Trying to create significant supplementary income is not easy. There are lots of people selling get rich quick schemes and ways to earn big money for little effort. But those schemes don’t offer what they claim (they just don’t work for any, but a few people).
In trying to figure out a good way to create another income stream I thought of the idea of consulting over the internet in very small chunks of time. I explored the options to be a consultant that way and they were not good. But the idea seemed excellent to me and I worked with a friend to develop the idea of us creating such a online service. The potential was great I think. The end service would provide value to those seeking answers and those providing consultation (and to us).
We did get a domain and plan out the service and begin coding the application but didn’t progress very far. It was still a great idea and something I planned to consider if I had a bit more time. Well there is now an offering that appears to actually be fairly decent (on first glance): Minute Box.
Minute Box allows you several of the things we planned on offering (but not all of them – at least not yet). You can register as an expert and then be available for those wanting advice. You sign in when you are available to answer questions (and people can send you a note while you are offline). You set your rate. Essentially IM is used for consultation and the billing is taken care of by Minute Box.
One of the keys is matching people to experts well. Minute Box does one thing we planned on doing, which is to emphasize the experts tapping those that already value their advice. This would work very well for bloggers and those with an online presence and reputation.
I signed up and created my expert account, so if you want to get some advice from me you can get consulting by the minute from John Hunter.
I think this consulting by the minute model is a great way to create a secondary income stream for those that have a positive online reputation. You can adjust your pay to manage demand. If you have a free week and want to make some extra income you can reduce your rate and offer your readers a special discount. This is potentially a great way to capitalize on your expertise. I haven’t had much experience with Minute Box yet so it isn’t certain they are the answer (but I haven’t seen any other solution that is very good). And no matter the service provider used, I believe the internet enabled micro consulting is a great way to provide some extra income and make your personal finances more robust.
The range of advice you can offer is huge. For nearly anything there are people that need advice: how to cook thanksgiving dinner, helping a child with math homework, fashion advice, editing a resume, which mortgage offer is better in a specific situation, fixing a bug in a WordPress blog, what are good plants for a shady area… The list is nearly endless.
I wish I had been able to create a web site to facilitate this process. I believe the potential is huge. That is why I was so interested in making this idea work. It is the only web business I have seriously considered (and even started). I have numerous web sites but they involve providing content online not any software as service businesses.
Related: Earning More Money – Save Some of Each Raise – If you can’t pay cash, earn more money or save until you have the cash
Georgetown University Center on Education and the Workforce has produced a new report looking at the value of different college degrees in the USA. I have seen a great increase in discussions of the “bubble” in education. Those articles often say a college degree doesn’t assure the success it used to. The data I review seems to show extremely large benefits for those with a college degree (higher salaries but, much more importantly, in my opinion, they also have much lower unemployment rates).
Those benefits are greatest for several majors including science, math and engineering. The problem I see is not so much that significant benefits are lacking for college degrees but the huge increases in costs of getting a degree are so large that for some majors the cost is just so large that even with the benefits it is arguable whether it is worth the cost (while a few decades ago the benefits were universal and so large the economic benefit was not debatable).
The authors of the report found that all undergraduate majors are worthwhile, even taking into account the cost of college and lost earnings. However, the lifetime advantage ranges from $1,090,000 for Engineering majors to $241,000 for Education majors. As I have written frequently on the Curious Cat Science and Engineering blog, engineering degrees are very financially rewarding.
The top 10 majors with the highest median earnings for new graduates are:
- Petroleum Engineer ($120,000)
- Pharmacy/pharmaceutical Sciences and Administration ($105,000)
- Mathematics and Computer Sciences ($98,000)
- Aerospace Engineering ($87,000)
- Chemical Engineering ($86,000)
- Electrical Engineering ($85,000)
- Naval Architecture and Marine Engineering ($82,000)
- Mechanical Engineering, Metallurgical Engineering and Mining and Mineral Engineering (each with median earnings of $80,000)
Chart of salaries (25th and 75th percentile) by major in the USA based on data from 2009
Related: 10 Jobs That Provide a Great Return on Investment – Mathematicians Top List of Best Occupations – New Graduates Should Live Frugally
I believe long term disability insurance is a must for a safe personal financial plan. The risk of not being covered isn’t worth it. An office worker should have a very low risk of something happening that qualifies you for receiving benefits (even with fairly serious injuries for a hunter-gatherer or farmer they can earn a living).
