly.
- Spending account: Transfer a fixed amount into the spending account at the beginning of the week or month (you decide), and use your debit card to access it. When it is gone, you are done.
- Avoid stores. Really, break the addition and don’t go places where you can buy stuff.
- Try this: on one typical day, count the number of receipts that you have at the end of the day.
- Set a goal to cut the number of daily spending events by 50%…and then another 50%.
- Don’t let ’stuff’ into your shopping cart.
- If it isn’t fruit, vegetables, protein or shoes to keep junior from going barefoot, don’t let it into the shopping cart. This strategy has the added benefit of helping you to lose weight, as you avoid all of the nasty carbs and junk food in the center aisles of the grocery store. Your closets will be less cluttered and you have less to throw out on garbage day.
- If you don’t really ‘need’ it, put it back on the shelf or rack (this includes food). Maybe you will forget about it by the time you get to the exit.
- Go directly to customer service to return items and then leave the store immediately. Avoid shopping first and doing an exchange.
- Make it a pain to buy stuff.
- Online addict? Jinx all of your credit card profiles by changing your credit card number. Then, never, ever, ever save the number online (or memorize it).
- Mall rat? Leave your credit card at home so that you can’t just ‘drop in’ to see what they have this week. There are other benefits, as well.
- Pay cash or use your debit card. Use your debit card instead of your credit card keep yourself on a cash basis.
- Make your resources pay for themselves. Look around your budget and see if some of your resources can pay for themselves. (P.S. You may have to pay income or other taxes on some of these strategies. And, make sure to adhere to local laws.)
- Own or rent a house?
- Rent half or all of the garage or half of the driveway to someone who needs to store a classic car, RV, or camper. Put the rent into your seed capital account.
- Rent a room or suite of rooms to local professional as an office. Make sure to check and adhere to applicable laws, then deposit the proceeds into your seed capital account.
- Get a roommate and deposit the rents in your seed capital account.
- Section off one part of the house or build a second unit and capture the proceeds in a seed capital account.
- Own more than one car? Sell the extra. It saves on insurance, gas, and operating expenses. Capture the proceeds and cost savings with a one-time payment into your seed capital account.
- Own a boat, RV, camper, or other rarely used recreational equipment? Sell them and deposit the proceeds in your seed capital account.
- Move. If you want to make a HUGE difference in your cost of living, and therefore the amount that you can capture in your seed capital account, move to a lower cost living arrangement. You can think about it as ‘downsizing,’ but I prefer ‘rightsizing.’ I recommend Ciji Ware’s book as a guide, Rightsizing: Simplifying your life while keeping what matters most.
- Change to less expensive transportation.
- Keep your old car. Instead of buying a new one, keep driving your old one. Deposit the cash that you would have used as a down payment in your seed capital account.
- Buy a less expensive car. If you really need to change vehicles, spend half of what you think that you can afford. Whether you are paying cash or financing, deposit the balance that you would have spent in your seed capital account.
- Go public. Yeah, it is painfully politically correct, but you could walk, bike, bus, ferry, train, or share rides. Make sure to capture the savings.
Filed under: Capture Seed Capital | Tagged: Family, personal finance, spending | No Comments »
Posted on March 17, 2008 by Dana Kunz
Slow your spending.
Imagine all the time and money you would save if you just cut out shopping and eating.
I came up with this idea one day over lunch.
Shift your focus to capturing seed capital instead of spending, you will have more time and money to invest in your financial independence. The idea with food is to eat less, stretch out the time between meals, and invest your time in fitness.
With spending, it means…
- Reducing the size of your transactions,
- Making it inconvenient to spend frequently,
- Investing your shopping time in exercise, friends, or family.
So, while it is impossible to stop spending entirely, you can trick yourself into slowing down.
Check out Eight Ways to Slow Spending and Capture Seed Capital for some ideas. And remember, make sure to capture your savings in a seed capital account so that you can enjoy the benefits of your new habits right away.
Filed under: Capture Seed Capital | Tagged: budgeting, Family, personal finance, spending | No Comments »
Posted on March 14, 2008 by Dana Kunz
Income has many definitions…enough to make it so confusing that even CPA/Financial Types (like me) have to ask for clarification from time to time. Here are several different ways that income is used.
- Income can come from both active sources (job) and passive sources (rents, dividends, interest, royalties, and business).
- Income can equal cash flow (take-home pay) or have no cash involved at all (depreciation).
- Income can be taxable (salary) or non-taxable (exemption for capital gain on home ownership)
Filed under: Definitions | Tagged: Family, income, personal finance | No Comments »
Posted on March 13, 2008 by Dana Kunz
Here is a quick reminder of where we are in the steps towards financial independence.
Over time, productive assets can shield you from uncertainty as well as make you financially independent from your job.
How To Collect Productive Assets Regularly
This is a quick overview of the sections that will be appearing to support your personal plan to collect productive assets regularly.
3a) Manage the managers and be the CFO of your financial life. Do it yourself or hire others. Either way, make sure that you know enough to confidently seek opportunities, choose advisors, evaluate alternatives, take action, and monitor the results.
