Category: Finance

How to Create Passive Income

Whether your goal is to boost savings, supplement retirement income or pay down debt faster, you are not alone in choosing to work nights, weekends or in-between other demands.

This can mean Uber driving, dog walking, freelance writing, even assembling IKEA furniture for a fee, essentially wherever skills and interests intersect with demand for those services.

The U.S. Bureau of Labor Statistics says about 20 million Americans are working part-time for so-called “non-economic reasons,” meaning issues such as childcare or income restrictions prevent them from working full-time or they simply do not want to work full-time.

One topic close to the classic “side hustle” is passive income. But what is it and how does it stack up to other types of earnings? The concept is called passive income because it requires little to no time on your part, yet can yield some serious recurring money.

If you have a website or own a domain name, joining a CPS affiliate network is relatively easy and there are some very good and reputable affiliates, including Amazon and eBay. Lesser-known affiliate programs are just as noteworthy and can generate revenue for use of your website as well. We’ll get to that list in a bit.

First things first, though: consider if your website is poised to become an affiliate website. Are you an authority on a particular subject? Does your website focus on a definable niche?

Determine Your Audience

If you can say “yes” to either one of these questions, your next step is to evaluate what kind of affiliate advertising would parallel your mission and serve your visitors. For example, writers and linguists who visit Grammarist, a website for word junkies and students surfing for extra grammar help, will find a banner ad for Maxwell House and Adobe’s Creative Cloud. I guess they think people who write love coffee and cool technology. (Right on both counts.)

Assume it’s a successful pairing, you’d be paid on the basis of clicks, purchases or leads that come from your pages.

How Affiliate Websites Work

The affiliates provide all the marketing muscle you might need, including banner ads, logos, tracking applications and tips on how to optimize your site to attract more viewers, and ultimately, clicks. Most have a team of managers who will help you get started and make sure you are on the right path. The goal is for your website to drive people to purchase name brand and not-so-name-brand retail products.

Additionally, some affiliates compensate you for posting on Facebook, Tumblr, Twitter and other social media sites. Taking this a step further, some will pay you for sending out links via email. One thing: if any affiliate marketer asks for money upfront, shut them down. You should never have to pay someone else to host ads on your website.

Related >> Reader Story: Turning a Side Hustle into Self Employment

If this is something you are looking into as an additional household or business revenue stream, I would recommend talking to the affiliate’s support team, asking a lot of questions, giving it a test run and determining how much time and energy you are expending relative to the actual return on investment. The key is building traffic to the sales page. For example, if you are a blogger and the ads are on your blog page, the more you promote your content, the greater your return as an affiliate. Use your affiliate link in the target page URL ad on Google Adwords too.

Here are some networks you may want to consider.

Noteworthy Affiliate Networks

The Blue Book Top 10 affiliate networks (in alphabetical order) for 2016 are:

Amazon Associate Network is offering up to 10 percent fees for selling the various retail product offerings on its site.

Avangate claims its merchants offer commissions up to 75 percent, special bonuses, and payment for licensing services.

AvantLink stresses quality over quantity and does not promote gaming or adult content sites. Ten years in business.

CJ Affiliate by Conversant allows its affiliate publishers to post retail coupons, set up email campaigns and distribute links to third party affiliates. The business model is based on loyalty or rewards.

ClickBank sells lifestyle products created by “passionate” entrepreneurs and claims to be a top 100 internet retailer.

eBay’s Partner Network currently is offering double commissions for the first three months that you join its affiliate network. Just post interesting items that you find on eBay to your blog, website or social media sites and you will receive a commission for each time an item sells.

LinkConnector offers fraud-free protection. Has been in business more than a decade.

Rakuten Affiliate Network claims it’s a Top 3 e-commerce company in the world. Offers more than 17 million products.

Revenue wire’s Affiliate Wire claims it partners with the best advertisers in the industry, as well as with the best software and digital merchants.

ShareASale focuses on technology, service and community responsibility. In business 16 years.

These are not endorsements. Rather it is a quick review of the affiliate marketplace and the major players within it. Please do your own research before signing up with any affiliates.


What kind of insurance do drivers like me buy?

Watching every penny is the starting point for getting rich slowly. But there are also big moves you can make that will earn or save you a lot of money. Big wins include refinancing your mortgage, negotiating your salary, improving your credit score or evaluating your car insurance. Your car insurance probably comes up for renewal every six months. When was the last time you compared insurance carriers or revised your policy to see if you could save a few hundred dollars? I thought so.

