Thursday, July 28, 2011

Passive Income Ideas

We are familiar with the routine.  Get up.  Go to work.  Come home.  In a week or so, get paid for the work we did.  Start over again.  Go to work. Come home.  Get paid for the work we did.  Some have come to accept it as a fact of life.  Well, to other more savvy and financially independent (or those aspiring to be) have probably heard of the idea of "passive income".  The concept is defined something like this:

"Passive income is an income received on a regular basis, with little effort required to maintain it"

That being said, most passive income streams do require an additional effort or monetary commitment to get set up.

Here are a few common ones:

  1. Rental Property - does require some upkeep or a reduction in income to subsidize the management of the property.
  2. Bond Investments - investing in bonds can be expensive (the usually cost around $1000 each + trading fees, and like most investment vehicles, can lose up to 100% of their value (although this is unlikely in most cases)
  3. Dividend Income - income from equities that pay a cash dividend;  these are usually financially strong and established companies such as Southern Company ($SO) and Verizon ($VZ).  There are also trading fees associated with purchasing stocks.
  4. Pension- Social Security (until it runs out) or other funded pension program you are vested into, more than likely from working somewhere that offered this as a benefit.
Additionally, there are other alternative ways you can earn "passive income":

  • Blogging - advertising and other referral sales income (if you weren't already blogging in some form, this really isn't that passive, but can be fun)
  • Vending Machines - owning vending machines can be a little work to stock and maintenance them, but is an interesting alternative way to generate a "side hustle" income
  • Royalties - recurring cash flow from the licencing of a patent, sale of booksmusic, etc.  A useful invention or phone application 
Frugal Dad has also had some pretty interesting ideas on the topic.  

I would love to hear other creative ideas for passive income....

Tuesday, July 26, 2011

A new player in Daily Deals! (Watch out Groupon)

Look, I'm a sucker for daily deals as much as the next guy.  I love a good discount, especially when it's for something I was already in the market for anyway (hello, discounted oil change) or for a restaurant I frequent or have been wanting to try (still waiting on Highlands Bar & Grill to show up on Groupon).  The market leaders (Groupon and LivingSocial) have captured significant subscriber lists and currently have serious clout with local businesses.

A new player has come into the market recently called The Customer Advantage that offers a new spin on this Daily Deals concept.  While GLS (my new acronym for Groupon/LivingSocial) offers referral bonus credits for both signing up users and getting friends to buy offers, TCA incorporates a MLM (multi-level marketing) aspect into this business concept.  However, the negative aspects of MLM usually revolve around paying an entry fee of having to his some sales threshold in order to benefit from signing up.  Amway comes to mind for sure.  This service is different in that a) there is no initiation fee and b) no minimum thresholds to meet in order to benefit.  By signing up members, when they purchase a deal, you get a cut.  It's just that simple.

Someone named Carl Willis has reviewed the service as well.... click here to read.

If you'd like to sign up for The Customer Advantage, you can click HERE.  The site has launched and is now offering deals.

At some point I'd like to talk about LivingSocial's pending IPO, but I'll save that for another posting.

NOTE:  There appears to be some people who are what you would call "less than fans" of the MLM concept and of the creator John Milanoski.  A Google search will pull some of his detractors.  I would say come to your own conclusions...

Saturday, July 16, 2011

The redbox Model

Redbox.  I remember the first time someone told me about redbox.  What an awesome idea.  At this point, Netflix ($NFLX) had pretty much made the traditional movie rental model obsolete.  One of the main problems with this model - extremely high overhead, was solved by Netflix by using lower cost (per unit of inventory) distribution centers and letting the USPS handle there logistics.

In a sense, redbox has done this as well, except the distribution centers are just kiosks that resemble a high tech, uber-marketed vending machine.  The kiosk acts as a movie rental store, except there is not associated labor costs, expensive lease to manage, or other utilities to worry with.  The business model is so simple, and yet such a great idea.