That is actually the perfect situation for insurance. Insurance should be cheap when the risk is small. You want insurance for unlikely but very costly events. You don’t want insurance for likely and inexpensive events (paying the middle man just adds to the cost).
I believe, other than health insurance it is the most important insurance. For someone with dependents life insurance can be important too. And auto and homeowners insurance are also important. Insurance if an important part of a smart personal finance. It is wise to chose high deductibles (to reduce cost).
In many things I believe you can chose what you want to do and just deal with the results. Forgoing health or disability insurance I think don’t fall into that category. Just always have those coverages. I think doing without is just a bad idea.
When I would have had gaps in coverage from work, I have purchased disability insurance myself.
I am all in favor of saving money. About the only 2 things I don’t believe in saving money being very important are health and disability insurance. Get high deductible insurance in general (you should insure against small loses). And with disability insurance you can reduce the cost by having the insurance only start after 6 or 12 months (I chose 12). As you get close to retirement (say 5 years) the risk is much less, you only have so many earning years left. If you wanted to save some money at that point it might be ok if you have saved well for retirement and have a cushion (in case you have to retire 3 year early). Long term care insurance may well be wise to get (if you didn’t when it was cheaper and you were younger. Long term care insurance is really tricky and very tied to whatever our politicians decide not to do (or do) about the broken health care system we have in the USA. The cost also becomes higher as it is moving toward a likely event, instead of a unlikely event (as you age you are more frail).
Related: How to Protect Your Financial Health – Personal Finance Basics: Avoid Debt
In the first place debit cards are a bad idea. They don’t have the same protection as credit cards. Banks pushed them in the USA because of the huge fees they charged (hidden from users). Now those banks are not allowed to charge the hugely excessive fees (compared to any other country) they had been charging retailers. And the banks are now trying to push huge fees onto those using the cards. Just dump any debit card you have.
Secondly, you should have long ago severed any ties with the large banks (that not surprisingly are the ones announcing the huge fees, so far). They provide lousy service and extract exorbitant fees whenever they can sneak them by you. Choosing to do business with companies that you must remain hyper vigilante to abuse from is just not sensible. Small banks unfortunately get bought out by the large banks to prevent competition. So while using small banks is ok, you keep having to go to a new one as the large ones buy out your bank to prevent the competition.
So it is more sensible to just pick a credit union. Credit unions are decent overall. Some can still be bad choices but it is almost impossible to do worse than any of the large banks. If you use ATMs a good deal make sure you minimize ATM fees when selecting a credit union (their policies in that area – waived fees, network ATM access… are significantly different between your options).
The free checking we have grown accustom to may well be on the way out. That seems fine to me. Essentially the government’s subsidy to the large banks and financial institutions in repressing short term interest rates (at the expense of course of savers and retirees) has greatly reduced the value of checking and savings balances at banks. I am sure the large banks will be the most customer unfriendly as fees are added to accounts, based on their track record.
Obviously you should not carry credit card balances, with high interest rates.
There really is almost no excuse for dealing with the large banks (other than a mortgage that was sold to them without your permission where you have no option but to put up with their behavior as their customer). Many of the other extremely bad customer service industries (cable TV, internet access providers, airlines) have monopolistic powers than often make it extremely difficult to avoid dealing with them. Of course the large banks make huge anti-competitive moves that shouldn’t allowed in any capitalistic system. But then our system is more about what you can buy with your cash payments to congress than capitalism. And you can’t accept the proponents claims of capitalism as a reason to do what they ask; more often then not those playing the capitalism over government argument are asking for anti-capitalist measures (allowing anti-competitive practices etc.) in support of special interest at the expense of society (markets require regulation to have the benefits of competition provide a dividend to society).
Related: Credit Card Regulation Has Reduced Abuse By Banks – Credit Card Issuers Still Seeking to Take Your Money – More Outrageous Credit Card Fees
I have written about the importance of protecting yourself against the companies that provide you financial services. There are few (if any) industries that as systemically try to trick and deceive customers out of large amounts of money as the financial services sector does. In addition to watching them, you it also makes sense to watch your credit card charges. For some reason attorneys general let large scale financial fraud go with much less policing than petty theft by juveniles (if some kids come in and take your TV they will be in trouble, if some large bank does the same thing to all of the household goods of many people that never even were their customers criminal charges are ignored for everyone involved – one of many such examples of bad decisions by attorneys general).