Des Toups, senior managing editor of Insurance.com (a QuinStreet site, like GetRichSlowly.org), has a lot of good information and statistics about car insurance that we wanted him to share with the GRS community. So, here’s Des!

Car insurance has only one real purpose: To stand between you and financial disaster.

Think about rear-ending a brand-new Jaguar, or your child causing an accident that puts other people in the hospital. Your car insurance only pays up to its limits. After that, you’re on your own.

Got a house? A savings account? A regular paycheck?

When there’s no more insurance, the other guy’s lawyers will turn to you.

Sure, there are generally accepted guidelines out there when you decide how much coverage to buy. Homeowners need at least $100,000 in bodily injury liability protection, because a large, valuable asset like a house is an easy lawsuit target if you don’t have enough to cover your victim’s hospital bills.

Or maybe you own nothing and have no savings – nothing you could lose. Then you might go for the legal minimum in your state.

The space between those extremes is huge, though, and needs vary from state to state, by age and by financial standing.

Seeing the choices other drivers in your situation make can be a good guideline when you shop for car insurance yourself. Insurance.com recently analyzed more than 550,000 insurance quotes delivered through its price-comparison tool to find the most common choices made by drivers of similar age, who live in the same state, who drive the same model year of car, or who own their homes.

You can find data for your state in the “What Drivers Like You Buy” tool.

Nationwide, there are clear patterns. Three out of four drivers choose a $500 deductible. A third of drivers under age 25 shop for the lowest legal amount of liability coverage, but only 19 percent of drivers over 55 do.

Nationwide, the most common coverage profile looks like this:

  • Most common bodily injury liability coverage: $50,000 ($100,000 per accident), selected by 46 percent of all drivers.
  • Most common property damage liability coverage: $50,000, selected by 59 percent of all drivers.
  • Collision coverage, selected by 60 percent of all drivers.
  • Comprehensive coverage, selected by 61 percent of all drivers.
  • $500 deductible, selected by 74 percent of drivers who buy comprehensive and collision.
  • Towing and emergency road service, selected by 16 percent of all drivers.
  • Rental reimbursement coverage, selected by 16 percent of all drivers.

As you decide on what coverage to buy, consider these tips:

  • Extra liability coverage beyond the required minimums is generally quite cheap – you’ll pay only a fraction as much for an additional $50,000 as you did for the first $25,000.
  • Raising your deductibles can save you money. Going from a $500 deductible to $1,000 on a 2012 Ford Explorer in Texas, for example, would cut the annual bill for comp and collision from $576 to $470. Saving $100 a year on your car insurance is nice, but only if you have $1,000 to get your car out of hock to the body shop.
  • Before you make big changes in coverage, shop around first. The more you pay for car insurance, the more you are likely to find savings by switching insurers.

Finding Retirement Security

You’ve seen them before: 10 mistakes that could ruin your retirement, 6 things to avoid, and so on. But many of those lists are copies of each other. Make no mistake: Common sense is common sense, and there’s only so many ways to catalog it.

The common sense behind any successful savings or investment plan? Rhythm, or doing the same thing month after month. When that rhythm gets disrupted, it can take months, even years sometimes, to get re-established It’s a funny thing about saving or investing: the more you have to think about it, the less you generally do it. The best savings plans, therefore, are usually the ones that run on auto-pilot. Starting over — no matter the cause — is costly.

The millionaire next door

I have written elsewhere about Jim, my neighbor, who is one of those mythical “millionaires next door.” On our other side lives Mario, whose parents immigrated from Mexico, and who owns the auto repair shop which takes good care of our gizmo bile (long story as to why we happily own that gas hog). Ours is a decidedly middle-class neighborhood, populated by some interesting people.

Anyway, my wife and I were hanging out in Jim and Eileen’s basement after another of her lovely dinners and, having solved all the world’s political problems, the conversation turned to money. Now, for those who haven’t met (or heard of) Jim, he is as ordinary as neighbors could come. In his 60s, he never had a high-paying job or inherited any windfalls. Although he never heard of Getting Rich Slowly before (he turns his computer on once a week only to check for Internet jokes that his buddies might have forwarded), he might as well have been a reader from the day J.D. Roth started banging keys.

