My Search for Residual Income

Posted May 31st, 2012 in Making Money by Jeremy Waller

residual income

Over the last 5 years I have constantly had a number of side projects to earn an extra income. In most cases it wasn’t much, maybe a couple hundred per month. There have been a few times I did really well and brought in over $1,000 of extra income. Those months were great, but they were always short lived.

Recently, I have been working on a plan to generate a more sustainable residual income stream that doesn’t take a lot of capital up front. I also need something that doesn’t take up a lot of extra time.

Sounds like I need to find a goose that lays golden eggs, right?

I do admit that there aren’t many things that fit those criteria. Most things that generate residual income take a lot of time, a lot of money or both.

I think I may have found something this month that if I do it myself – doesn’t take much time up front – or I can outsource it relatively cheaply.

I think I have stumbled into a market where I can produce a product for either 10 hours of work or $250 (approximately) and then sell that product in a way that should generate $100 of residual income each month. The process can then be repeated over and over.

That’s not a bad ROI. If I decide to outsource, then I should recoup my investment in 2.5 months. Everything after that is profit.

Even if it doesn’t do nearly as well as I think it will, it shouldn’t take longer than 6 months to recoup my costs. That’s still a 100% ROI in the first year.

There is, of course, the possibility that this idea could totally flop and I won’t make a dime. But I’ve looked at it again and again and can’t find any major flaws in my plan.

Nothing is guaranteed, but the strengths and opportunities far outweigh the weaknesses and threats.

…Drum Roll Please…

What is this magical business I’ve stumbled on?

I’m not going to tell you…yet.

I will say that this business has been around for hundreds of years. But, technology over the last few years has changed the business model substantially.

It is now possible for nearly anyone to break into this business and be very successful.

That’s my theory anyways. Over the next few weeks I’m going to test it.

As soon as my first project is done, you’ll be the first to know about it.

Do you do any projects on the side to generate extra income?

Financial Spread Betting Explained

Posted May 27th, 2012 in Investing by Jeremy Waller

For those with an appetite for risk, there are a wide variety of derivatives that you can trade. When traded as a speculative investment, rather than as a hedge, they can be extremely high risk. Just ask JPMorgan Chase who lost well over $2 billion this month from trading naked credit default swaps.

On the other hand, derivatives have tremendous upside potential. But upside potential isn’t everything – the lottery has a great upside as well!

Spread betting is one of the many derivatives that allow you to speculate on the price movement of an underlying security. If you don’t mind the risk, a great way to make an additional income is spread betting.

Now, let me be clear here. You shouldn’t do this with your retirement portfolio. But if you have some extra money to play with, I don’t have a problem with speculative investments – as long as you are okay with the fact that you could lose 100% of your investment.

The Basics of Betting the Spread

Essentially, spread betting is placing a bet on the price movement of a security. Let’s say that Apple is trading at $550. You believe it is oversold and think that the price will rise over the next few weeks. You could use a spread betting firm to bet a certain dollar amount per point. If you buy a stake size of $10 per point then you gain $10 for every point that Apple rises. Conversely, you lose $10 per point that Apple falls.

Say after two weeks, Apple is trading at $575. You could exit your position, taking a profit of  $250 (25 point increase x $10). It works in reverse as well; if you exit your stake when Apple is at $540 your loss would be $200.

How to Manage Risk in Spread Betting

Stop loss orders can be used in spread betting in the same way they can be used when trading equities.

Before you open a new position, you should already know at what price you will take your profits and at what price you will cut your losses. As soon as you get into the position, immediately set your stop loss – allowing some room for price fluctuation, but tight enough that you won’t lose more than you can afford.

As mentioned above, the amount you invest should be a very small percentage of your portfolio. Never use money that you can’t afford to lose. Spread betting offers the potential for high returns, but also has the potential to wipe you out if you don’t effectively manage your risk.


Infographic: The Insanely High Cost of Higher Education

Posted May 23rd, 2012 in Economics by Jeremy Waller

Upon graduation, the average student has over $25,000 in student loan debt. Though, it’s not unusual to graduate with many times that amount.

If you are not strategic about where you attend college, what you major in and how you pay for it, you could find yourself out tens or even hundreds of thousands of dollars. And all of that time and money may set you up for a career that doesn’t pay much more than a fast food chain.

The Price of Higher Education

Top Personal Finance Posts Of The Week – Facebook IPO Post Mortem Analysis Edition

Posted May 20th, 2012 in Blog Carnival by Jeremy Waller

So…Facebook’s IPO was on Friday…and it was one of the least exciting IPOs I’ve ever seen.

The hype leading up to it was off the charts. This was supposed to be one of the biggest IPOs in years. It opened pretty stinkin’ close to my prediction. And then slowly dropped back to the IPO price – $38.

I expected a big pop, but the fact that there really wasn’t much of one shows that the investment bankers did their job and priced the IPO well. A big pop would mean that they underpriced the stock and FB wouldn’t have received as much money as it should have.

Now, I betcha we see a big drop when the market opens tomorrow. I still think the stock is way overpriced.

