Passive Family Income » Income Stream

How to Give Yourself a Raise – Even When Your Employer Does Not

John S. — Tue, 07 Feb 2012 11:47:11 +0000

Did you get a raise this past year? I didn’t get one or cost of living increase from my employer last year. Actually, I didn’t get one the year before either. It now looks like I won’t be getting any pay increase this upcoming year as well.

I know firsthand how frustrating it can be not to get a raise or cost of living increase after putting in a lot of hard work for your employer. Fortunately, I still have a job with steady income coming in – so I am not going to stress too much over it.

Instead of complaining about not getting a pay increase, I plan take matters into my own hands by giving myself a raise. I don’t believe in relying on other people or companies for my family’s well-being. I take full responsibility for my family’s finances, which is why I am proactive about managing our money properly.

Listed below is one of the best ways to give yourself a raise every year, even when your employer does not.

How to Give Yourself a Raise

I recently declared the best source of passive income is to own blue chip dividend stocks. Owning shares in well managed dividend paying companies can offer a steady stream of income to investors. What’s even better is that the best dividend paying companies will give you a raise each year just for owning their stock!

Take a look at these 5 companies that I currently own in my dividend income portfolio. This list is not a recommendation to buy shares in these companies, but should prove to you the power of investing in dividend stocks. With each stock that is listed below, I have included the percentage dividend increase from the prior year.

Abbot Laboratories (ABT) – 9% dividend increase
McDonald’s (MCD) – 14.7% dividend increase
Aflac (AFL) – 10% dividend increase
Procter & Gamble (PG) – 8.9% dividend increase
Johnson & Johnson (JNJ) – 5.5% dividend increase

The 5 companies listed above are some of the best dividend paying stocks to own. Each company has had a strong history of increasing dividends annually, which is a good sign to look for when screening income stocks. Investing in companies that have a strong history of increasing dividends every year can help you give yourself a raise, even when your employer does not.

If you think last year’s dividend increase in these stocks was a fluke, take a look at the 10 year average dividend increase of each company. Each stock on this list has increased its dividend payout annually for at least the past 10 years.

Abbot Laboratories (ABT) – 8.7%
McDonald’s (MCD) – 29.0%
Aflac (AFL) – 20.9%
Procter & Gamble (PG) – 10.9%
Johnson & Johnson (JNJ) – 12.4%

Just think if you would have invested in McDonald’s stock 10 years ago? Your shares would have averaged a 29% increase every year. When was the last time your employer gave you a 29% raise, or even a 5% pay increase in a given year?

Full Disclosure – At the time of this writing I own shares in ABT, MCD, AFL, PG, and JNJ.

What stocks do you own in your portfolio that offers an annual raise?

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What is the Best Investment Option – CD’s or Dividend Stocks?

John S. — Mon, 30 Jan 2012 11:20:06 +0000

What is the best investment option to earn passive income? A certificate of deposit or dividend stock? My wife and I have money invested in both. Here is a breakdown of the pros and cons of each and a explanation of where we are moving our money in this low interest rate environment.

Investing in a Certificate of Deposit

Investing in a certificate of deposit (CD) offers plenty of advantages to an investor, including the following list -

FDIC Insured – Investing in a FDIC insured CD will guarantee the protection of your money up to a certain limit.
Fixed Return – Investors will always earn interest off their investment, although it may not be very much.
Passive Income – There is no better source of passive income than a certificate of deposit. Once your money is invested, you can simply sit around and wait for it to expire.

There are certainly plenty of reasons why investors may want to choose a CD to invest their money. However, there are also a couple disadvantages which include -

Poor Return – CD rates are horrible right now, making them unattractive to most investors. The thought of earning less than 1% on my investment makes me sick.
Locked in Term – Regardless the term, investing in a CD locks your money up. Pulling your money out before the deposit account expires will cost you a penalty.

