Develop Multiple Streams of Income When people hear the advice to save more, they typically think that they should stop going out to lunch, and instead bring a bologna sandwich to work or school. Although one obvious way to save more each month is to reduce frivolous expenditures, that's not the main thing I have in mind. If a person really wants to start socking away a lot more each month, the best avenue is to boost his income, not cut spending. Particularly for young people (my target audience), there may not be that much room to cut. However, there's no limit on how much (in principle) someone can earn. Don't misunderstand me. By all means, if a 22-year-old with no steady income is making huge payments on a sports car and rent in a posh neighborhood, then obviously it would be very prudent to move to a cheaper place and to switch to a boring vehicle with 80,000 miles on it. Yet even after plucking such low-hanging fruit, everybody â especially young people â should start brainstorming about how to bring in more income. "Incidentally, people shouldn't feel guilty about saving more, notwithstanding the handwringing coming from mainstream economists.⦠Society really can save and invest 'on net.'" Notice here that I don't simply mean someone who currently works in an office should consider working nights as a waitress. In fact, that's not primarily what I have in mind. Instead, I think young people should consider a host of entrepreneurial ventures. Rather than looking for other bosses, young people should become their own bosses, at least in a few limited areas. To some people this suggestion may sound intimidating. But notice that plenty of young people are entrepreneurs and they don't even realize it: Anybody who babysits or cuts lawns for neighbors is an entrepreneur. Such kids have to find customers (usually through word-of-mouth) and provide a service for which they get directly paid. That's what an entrepreneur does. When I have mentioned this recommendation in public settings, sometimes students ask me what sorts of businesses they should start. The short answer is, "I don't know; that's what you need to figure out." The entrepreneur looks around and identifies a product or service that people currently lack but would be willing to pay for, in such amounts as it would be worth the entrepreneur's money and effort to provide it. The reader should keep in mind that I'm not saying a person needs to brainstorm until finding "it," the fantastic idea that will eventually make someone rich. On the contrary, it's worthwhile doing all sorts of different ventures, so long as each one is self-contained and doesn't threaten to absorb too much time. It may take a lot of trial and error to gain the skills, confidence, and knowledge of customer demand before finding something really profitable. As with all of my recommendations in this article, generating multiple sources of income is always a wise thing. However, in the present environment it is critical. Even someone who currently has a "good, steady job" can't be sure of his position even a year from now. A young person who inculcates that weekend business now, can expand the business in the unfortunate event of a layoff. But if that same young person, who has always (say) thought of starting a dog-walking service, tries to do so next year when the unemployment rate shoots up to 12 percent, she will be competing with that many more people. It's much better to get a fledgling business established now, during the weekends or other days off, so that the owner will already have a solid base of customers when the economy slumps again. To reiterate, my advice is not to try to save more by looking at the monthly budget and saying, "Well, this is how much I make, and so if I cut back here, here, and here, then I can afford to put aside $250 more per month." No, I would much rather a person say, "If I cut back here, I can free up another $100 per month. And if I cleaned three houses every Saturday, then after expenses and treating myself to a nice dinner every weekend, I could save an additional $600 per month." Sell Your TVs "Everybody â especially young people â should start brainstorming about how to bring in more income." The most succinct tip I can give, in order to find ways of generating new income, is to sell every TV in the house. I got rid of my TV during one of my frequent moves in grad school. At first I went through psychological withdrawal, but now it would sicken me if someone put a TV in my house. I can't imagine how much it would destroy my productivity. People can still watch their favorite shows on the computer. Build Up at Least a Month's Worth of Expenses in Cash Now if a person is saving more each month, the obvious question is: How should those savings be used? I think the first step â and no I'm not trying to sound like Dave Ramsey â is to accumulate at least a month's worth of cash. (Depending on the person's preferences and habits, it could be best to put this cash in a can in the closet, in a bank checking account, or in a bank savings account.) The point of doing this is to get out of the habit of living paycheck to paycheck. Such a lifestyle is bad for (at least) three reasons: Most obvious, it leaves a person vulnerable to even a minor setback. If there is an unexpected expense, or if the person gets laid off, then obviously a small cushion of cash would be crucial. Yet beyond this obvious justification, there are two other reasons that building up at least a one-month window of cash balances is a vital, immediate step. First, it frees up more time, especially for a person who has followed the earlier steps and is now earning income from several sources. Rather than having to run to the bank every time a new check comes in the mail, and rather than having to go online and check the bank balance every other day to make sure nothing is going to bounce, a person with at least a one-month cushion can better afford to let the paychecks and bills accumulate, then deal with them in one fell swoop. This allows for the person to spend more time focusing on the business(es), rather than stressing out about cash flow. The other main reason the paycheck-to-paycheck mentality is destructive for the entrepreneurial person, is that the person is more prone to goof off whenever he's done enough to "get through the month." But once that critical threshold has been extended past the one-month barrier, there is little difference between having enough to pay for one month versus two or three months. Once a person takes it for granted that he will have money left in his checking account even after paying all his bills for the month, that surplus will mysteriously begin to drift upwards with each passing month.