Top Posts of the Week

Kurt Fischer @ Money Counselor writes Jobless Youth Take Action – Slammed by the terrible trio of an anemic job market, lower starting pay, and record student debt, young people are organizing to seize the day. Through initiatives like Campaign for Young America and Fix Young America, 20-somethings resolve to find or create jobs for themselves, move out of their parents’ basements, and resurrect America as the land of opportunity.

Lena Gott @ Taxes and Stuff writes President Obama’s 2011 Tax Return – You can learn a LOT about someone by looking at their tax return. Wanna know how much Barack Obama made in 2011 from his job as President and from book royalties? Wanna know what kinds of tax deductions he takes and how he allocates his charitable contributions? Read on to learn these and other highlights from Obama’s 2011 income tax return. You’ll even be able to pull up several years’ worth of presidential tax returns to see them for yourself!

TRL @ The Retired Landlord writes Important Traits of a Successful Landlord – Find out what it takes to be a successful landlord. Do you have these important traits to make a profit in real estate investing?

Sustainable PF @ Sustainable Personal Finance writes Green Tip #242: Sharing Toys – Share toys, keep your baby stimulated but save money.

Jeremy @ Modest Money writes Keeping Up With The Joneses In The Digital Age – As the internet has evolved and we truly enter the digital age as a society, the biggest enemy of our personal finances has been quietly growing stronger and stronger. No it’s not inflation. It’s not government taxes. It’s something much less obvious. It’s those pesky Joneses!

Earth and Money @ Earth and Money writes Planning a Green Frugal Wedding – Guests – At most weddings, there is a fixed cost associated with every guest that attends – food, dishes, venue, all these things are related to the number of guests that you have. So that begs the question – do you really want to invite your dad’s cousin’s nephew’s boyfriend who winds up getting drunk at the open bar?

Dave @ Financial Conflict Coach writes How To Map Your Financial Relationships – A Financial Relationship Map helps you create a current snapshot of where your money goes, where it comes from and how strong or weak these financial relationships are. It’s not about numbers- it’s about relationships.

Brent Pittman @ On Target Coaching writes S.H.I.E.L.D. Your Finances from Total Destruction – Protect your finances like Nick Fury and the Avengers are protecting the earth from total destruction by using the S.H.I.E.L.D. method.

Kraig @ Young, Cheap Living writes How to Achieve Balance and Do What You Care About – How well do your values and what you care about line up with what you actually spend your time and money on? My definition of life balance here is based on if you’re doing what’s important to you, or other things which are throwing your balance off.

Jeff Rose @ Life Insurance by Jeff writes Guaranteed Acceptance Life Insurance – How Does it Work? – For those who cannot get approved for a basic term life policy, guaranteed acceptance life insurance is the solution to their problem.

Sean @ One Smart Dollar writes How is My Credit Limit Determined? – Understanding how your credit line is determined can be a great way to start understanding your finances.

Aaron @ Aaron writes How to be extraordinary – Have you ever stopped and wonder how people like Mozart, Shakespeare, DaVinci and even Jordan became such an influence in our everyday lives? How is it that they became so creative and talented that it seems almost impossible for anyone to try to be like them?

JB @ My University Money writes Are Banks Really In It For You? – Learn from my mistakes and never assume the banks are in it for you. They aren’t, in fact they make a killing off you so don’t make it easy on them whenever they try to push a product on you.

Young @ Young And Thrifty writes RRSP vs RESP Accounts – There are obviously numerous aspects of each person’s financial situation that will come into play when looking at whether a RRSP or an RESP contribution is right for them.

Khaleef Crumbley @ Faithful With A Few writes 4 Reasons Why I Will Not File For Bankruptcy – To file for bankruptcy is not an easy decision. Even though it has become more common, here are 4 reasons why I will never do it!

Kim @ Money and Risk writes How to Get a Hot New IPO and Why You Did Not Get One – Ever wonder how you can get shares of a hot IPO – initial stock offering? Here’s the scoop.

Lance @ Money Life & More writes How I Paid for My Hobby – Hobbies are a lot of fun, but there is one thing that prohibits many from taking part in their favorite hobby as much as they would like to. Cost. Hobbies, while fun, can be expensive. In this post I describe how I paid for my hobby.

Echo @ Boomer & Echo writes How Young Adults Can Still Thrive Financially – It’s hard to see the silver lining for today’s youth, but luckily there are still plenty of opportunities for young adults to thrive financially.

SB @ One Cent at a Time writes How to shop at Garage Sales – A Guide to Garage Sale Shopping – A shoppers guide to garage sales. What to buy, what not to buy and tips for a successful treasure hunt at a garage sale is included in this post.

Oh Noes! The Facebook IPO!

Posted May 18th, 2012 in Investing by Jeremy Waller

Today is the big day. The day that Facebook goes public and makes Mark Zukerberg the 29th richest person in the world.

It’s unreal how much hype is surrounding this IPO. I don’t know if it’s because it’s one of the biggest IPOs in history or if its simply because it’s Facebook.

I’m sure there’s no shortage of people that will be doing everything they can to grab a piece of the action as soon as the opening bell rings.

I think those people are fools.