Investing in Dividend Paying Stocks

Another option for investing your money are dividend paying stocks, which can provide a steady income stream. Here are a few advantages -

High Yields – Investing in dividend paying stocks can produce much higher yields compared to a CD or savings account. Even when interest rates are high, a good dividend stock can still probably return a higher rate.
Capital Gains – If you own shares of stock that pay dividends, there are two ways to build wealth. Besides earning dividend income as a shareholder, investors have the potential to earn capital gains when the stock price goes up.
Liquid Investment – In most cases, the money invested in the stock market is liquid. This means you can sell your shares at any time without paying a penalty.

With the good, there is always some bad. Even though dividend stocks may offer better returns than other high yield investments, there are some disadvantages to consider.

No Guaranteed Return – Unlike a CD, you are not guaranteed any return on your money when investing in the stock market. In fact, you are not even guaranteed to get your initial investment back.
Highest Dividend Paying Stocks – It may be tempting to chase a double digit yielding stock. There are companies that actually have double digit yields which may be a tempting option. In almost every case, these stocks are actually risky investments and should be avoided.
Commissions and Fees – If you plan to buy stock, then you will probably have to pay a commission to your broker. Depending on the amount you invest, the commissions charged can make up a big percentage of your total investment.

My Best Investment Option

I have always preferred to invest most of my savings into CD’s because of the security they offer. However, as interest rates remain low, I have started moving money out of our CD Ladder investments and into dividend paying stocks as we work to build our dividend stock portfolio.

Many of the CD’s that my wife and I opened up in the past had been earning over 3%. Now that they are beginning to expire, the rates are below 1% – which is not good enough. Because of these low rates, we have started moving our money into the stock market. Our first move was this week when we transferred $1,200 from an expired CD into the market.

For more information on how we are building a low risk investment portfolio of stocks, check out my other site called BuyStocksOnlineInfo.com.

Where are you investing your money today? What is your best investment option in today’s economy?

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What is the Best Source of Passive Income?

John S. — Tue, 24 Jan 2012 11:32:48 +0000

Over the past 4 years I have experimented with many different passive income ideas. Some of these ideas were successful (i.e. CD Ladder), while others never materialized into anything other than a lot of wasted time (i.e. peer lending). One of my passive income streams was a huge success for a couple years and then fell flat on its face (i.e. eHow). Regardless of the results, I continue to stay focused on testing out new passive income sources.

I am a firm believer in diversifying my income streams to protect my family’s finances. While the majority of our income comes from my job, I am working hard to diversify it into multiple sources instead of one. In order to expand our income sources, it is critical that I build them to be as passive as possible.

One income stream that does not require a lot of my time are dividend paying stocks. In my opinion, these investments offer the best source of passive income possible. While some may argue that investing in stocks requires a lot of time and can be risky – I disagree. This income stream has now become my top priority, which is why I have highlighted some important points below.

How Can Dividend Paying Stocks Provide Passive Income?

The one source of passive income that has been the most consistent and successful for me is my portfolio of dividend paying stocks. No, I am not talking about the highest yielding stocks that offer a double digit yield. I learned the hard way that a stock with a 15% yield is too good to be true! I am actually referring to low risk, blue chip stocks that probably seem boring to most investors.

There is nothing glamorous about these investments that I am talking about. The companies that I invest in have low price to earnings ratios (under 20), a moderate yield (between 2.5% and 6.0%), and have a solid history of raising dividends each year. Many of these companies can be found on the S&P 500 Dividend Aristocrat Index.

The stock portfolio that I am building offers a low risk and steady form of passive income. Here are a few reasons why I believe blue chip stocks offer the best source of passive income.

Yield on Cost – If you don’t know what yield on cost (YOC) is and want to invest in dividend stocks, you should learn. One of my holdings is Consolidated Edison (ED). The stock currently offers a modest dividend yield around 4%. Since I purchased these shares several years ago, my return on investment is actually much larger – 7.4%!

Since this company has a history of increasing their dividend annually, my shares keep earning higher and higher interest! If you build your portfolio the correct way and target blue chip dividend stocks, your yield can compound every year without lifting a finger!