Coinstar ($CSTR), who owns Redbox, has also diversified this model (which they have dubbed "automated retail") to include BluRay and Games.  This got me thinking....what other business models could be disrupted by instituting the "redbox model"?  There is one I can think of:  the airport "Best Buy" kiosk.  Another good way to remove some of the overhead to an increasingly low margin industry (in this case, consumer electronics).

Eventually, streaming video content will make the DVD itself obsolete, in the way Netflix has made the traditional movie rental store obsolete (I'm looking at you, Blockbuster).  But the "automated retail" idea will always be able to be utilized as a low-cost distribution model for retail products.

Thursday, July 14, 2011

Should the government subsidize home ownership?

Home ownership.  It's certainly an issue in today's economy.  Speculation, 100% financing, and predatory lending practices during the heat of the housing bubble certainly points to the cause of the crisis.  But this post is not about that.  What this is about is home ownership.  Certainly there is an emotional element to this topic.  But I propose that in a time when the government is on the brink of default, the federal debt is growing to unfathomable levels, should they be subsidizing America's financing of home ownership?

Mortgage interest, for the majority of filers, is the largest single deduction itemized each year.  I know it has been for me for the past several years.  I certainly enjoy getting that credit back from Uncle Sam for the money I've been paying into my home each year.  By getting credit for these interest payments, the US Government) are giving a discount on these interest payments, providing an additional incentive for someone to rent vs. own via mortgage financing.

Am I saying I want to give up this deduction, the largest personal deduction for me when filing my income taxes? On a personal level, of course not!  But, when thinking about ways the government can increase revenue to close the budget gap that is a serious mid to long term problem for our government, this "loophole" seems to make sense.  I, personally, would like to see a cap put on this deduction.  I think that's the best solution.  By capping, you are not eliminating the deduction for low and middle income homeowners.  At the very least, capping is a way to phase out this deduction (if that is what is ultimately decided by our legislators).  

I am sure this would have a short term negative affect on the demand for housing.  No doubt, as people rationalize and look at the pros and cons to buying a home, interest deduction is one of the benefits listed.  This would reduce the pool of already small buyers, further shrinking already slow demand for housing.  But the greater problem, in my opinion, is the inflated inventory of foreclosures on the market.

Would love to hear any of your thoughts/comments on this idea.

Currently Reading:  Fast CompanyFirst Time Dad by John Fuller

Sunday, July 3, 2011

Welcome to Gemini Finance - Business and personal finance for everyman

Welcome to my new blog, Gemini Finance.  It's goal is to be an interesting and entertaining read for personal finance, observations from the world of business, and general musings I think someone other than me will find interesting.  My goal is to make this little piece of cyberspace (1) interesting, (2) entertaining to read, and (3) hopefully informative on some level.

I welcome any comments on my thoughts - I don't claim to be an expert in any of the fields I post on, just my take on them and something I found interesting enough to write about.

It may help to learn a little bit about me and some of my interests regarding these fields I plan to post on.  I live in Birmingham, Alabama and work in the field of risk management.  But what I really do is solve problems, answer questions, and do my best to think the things that are put in front of me through to the best of my ability.  This aspect of my job is not unique to me - I'm sure there is some aspect of this in anyone's job - but I think my enjoyment of this aspect helps me to succeed at it, at least to some degree.

I enjoy reading books that make me think, and expand my understanding of fields of interest to me.  A couple of books come to mind:

I'm also a big fan of the periodicals "Fortune" and "Bloomberg BusinessWeek", so you may see me post on some topics they cover as well.  This is more than likely not coincidence, and I'll try and make it known my muse for the post if it comes to me.

Personally, I'm also a huge college football fan, so I can't rule out a post or two on this topic, although I'll do my best to give a business/finance slant to it (but, hey, I make no guarantees).   

I think you'll get to know me and my interests pretty well by following this journey that is Gemini Finance.  My hope is that will be fun for both me and you (the reader) and we'll both learn something - about finance and about ourselves.