3b) Set objectives and timeframes for your portfolio and fill it with productive assets having different job descriptions.
3c) Collect productive assets that generate cash flow now, appreciation later, or both from a wide selection of publicly-traded and privately-held interests in business, real estate, and intellectual property investments.
3d) Reinvest faithfully and put the proceeds of your investments back to work immediately.
3e) Diversify, dollar-cost average, and adjust in order to capitalize on opportunities from different types of assets and changing market conditions.
3f) Use leverage to magnify returns and watch selected parts of your portfolio grow more rapidly than others.
3g) Own your own business and gain the tax benefits of greater tax deductions and income management.
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Posted on March 12, 2008 by Dana Kunz
Total net worth is the difference between the market value of what you own minus what you owe.
- There are a lot of different definitions of net worth, but in the most extreme, it is what you would have left over if you sold everything of value today and paid off all of your debts.
- It is important, because it is a measure of your current and potential financial independence.
Filed under: Definitions, Earn To Invest | Tagged: net worth, personal finance | No Comments »
Posted on March 11, 2008 by Dana Kunz
Productive assets an shield you from uncertainty and make you financially independent of your job.
What you personally want from productive assets depends on your definition of financial independence, and how you want to invest your time each day. Here are some quick definitions to get you thinking about the technical side of productive assets.
Productive assets…
- Generate cash flow now, appreciation later, or both.
- Are interests in businesses, real estate and/or intellectual property.
- Can be managed directly (hands-on) or indirectly (via a manager).
- Can be publicly traded (exchange-traded stocks, bonds, and funds) or privately-held (non-public stocks, bonds, partnerships, and other ownership interests).
- Can be equity interests (ownership) or debt interests (loan to another party).
Filed under: Collect Assets, Definitions, Productive Assets | Tagged: Family, personal finance, Productive Assets | No Comments »
Posted on March 10, 2008 by Dana Kunz
When I started looking for answers to my personal financial puzzle, I realized that I didn’t really know what my alternatives were. Now, some of this stuff seems terribly obvious (like this post), but it is helpful to be reminded of our choices so that we stop repeating the same mistakes (and only repeat the successes!).
Know your choices: stop insanity.
Remember the definition of insanity: doing the same thing over and over and expecting a different result. We do this with our money all of the time. We’re like gerbils in a cage: ring the bell and we press the lever for food.
So, in a quest to reprogram your thoughts and actions around money, take a moment to review your choices for building seed capital.
- Are any of these choices available to you right now?
- Are you willing to make some changes in your lifestyle to make them available in the future?
There are four ways to build your seed capital.
- Earn more: Work more hours or raise your hourly rate.
- Keep more of what you earn by spending less.
- Ask your existing resources to produce more.
- All of the above.
1) Earn More: Work More Hours Or Raise Your Rate
Regardless of whether you hold a job or not, you can always trade your time for money.
- If you have a job, you may or may not be able to work more hours for compensation and/or raise your hourly rate or salary.
- If you work for yourself, then you may be able to increase work time and realize more profits. If market conditions warrant it, you might even be able to raise your hourly rate.
2) Keep More Of What You Earn: Spend Less
Anyone can keep more of what she earns by spending less.
- To make small increases in your seed capital, limit discretionary spending like lattes, dinners out, and clothing.
- To make huge increases in your seed capital, reduce your lifestyle obligations like housing, transportation, and debt service.
3) Ask Your Resources To Produce More
If you have assets, then you may be able to re-allocate them to produce more current cash flow or long-term appreciation.
- If you own a business, you may be able to sell more projects or products and increase your passive business income.
- If you own real estate, you may be able to raise rents, restructure debt to reduce costs, or both. You could also sell or leverage the properties and invest the proceeds in assets that produce the result that you want.
- If you own securities, you may be able to sell all or part of them and reinvest the proceeds in securities or real estate interests expected to produce more current cash flow or more long-term appreciation at the time that you need it.
- If you own or rent a home, then you can ask your home to pay for itself by renting out a room, part or all of a garage, or part of your driveway.
- If you own the home, then you may be able to build and rent a legal second unit.
** Capture Seed Capital: Once you have taken one or more of these steps, then it is important to capture the extra earnings and/or savings in your seed capital fund where it can later be invested in productive assets.
More details to come….
Filed under: Build Seed Capital, How To, Invest More Now | Tagged: budgeting, debt reduction, personal finance | No Comments »
Posted on March 7, 2008 by Dana Kunz
Capital is your available time, credit rating, productive assets and financial aptitude. It is the resources at your disposal to make a positive impact on both your life and those around you.
Filed under: Build Seed Capital, Definitions | Tagged: capital, credit, Financial Independence, personal finance | No Comments »
Posted on March 6, 2008 by Dana Kunz
Seed capital is financial resources (cash, credit, aptitude, and ambition) destined to become productive assets.
- Your best source of seed capital is keeping more of what you already earn.
- There are four proven ways to create seed capital.
- Earn more
- Keep more/spend less
- Grow what you have
- All of the above
Filed under: Build Seed Capital, Definitions | Tagged: budgeting, debt, Family, personal finance, spending | No Comments »
Dana Kunz