Automated Investment Plans – If you think you don’t have enough money or time to start investing, consider an automated investment plan (AIP). For as little as $25 per month, investors can begin purchasing fractional shares in a company, which can add up in the course of a year. Online brokers such as ING ShareBuilder offer automatic investment plans as well as investing in companies directly.

Automated investment plans are also a great time saver, provided you do your research up front and select only the best dividend stocks. Once your plan is setup, money is taken out of your checking or savings account each month and used to buy shares in the stock without any work on the investor’s part.

Dividend Reinvestment Plans – Dividend reinvestment plans (DRIPs) are perfect for the passive investor. Once you own shares in a top dividend stock, a DRIP can be setup which will automatically reinvest dividends back into additional shares of stock. As long as you have done your due diligence, reinvesting your dividends is a great way to earn compounding interest.

A DRIP can be setup for companies you own in your portfolio through your online discount broker or through the company in which you purchased shares from. There are usually no commissions to reinvest your income into new shares, so a DRIP will save you time and money on brokerage fees!

Investing in Dividend Paying Stocks

While there are risks involved with investing your money in the stock market, investors can take steps to protect their portfolio. Screening for only the top dividend stocks and not overpaying for them are a few ways that I am able to protect my investments. A well-built portfolio can withstand any stock market correction or downturn.

Investments like a certificate of deposit and high yield savings account usually offer protection on your initial investment. However, with current interest rates so low (under 1%) for many of these investments, it has become difficult to justify the protection. For that reason, I have started to move money out of my CD’s (as they expire) and invest in top dividend stocks. Building these investments will provide a steady stream of income for many years.

For more tips on investing in dividend paying stocks and how I am building my portfolio, check out my other site – BuyStocksOnlineInfo.com.

What is your best source of passive income?

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What’s So Great About Passive Income Anyway?

Derek (Staff Writer) — Fri, 20 Jan 2012 11:26:11 +0000

If you’ve ever browsed around this site, you know that John is a huge fan of passive income. Every one of his actions is based on the idea of passive income: writing for eHow, hiring staff writers, CPC ads, niche websites, dividends; all of this work is performed so that he can earn an income that’s regenerative and takes care of itself. It just so happens that John and I are incredibly similar on this viewpoint – I’m a believer in passive income as well. But what is it that makes passive income so great in my eyes?

Passive Income vs. Earned Income

Do you understand the difference between passive income and earned income? A typical job is a great example of earned income. You head to a building, punch the clock, work for a certain amount of hours, punch the clock again, and then you head home. Your pay is not dependent on what you accomplished that day – you get paid based on the number of hours that you worked. In other words, if you show up and put forth a little bit of effort, you get paid. If you don’t show up, you won’t get paid. It’s a time for money exchange. And, what if you want to increase your income? Since promotions don’t happen too often, you’ll have to work more hours – either at your current job or you’ll need to get another one. The more time you put in, the more you get paid.

Passive income is radically different and most people do not understand it. In order to generate this type of income, you’ll typically put in quite a lot of time to develop the core of the business and get paid hardly anything to do it. In the beginning, those that work for earned income look at the pennies that you’re earning and they think you’re crazy. Why wouldn’t you just do what they do and make some decent money already? What they don’t understand is that your earnings could multiply many times over, which soon propels your income past theirs. Plus, it’s typically at this point where their income has peaked and they have no hope of earning more.

Michael Jordan vs. Bill Gates

Most often known as one of the best basketball players of all time, Michael Jordan was paid quite well for what he did on the court. He was also paid for endorsements and appearances, which I’m sure totaled a hefty sum, but guess what? Michael Jordan was an employee. If he decided that he wasn’t going to play basketball for a couple of weeks, his team would not pay him. He needed to show up and “punch the clock” to earn his paycheck, just like the rest of us.

Today, Michael is worth $500 million. Not too shabby huh? I’m sure he could survive for a while if he stopped earning his income. He has done quite well in the “earned income” category, but guess what? Passive income still takes the cake. Let’s read on….