Because financial fraudsters are allowed to continue without much fear of prosecution: thousands, or tens or thousands, or hundreds of thousands and then maybe something will be done, of course that is a lot of people to suffer before action is taken. For that reason we are subject to long standing schemes to take money fraudulently go on for a long time. I wouldn’t even be surprised if most companies found to have taken money that isn’t theirs are left off when they refund money to those people that caught them and that is seen as ok.
Given this state of affairs, many have discovered just sending bills to people and companies and billing your credit card for things you didn’t order is a good way to steal money. Since law enforcement is extremely lax about stopping this. It is in your interest to protect yourself.
Bill Guard is a new service to watch your credit card charges and alert you to potentially fraudulent charges. It seems like a pretty good idea. Like Google flagging spam email for you. I really would think credit card companies should do this (they do but I guess not nearly well enough – no surprise there). I don’t so much love the idea of sharing credit card info with these people. And I don’t charge much so I can review my bill easily, myself. I can imagine lots of others though have difficulty remember every charge. If so, this may well be wise.
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His point on dollar cost averaging is sensible. Markets go up, more than down, overall [the statistically best approach] if you have a lump sum to invest the best strategy would be to invest it all now. There is added risk with this however, which he would accept. Also it doesn’t change the main reason people end up dollar cost averaging (by default, with retirement savings from each paycheck).
He discusses these ideas, and many more in his book: Debunkery: Learn It, Do It, and Profit from It-Seeing Through Wall Street’s Money-Killing Myths.
Related: Curious Cat investment books – Investment Risk Should be Evaluated as Part of a Portfolio, Rather than Risk of Each Individual Investment – Save Some of Each Raise
You should review your credit reports annually (at least) to correct any errors. Also doing so can be a tool to help you spot identity theft.
The real free credit report site (for those in the USA), annualcreditreport.com, is provided by government regulation (so those that don’t believe in regulation would maybe rather use one of the sites advertising “free” credit reports). But I suggest using the government provided reports and I would suggest spreading the requests out during the year (you get 3 a year, 1 from each of the nationwide consumer credit reporting companies).
The site also has a large frequently asked question section including:
How do I request a “fraud alert” be placed on my file?
You have the right to ask that nationwide consumer credit reporting companies place “fraud alerts” in your file to let potential creditors and others know that you may be a victim of identity theft. A fraud alert can make it more difficult for someone to get credit in your name because it tells creditors to follow certain procedures to protect you. It also may delay your ability to obtain credit. You may place a fraud alert in your file by calling just one of the three nationwide consumer credit reporting companies. As soon as that agency processes your fraud alert, it will notify the other two, which then also must place fraud alerts in your file.
Where can I find out more about credit reports, my rights as a consumer, the Fair Credit Reporting Act and the FACT Act?
Please visit www.ftc.gov/credit
Related: Credit Card Tips – Personal Finance Basics: Avoid Debt – Save Some of Each Raise – Personal Finance Basics: Long Term Disability Insurance
Most people know living without health insurance is very risky (and shouldn’t be done). But people are much less aware of the importance of long term disability insurance. The census bureau estimates that you have a 20% chance you will be disabled in your lifetime. A disability can decrease your earning power and also can increase your expenses (to cope with your disability). In my opinion your emergency fund is best used for short term disability insurance.
One of the most important things you can do is be sure you have disability coverage. In the USA about 50% of the jobs provide coverage. If your job does not you should get insurance yourself. Many companies may not pay for disability insurance but may allow you to pay for it (this often can be the best option as the company can gain a better price than individuals but you have to check out the details). Also social security includes some disability insurance coverage but it is very limited. Relying on social security alone is not wise. For one thing it does not protect you from being unable to do your current job but will only pay benefits if you are unfit to do any job.
There are numerous factors to consider for disability insurance. Normally a long term disability insurance policy will pay 50-60% of your salary (be sure to check and see, and check if there is any cap). The terms of the policy will also determine how long you will be paid, being paid until at least 65 is what I would suggest – but some only pay for a limited number of years.
Often policies will offer pro-rated benefits if you earning power is reduced by a disability but you are still able to earn something. So you may have a policy that pay 60% of your original salary but if you make 50% of your previous salary then the payout is reduce to say 20%. So if you originally made $80,000 and now, due to a disability (not just losing your job), you could no longer do your job but could do one that paid less – say $40,000. You would then get your new salary of $40,000 + $16,000 in disability payments or $56,000.