Tithe or Give to Charity It seems counterintuitive, but when a religious person tithes (or when a nonreligious person gives to charitable causes) there is somehow more money each month to work with. For tithing â where a person is supposed to give a specific percentage of income to the church â I think it's because the practice forces a person to stay on top of his finances. More generally, by focusing attention away from oneself, things become clearer and it's easier for a person to do the "responsible" things like avoiding impulse purchases and doing the extra work needed to bring in more income. This last point is crucial for people who are suffering from depression and are in a financial hole. Part of what keeps them there is that, deep down, they don't think they deserve to live stress free like the other people they see around them, who somehow have their act together and don't let bills pile up on the kitchen table. By bringing in the church (or a charity that the person really respects), the depressed and financially beleaguered person can stop dwelling on self-loathing and instead focus on helping others. Eliminate Variable-Rate Debt as Quickly as Possible If a person already has a decent amount of cash on hand, I think the next goal should be to eliminate variable-rate debt as quickly as possible. The most obvious example is credit-card debt rolling over at an APR that moves with the prime rate. If the dollar crashes as many Austrian economists fear, we can expect massive jumps in interest rates. This will wipe out many people who thought they were doing just fine the month before. Note that "eliminating" variable-rate debt doesn't have to mean paying off the balances. Using a new balance-transfer promotional offer, for example, might allow a person to lock in a fixed rate for a year or more. I have written on these pages about the pros and cons of credit-card use. Unlike my other suggestions, this particular one â namely to get out of variable-rate debt quickly â is based on our current situation, where I believe there is a real danger of interest rates spiking with little warning. Acquire Some Physical Gold and Silver Coins Once a young person has accumulated at least a month's window in cash and has neutralized variable-rate debts, I think an excellent outlet for some of the saving each month is the acquisition of gold and silver coins. These don't need to be collector's items; in fact my favorite thing is "junk silver," because if the Big One comes it will be easy for other Americans to recognize US coins that were minted before the 1960s and have an easily verifiable silver content. "Anybody who babysits or cuts lawns for neighbors is an entrepreneur." From an Austro-libertarian perspective, the other great benefit of buying at least some physical gold and silver is educational: This is what genuine, market-produced commodity money feels like. Conclusion The above tips are mostly common sense. Except for the warning about variable-rate debt, they are good ideas in any setting. Yet they are particularly important, especially for young people, in our present environment. In closing, I want to stress that I am by no means a role model in this arena. I can write with confidence on the above matters precisely because I have seen firsthand what happens when you don't follow those guidelines. If you want to keep your hair, you will give serious consideration to my recommendations. Robert Murphy, an adjunct scholar of the Mises Institute and a faculty member of the Mises University, runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, the Study Guide to Man, Economy, and State with Power and Market, the Human Action Study Guide, and The Politically Incorrect Guide to the Great Depression and
I consult now. I raise Capital for a few Investment Groups and I own a Digital Record Label, that is Kicking ass on Itunes. Self promotion time: BUY THE MUSIC IF YOU LIKE IT. http://itunes.apple.com/us/album/soniquarium-rennaisance-vol/id443760230te.... Label brings in between 1000-3000 per month. Not bad but working on increasing the revenue. Consulting is done an a retainer that can range from 700 to 1500 a month plus expenses and 10% commission on any money raised. Private Equity Teams pay me only on the end result of the project funding. So, once the entire project is funded I get paid out. I loose money trading But it's money I can afford to loose.. This is the future of working for yourself.
thanks for posting, I always like to read things like this. Everybody â especially young people â should start brainstorming about how to bring in more income." Reminds me, wayyyy back in the day. I used to come home from work and drink beer. I figured I'd build some dog houses to sell and drinnk beer. Then I talk to the kid who delivered my papers, he was about 12 years old, looked like John Denver, I asked him if he wanted to sell my dog houses, what the heck, he knew who had dogs, etc, etc. So I gave him a commision. We both made out okay. Your post brought that up from the past. I completely forgot about doing that. But it does help make your point. Make your own opportunities.
That is good advice. Great job emrglobal. I have a harder time taking my eyes off markets to get all that done, wow, great job. I'm taking night classes to sit for my cpa. Already have a degree, so it won't take long. Plus it can only help trading. Maybe soon I sit for cfa too. Cpa seems like a great thing to shoot for as you can be flexible. I want to get into Forensic accounting. We all knew Lehman was full of shit, but Einhorn had the numbers, I want that. Get um by the balls.
I also recommend reading the books "The richest man in babylon" and "an uncommon way to wealth" Not very expensive books. One costs $3.50 on amazon, the other costs 1 penny used. http://www.amazon.com/Richest-Man-B...=sr_1_1?s=books&ie=UTF8&qid=1315878180&sr=1-1 http://www.amazon.com/Uncommon-Way-Wealth-Victor-DArgent/dp/1570980098