I could go on about old Jim, except that that particular evening I thought to ask about something much more relevant — the secret of his retirement success (even though he postpones actual retirement, but that’s a different story). As I said, he hasn’t read any of those blog posts with X things to do right and Y things not to do wrong so you, too, can retire comfortably. It was refreshing to talk to someone who hasn’t read any of those “lists.” What he did for his retirement is all his own wisdom.

He took a deep breath, another sip of his drink, and out came his list of things to do and to avoid if you want to end up being a millionaire without earning a huge income. (The sequence is his, by the way.)

1. Stay married

Jim and Eileen are older than we are, so that makes them older than dirt! Hey, they don’t use their computers, so I can get away with the truth here. Hehe 🙂

Along the way, they have seen many of their friends “lose everything” to divorce. (As an aside, it always puzzled me that when you talk to both parties after a divorce, both sides always claim to have “lost everything.” Mathematically, you know that can’t be the case — if one “loses everything,” the other one would gain it; but in one of our universe’s unfathomed mysteries, that almost never happens.)

As we talked about it, several things emerged which would not be immediately obvious. The obvious financial hit comes when each party has to pay lawyers and split up properties and other assets. It’s clear that that sets everyone back. However, the hit to your financial future (and, therefore, your retirement) doesn’t stop there. For a few years prior and several years after, it can be difficult to make the sound, rational decisions, and that’s pretty much where financial decisions fall. Jim and Eileen’s commitment to stay married is one of the decisions they make which keeps their financial rhythms on track.

2. Don’t move

They had their home built over 30 years ago, and never added to it. By simply keeping up the payments, they paid off their house. Once it was paid off, they had a jacuzzi built next to their deck, but that was paid for in cash from funds they had kicking around.

Few transactions have as high a cost as selling a home and buying another one. It’s not only the realtor commission, which can be substantial. There are a host of other expenses attendant to this change, not the least of which is the cost of moving. Then, the new place usually requires some money to make it “just so.” The total cost of a move can be well north of $20,000 — and that’s a straight hit to your retirement nest egg. Jim says that’s a big reason they decided just to stay put.

3. Use common sense

Although Jim says he never read any financial books or websites, he listed a few items we all know and have heard enough of that we can call them dead horses (which don’t need to be beaten again):

We always spend less than we make
We always have “mattress money” (his term for an emergency fund)
We stayed out of debt
As we talked, we agreed on this: Debt is nothing more than impatience expressed in money. If we buy anything with debt, what we are saying is after X months we will have paid enough to buy it. Well, if we saved the money for the same X months, we would be able to buy the same thing for cash. Therefore, the only reason we’re doing it with debt is to change the date of the purchase, i.e., we want it now rather than later.

You can argue all you want, but the only difference is the date.

Related >> Retirement Checkup

To move the date forward, you not only pay more (in interest) but you also increase the risk that you would never become able to make the payments. Jim may be a bit of an Eeyore, but he’s a patient one.

And frugal — their cars are more than 10 years old, both bought used. Their garage is occupied by a top-of-the-line Corvette, though, one of those scary fast ones which they drive only a few times a year. It was an indulgence bought late in life which he bought used as well and for cash. But he mows his own lawn and fixes everything that breaks himself. They don’t eat out often. In fact, they still owe us a dinner from more than a year ago when he bet against me and lost.

4. Invest your money

Jim is not the world’s biggest authority on investing, but from his young days he took the difference between their earnings and their spending and invested it. He didn’t do it with IRAs, 401(k)s or any tax-advantaged instruments. He simply did it “old-school,” buying stocks and mutual funds consistently. Over the years, he has tried every way imaginable — with an adviser and without, with stocks, managed mutual funds and index funds, following some trends and then not following them. Some of his investments were good and some were mistakes. But as he put it, “If you do it often enough and consistently, you can’t help but come out ahead.” The only thing he didn’t do was buy a rental property. (“I deal enough with people already,” he says.)

When I asked him to what he ascribed his investing success, he didn’t hesitate: “Just keep on doing it, no matter what.” His returns were never spectacular and pretty much mirrored what everyone else was getting. He just did it for a long time, plugging along even when the markets crashed. And he never took anything out for any reason.

As the conversation wound down, he thought a bit and summed it up: “I guess when you boil it down, not making changes is the biggest reason we don’t have to worry about our retirement.” People so often get wrapped up in change because they see only how that change will improve their happiness. What they overlook is how not changing can also add happiness, albeit later in life.