Another detail you should check is whether the payments you will receive are indexed to inflation. In addition, make sure the policy is guaranteed renewable. You also want to buy from a reputable insurance company (check AM Best, Moody’s, Weiss rating agencies). It doesn’t help to have a guaranteed renewable policy if the insurance company goes out of business.
Another thing to consider is buying additional disability coverage. For example, if your company provides a 60% coverage policy it is often possible to purchase addition coverage (to provide additional benefits of 10% or 20% or more of your current salary).
A rough guide is disability insurance will cost 1-2% of the income replaced. For example, a policy replacing $50,000 per year of annual salary would cost about $1,000 per year. Of course, the older or sicker you are the higher the cost. Premiums are based on risk factors, so if you have health risks that will cost more. And, as age is a significant disability factor, the older you are the higher the cost will be.
Remember if you have disability insurance through work, and lose you job you need to get your own disability insurance. This is yet another reason to have an adequate emergency fund.
Related: Personal Finance Basics: Long-term Care Insurance – Personal Finance Basics: Health Insurance – How to Protect Your Financial Health – Life Happens: disability insurance
Earning more is an important and simple idea that is ignored far to often. Simple, doesn’t mean, easy, just easy to understand. This is something people should definitely consider in their personal financial planning.
There is a important caveat to remember, people earning a lot of money often have large financial problems and go bankrupt. Earning more if you borrow more than you earn and rely on ever increasing earnings can make you even more venerable than those earning less. A significant factor is how likely you are to replace your current earning if you need to find a new job.
There is also another concern to watch for – don’t become a slave to your desire to earn more. The reason to earn more is to improve your life long situation. If you sacrifice what you enjoy too much it becomes a bad trade off. Short term sacrifices may well be wise. But many people find themselves in decades long sacrifices to try and get ahead. This isn’t a good plan.
Making money online can be enjoyable and rewarding. However, it isn’t easy. I am putting more effort into this area and will be doing a great deal more in the next year. We will see how successful I am.
Related: Earn more money. It matters more than everything else combined. – 10 Jobs That Provide a Great Return on Investment – Earn More Money to buy luxuries (don’t go into debt) – High Expectations
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The biggest investing failing is not saving any money – so failing to invest. But once people actually save the next biggest issue I see is people confusing the investment risk of one investment in isolation from the investment risk of that investment within their portfolio.
It is not less risky to have your entire retirement in treasury bills than to have a portfolio of stocks, bonds, international stocks, treasury bills, REITs… This is because their are not just risk of an investment declining in value. There are inflation risks, taxation risks… In addition, right now markets are extremely distorted due to the years of bailouts to large banks by the central banks (where they are artificially keeping short term rates extremely low passing benefits to investment bankers and penalizing individual investors in treasury bills and other short term debt instruments). There is also safety (for long term investments – 10, 20, 30… years) in achieving higher returns to gain additional assets – increased savings provide additional safety.
Yes, developing markets are volatile and will go up and down a lot. No, it is not risky to put 5% of your retirement account in such investments if you have 0% now. I think it is much riskier to not have any real developing market exposure (granted even just having an S&P 500 index fund you have some – because lots of those companies are going to make a great deal in developing markets over the next 20 years).
I believe treating very long term investments (20, 30, 40… years) as though the month to month or even year to year volatility were of much interest leads people to invest far too conservatively and exacerbates the problem of not saving enough.
Now as the investment horizon shrinks it is increasing import to look at moving some of the portfolio into assets that are very stable (treasury bills, bank savings account…). Having 5 years of spending in such assets makes great sense to me. And the whole portfolio should be shifted to have a higher emphasis on preservation of capital and income (I like dividends stocks that have historically increased dividends yearly and are likely to continue). And the same time, even when you are retired, if you saved properly, a big part of your portfolio should still include assets that will be volatile and have good prospects for long term appreciation.
Related: books on investing – Where to Invest for Yield Today – Lazy Portfolios Seven-year Winning Streak (2009) – Fed Continues Wall Street Welfare (2008), now bankers pay themselves huge bonuses because the Fed transferred investment returns to too-big-to-fail-banks from retirees, and others, investing in t-bills.