The age of the financial roller coaster ride is in full swing and to counter the negative effects as an individual, the best plan is to reduce risk using income streams. Notice I said streams, as in plural. The only real hedge against financial peaks and valleys is to have a variety of money making tributaries that will provide income which if not stellar, are at least consistent.
Why Relying On Your Job Is A Failing Plan: The Curse Of The One-Trick Pony
According to recent surveys in both the US and Canada the primary cause of stress for North Americans is financial. While this news comes as no shock, what is so surprising is how few people are actually taking any action to reduce that stress and simply avoid the issue, hoping in vain that the situation will somehow resolve itself. The shift towards contractor positions over regular full-time employees is happening. Extras such as flexibility in work hours, options to telecommute and performance based bonuses make contract positions alluring. And while there is benefit in the freedom that comes with being a contractor, very little can be said of it’s beneficial upshot when considering retirement. The contractor is a lone gunman and is treated as such by the employer. The funny thing is, in most cases, being an employee doesn’t offer the benefit it used to either. As far as retirement plans go, many companies will offer retirement plan contribution matching (to a certain point), though this advantage also goes “the way of the Dodo bird” if an employee is sent packing.
At such times, be it a contractor whose juicy contract expires, or long term employee who is shown the door – the concerns of both groups become the same. Those concerns are for short term financial survival (read: staying afloat) and for the long term, making certain that retirement plans are impacted as little as possible. The sad part is, for all the effort the worker bee has put in, whether a contractor or employee, they will face a financial reckoning which could take years to recover from if they don’t manage to secure new employment. All this is assuming no other issues arise which could also create even more unexpected financial burden. No wonder financial stress is the primary concern of North Americans. By relying solely on the income of a job without reinvesting in other sources of income, an individual is taking on increasing risk. Over a long enough timeline, this is a recipe for financial failure. Gone are the days where people spend thirty years at a job and retire with a healthy-sized employer provided parachute. The only way to offset the current job market realities is to reduce risk using income streams. Listed below are a few tips for income stream tactics that you can employ and start reducing your risk.
Reduce Risk Using Income Streams – Tip#1: Tax Liens Certificate Investing
Every year in North America, people fall behind in tax owed to the government. What most people don’t realize is that the government always has “first seat” on a property title. That means if there are debts owing to the government, regardless of what financial institution has an interest in the property (like a mortgage on it), the government gets it’s share first, in the form of a “lien” on the title of the home. The government puts lien certificates up for auction at different times in different states and provinces each year. If the owner of the home pays their taxes within the allotted time, then the lien certificate holder will be reimbursed their initial investment, plus interest. The interest varies, though depending on the state or province – can be sizable when considering the low level of risk of the investment. If the owner does not pay within the allotted time, then the lien certificate holder can assume first position on title, after paying any remaining fees or taxes accrued in the interim. This means you will then be the proud owner, free and clear of the property held under the certificate. There is due diligence required on the part of the investor to confirm that there is enough value in the title to make the investment worthwhile. In other words, the title needs to be checked to be sure what you’re investing in will easily cover the amount you invest, which could be several thousand dollars. I’ve heard of a person spending several thousand dollars on a tax lien certificate, only to later find out that what they’d purchased was the title to a parking pad in a condominium. While technically it has value, it would be tough to recoup the investment. Remember, in all investments tax lien certificates or otherwise – “caveat emptor” (buyer beware). Seldom do the tax sales actually follow through. The owners usually pay at the eleventh hour. Still, this means you net a healthy interest with low risk. Year over year, this is one decent long-term strategy to reduce risk using income streams.
Reduce Risk Using Income Streams – Tip#2: Rental Property
The advantage to owning real estate can be enormous, with patience and discipline. Rental properties, especially in the initial years are quite hands-on. As an investor, you need to be hands-on to fully understand your investment. If owning a second home is too big a financial burden based on your income, consider buying a home with a secondary suite, either in the basement or over the garage, which you can rent out. Yes, this means you’ll be sacrificing space and have a neighbor closer than you might want. This will feel like a real drawback until you look at your savings account after the first year.
There are horror stories of landlords having nightmare renters. In my experience, usually the bad renters could’ve been avoided and are the result of a landlord not wanting to go an extra month with a vacant property, so they take the first person that comes along. Don’t let these stories scare you, rather let them serve as a cautionary tale of what not to do. Again, like any investment, it’s all about due diligence. There are many courses and guidebooks to help, as well real estate investing clubs that can offer support. Wait until you find the perfect investment property to suit your needs and make sure the numbers are right. In other words, buy it because it offers a great return on investment every year. If it doesn’t, you should pass. Buying a place that doesn’t provide actually cash flow, in the hope it will increase in property value is called speculation and it’s risky business, even for investors with deep pockets.
Reduce Risk Using Income Streams – Tip#3: Rental Equipment
There are a lot of companies making an absolute fortune in the rental business each day. Perhaps you have a hobby that is costly. Have you ever considered what you could make by renting out your equipment? The options are really endless…boats, film and video equipment, landscaping tools. You would be amazed at the demand. I have a camera that shoots both film and video. Out of curiosity alone, I checked what the local camera shop rented my model camera out for per day. Based on their rate, if I rented out my camera, it would be paid for in ten days of rental. Obviously you will want to get a rental agreement contract drawn up by a lawyer, though this is a small cost when it is used over and over, each time you rent out your equipment. The same goes for insurance. You will need extra, which can be added to the rental cost, or simply demand that the renter has their own insurance coverage, which proof of can be provided, as a condition of the rental. A decent powerboat can rent for $500-$700 a day. How long will it take you to pay off that boat over a long, hot summer? You may find the rental business becomes a way of life, rather than a just a stream of income.
Reduce Risk Using Income Streams – Tip#4: Honorable Mentions
Below is a few other options for income streams which should also be considered, as they may fit your lifestyle and financial situation better than others:
- Importing Wholesale Goods and selling on eBay – I’ve done it and I recommend it. You can start small with little actual investment, just to get your feet wet. Research into finding a timeless, non-perishable product to sell that has the right profit margin is definitely the key. The other important factor is customer service. All eBay stores live and die by their customer ratings. Find something small, which has a low cost to you and will ship for very little cost as well. Once you understand the nuances of eBay and your store grows, you can retire on this option alone.
- Estate Sales and Flea Markets – If you like to shop, get into the habit of shopping to make a buck. This option is a time investment, though if you know what to buy because you’ve done the research, you will make expert decisions, which means more money in your pocket. If you simply reinvest your profit into new purchases, you will soon find your financial coffers swelling.
These are just a few examples of income streams you can invest in. If none of these options appeal to you, I urge you to research the topic in more detail. I guarantee you will find an option that fits your needs with little difficulty. The important takeaway from this article is that you reduce risk using income streams. If you do and the day comes where you find yourself unemployed, the adjustment will be much easier then if you relied only on one source of income. You may also find that one of the investing options become your new “job” because of the success you find with it.