Facebook is incredibly overpriced at $38 – the price it is set to start trading. (Though there’s no way you could actually buy it at that price today. FB it going to pop like you wouldn’t believe today.)

At $38, Facebook will trade at 65 times projected earnings for 2012. 65x is nuts!

Google is currently trading at 15x projected earnings for 2012 and Apple is currently trading at 13x.

Oh, but I’m buying Facebook on future earnings. I’m getting in at the bottom!

Oh you are?

Are we looking at the same data here?

Well, we probably are – you just don’t care.

Let’s be realistic here folks. Everyone buying Facebook today is doing so on pure speculation.

The fundamentals simply do not support the pricing of the IPO.

But, people simply don’t care.

They look at Google’s IPO in 2004 with was priced at $85, immediately rose above $100 and continued to climb to $400 in less than 1 year.

There’s a very significant difference in the IPOs though. Google was priced cheaper compared to earnings and Google had more than double the revenue growth in the quarter before its IPO than FB has.

Even if Facebook can achieve 50% earnings growth year-over-year, $38 will still be 40x earnings.

Ding! Ding! Ding!

There goes the opening bell.

Grab you bucket of popcorn and get ready to see an opening pop like you’ve never seen before!


Top Personal Finance Posts Of The Week – Big Fat J.P. Morgan Losses Edition

Posted May 13th, 2012 in Blog Carnival by Jeremy Waller

Last week JP Morgan Chase announced it was sitting on at least $2.3 billion in paper losses stemming from trading naked credit default swaps. These high risk derivatives are analogous to buying insurance on a house you don’t own – doesn’t make a whole lot of sense.

Initially credit default swaps (CDS) were introduced as a way to hedge against defaults on debt – bonds in particular. However, the practice of trading naked CDS (credit default swaps in which you do not have an interest in the underlying debt) became more and more popular.

JPMorgan Chase, one of the biggest financial institutions in the world, is now facing scrutiny for the huge losses it has amassed from trading these high-risk derivatives.

Top Posts of the Week

Roger the Amateur Financier @ The Amateur Financier writes Book Review – The Art of Non-Conformity – A review of the book The Art of Non-Conformity, which takes a look at ways to live your life that aren’t in line with the normal approach most people take.

MMD @ MyMoneyDesign writes What Did You Learn From Working as a Teenager? – Was your job as a teenager a complete waste of time, or did you learn some incredibly valuable life lessons that prepared you later on in life to be a better working professional? I present to you 17 lessons I learned from my early days of employment that I still carry with me today.

Maria @ The Money Principle writes Politics and economy in the Eurozone part 1 – The people have spoken in France and Greece. They do not like this austerity business one little bit. Can you blame them? After all it was not the people who caused the problem so why should they suffer while the banks get off scot-free?

TRL @ The Retired Landlord writes Different Places to Save a Down Payment – Find out the many different accounts or investment places that you can use to save a down payment for a rental property.

Teacher Man @ Young And Thrifty writes Choosing the Latest Investing Fad – Don’t you love the guys/gals that get their investment advice from the water cooler? You know the guys and gals that are constantly hopping on the bandwagon of whatever terrible investment advice that their co-workers heard on the radio on the way in this morning?

Echo @ Boomer & Echo writes Pitfalls Of Chasing The Highest Dividend Yield – Choosing a dividend stock involves a lot more than simply looking for the highest dividend yield. Here are some of the pitfalls to avoid:

Harry Campbell @ Your Personal Finance Pro writes Traveling on a Budget: A Review of My Vacation to Maui – I never realized the value of a vacation until I started working full time. You could even say I took my travels to Thailand, Hungary & Turkey for granted. My trips during college were an awesome experience that I would recommend to anyone at any age. But for working professionals, who get anywhere from 2-4 weeks off a year, vacation time becomes a precious commodity. I get two weeks a year but I think I would be a lot happier with four

Sean @ One Smart Dollar writes 8 High Paying Jobs Without a College Degree Needed – Not everyone has the means or want to go to college. Luckily for them there are still plenty of jobs that you can make over $100,000 while not having a college degree

Earth and Money @ Earth and Money writes How NOT to Make a Financial Decision – When it comes to making financial decisions, it is imperative that you have a clear and focused mind. Given how hard we work for our money, a poorly made financial decision can come back to haunt us many times over.

SB @ One Cent at a Time writes Top Risks for Investing in Oil and Natural Gas – Every investment opportunity has its share of risks. This article talks about the risks of investing in oil and natural gas sector, geared towards beginner investors.

Lance @ Money Life & More writes Rental Property – The Financial Side – There are many numbers that are important when making a decision on buying a rental property. The first one that we calculated was how much we would offer for the townhouse. It was listed at $73,500 which may not seem like a lot but would probably be about 5,000 under market value IF it was in great shape and ready to rent out. It wasn’t, so we definitely would not be offering anywhere near that amount.

J.P. @ Novel Investor writes Remember Your Investment Horizon – Fears in Europe, slowing economy, unemployment concerns, and a few hundred other data sets all contribute to the daily swings of the market. When the markets start acting crazy, remembering your investment horizon will bring everything back into perspective.

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