It’s not often you’ll see that in those lists of things to do or not to do to succeed financially.

Related >> Survey: 71% of Americans are Behind on Retirement Savings

Of course, not everyone can pull off what he did. I sure didn’t. But it struck me that when we encounter life’s decisions along the way, many of them are not black and white, and very often we overlook the financial cost that change — any change — brings, because that cost is often hidden. Yes, there are things like divorce or moving because you simply cannot find a job, and there are other things like disease and family issues which don’t give you much choice. But there are also many changes we sign up for without considering the long-term financial hit to our retirement investments.


A Home Owner’s Guide to Refinancing Your Mortgage

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Low mortgage rates unleashed a massive wave of refinancing that was a windfall for millions of consumers, but what will happen once those unusually low mortgage rates are gone? Will refinancing mortgage loans effectively be sidelined as a financial resource for home owners?

While the opportunity to lower your interest rate may be the most compelling reason to refinance, it is just one of several. Refinancing can accomplish different things for different people, and the more you are aware of what refinancing can do, the more likely you are to be able to use it to your advantage.

5 compelling reasons to refinance your mortgage

Here are five good reasons to refinance:

1. Reduce interest rates
A drop in market rates can create a compelling opportunity to refinance. However, even if interest rates generally are not lower than those on your current mortgage, you still may be able to lower your rate by refinancing. Rates on shorter mortgages and on adjustable rate mortgages are generally much lower than those on 30-year mortgages.

So, if you can afford the higher payments that come with a shorter mortgage, you might be able to lower your interest rate by refinancing from a 30-year to a 15-year loan. As for adjustable rate mortgages, the drawback with them is that the rate is subject to vary, so you won’t necessarily be lowering your interest rate for the life of the loan.

However, if you only anticipate being in your current home for a few years more, you might be able to benefit from an adjustable-rate mortgage without the long-term risk of rate fluctuations.

2. Lower long-term interest expenses
Shorter mortgages don’t just carry lower rates. They also mean paying interest for fewer years. Even if conditions are such that you can’t lower your mortgage rate, you might find you could achieve significant long-term savings by switching to a shorter mortgage.

3. Eliminate mortgage insurance premiums
Mortgages like loans from the U.S. Federal Housing Administration that allow low down payments also typically require that you pay for mortgage insurance. Once you have built more equity in your home though, you might qualify for a type of loan that does not require mortgage insurance, so that could represent potential savings if you refinance.

4. Make monthly payments more affordable
Stretching your remaining payments out over a longer period can result in reducing those payments. Lengthening your loan is also likely to result in paying a total interest in the long run. But if it is the only way to make your mortgage affordable, this can be a good reason to refinance.

5. Switch from an adjustable-rate to a fixed-rate loan
You may have chosen an adjustable-rate mortgage for a variety of reasons, but if you plan on being in your home for the long-term it would reduce your financial risk to stabilize your monthly mortgage payments. You could do this by switching from an adjustable-rate to a fixed-rate loan.

What you need to refinance

To take advantage of your refinancing opportunities, it helps to have the following:

1. Equity – and the more the better
While government programs temporarily made refinancing available to some homeowners with little or no equity in their homes (due to the collapse in home prices following the housing crisis), generally you are going to need a solid amount of equity in your home in order to qualify for refinancing. If you have 20 percent or more, you may be able to qualify for a loan that does not require you to pay mortgage insurance.

2. A good credit score
Keeping your credit healthy means keeping your refinancing options open – and you never know when the right conditions might arise.

3. Steady employment
If you are thinking of refinancing, you might want to do it before you make a change in jobs. Lenders like applicants who have held their jobs for a long time.

4. Closing costs
Closing costs will probably total at least a couple thousand dollars, and very often much more than that. You can finance this, such as by adding the closing costs to the amount you are borrowing in the new mortgage. But this will be more expensive in the long run and could eat into your equity balance. As noted previously, less equity (or what’s known as a higher loan-to-value ratio) can negatively impact your ability to qualify for refinancing. Or it could result in you paying more in mortgage insurance premiums.

Consider a low-interest rate environment as the low-hanging fruit among refinancing scenarios. However, it is not the only worthwhile reason to refinance. Getting the most out of the potential benefits that refinancing presents requires knowing the different things it can accomplish, and being prepared to act on your refinancing opportunities.