Whenever I hear the phrase, “computer geek”, I think of Bill Gates. He is most definitely one of the better geeks of his day, but he’s also one of the most brilliant passive income earners I’ve ever seen. At a very young age, Bill decided to improve the usability of the computer and developed “Windows”, an operating system that made the computer simple. While he was developing the software, guess how much money Bill was making? Absolutely nothing! Who in their right mind is going to pay for a half-completed project that would most likely fail?

So, in order to write the software, Bill basically worked for free, but hoped that it would pay off once it was finished. Well, his time certainly wasn’t wasted. Soon, the software was complete and all Mr. Gates had to do was watch the money roll in as he sold disc after disc after disc. Today, Bill Gates is worth $59 billion, which is more that 100 times the net worth of Michael Jordan.

Passive Income Wins

So why is it that creating a passive income can develop into a larger amount of money than earned income? It’s quite simple really. Let say that your friend works as an employee. He punches his clock every day and earns $40,000 for the year.

With passive income, you might not make an income at all in your first month because your project is not yet complete, but let’s say that you finish it in the second month. Sales start out slow, but then they grow at an exponential rate. $200 in February, $400 in March, $800 in April, $1,600, $3,200, $6,400, $12,800, $25,600, $51,200, $102,400, and $204,800 in December. The income started slow, but once it picked up it shot off like a rocket! Instead of your friend’s $40,000, you earned $409,400!! That is why passive income wins.

Are you making an effort to develop passive income? And, do your friends think you’re nuts!?

This post was written by staff writer Derek.

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3 Ways to Make Money in the New Year

Julie Mayfield (Staff Writer) — Mon, 19 Dec 2011 11:46:31 +0000

Check out any list of the top New Year’s Resolutions made every year, and among all the promises to lose weight or spend more time with family, you’re sure to find decluttering, getting organized, or some variation of that theme on the list.

The resolution to get organized is more than an interesting tidbit, however. It can also be a way for you to make some side money or even start a full-fledged business in the new year.

3 Ways to Make Money in the New Year

1 – Online Sales Consignment

Almost everyone wants to sell some of their excess stuff online. And while listing and selling on eBay or Craigslist are fairly simple propositions, few people are inclined to take the time or trouble to learn and follow through.

That’s where you come in.

If you’re handy with a camera and know how to write an effective description and get stuff sold and shipped (or are willing to learn how), it’s a pretty short leap to helping others with their sales.

Price your online consignment service the way the bricks and mortar consignment shops do: by taking a percentage of the final sales price. And starting your business on January 1, when everyone is overwhelmed with extra stuff from the holidays, not only allows you to help them with their resolution to simplify, but also with the popular goals of making more money or paying down debt as well.

2 – Garage Sale Consulting

Just as with online sales, many people overwhelmed with clutter like the idea of holding a big sale and getting rid of it, but aren’t as thrilled with the reality of doing just that.

As a garage sale consultant you can offer to clean, organize, display and price the items, again for a cut of the profits. You can even offer the ultimate service: to run the sale for them.

This business is ideal for a seasoned garage sale goer, who knows what items are worth and what makes an effective sale. Turn your knowledge of sale advertising, staging, and signage into money for your customers, and for you.

3 – Photo Organization

In a previous version of my life I ran a fun and profitable scrap-booking business. And while creating cute and crafty scrapbooks was the goal of many of my customers, many more simply wanted to get organized with their photos.

Strike that: many, MANY more simply wanted to get organized. As in the vast majority of them.

The photo world may have gone all digital, but people – especially those of a certain age – still have a ton of actual printed photos and memorabilia in their basements, drawers, and attics.

Helping them organize those photo and keepsakes into something meaningful is a valuable service that many will pay for.

An effective photo organization business will charge by the hour and will work with the client where they are. Your services can include simply helping the client organize the project and get started; sitting with them while they go through every last photo; or anything in between.

What are your resolutions for the new year? Is making more money among them?

This post was written by staff writer Julie Mayfield.

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