You can lead a horse to water...

You can lead a horse to water, but you can’t make him invest in it. Okay, so that’s not how the saying goes, but if an investor had come up with it, it might have been something similar to that. The concept
is SO true though. I re-discovered this lesson last night while having a discussion with a very talented and very knowledgeable friend of mine. I was at his house with some car trouble with which he’d offered to help. This friend isn’t a mechanic by trade, but he’s one of the most honest and talented car “tinkerers” I know. Lots of friends and family come to him for car advice and repairs. He and I started
out talking about my car’s issues which lead to estimated costs of repair. That then lead to financial challenges we’re both experiencing. After listening to him tell me about his efforts to match his employer’s contributions to his 401K, I thought I’d found a pretty good segue into a topic that I love. Investing. I gave him my “elevator pitch” on tax lien certificates (the investing vehicle I’m currently studying) and, although I could tell the idea seemed very intriguing to him, his reply was just, “Hmmm…interesting.” The conversation gradually just meandered back to cars quite anti-climactically after that. I was taken back.

Okay, so I guess that just wasn’t his thing, or whatever. Hmm. So, I decided to try something else on him.
Investing in… himself. I started out by telling him – very honestly – how I valued his expert advice and talent with cars. I told him that he really ought to be working less, and earning more with this “hobbyjob.” I told him that I thought he’d do really well as an “infopreneur,” specializing in automotive information & consulting. I said that with his skills, he really shouldn’t be trading precious hours of manual labor for mere dollars, but instead, documenting his knowledge and selling it as valuable information on the web or
in print. I told him this would allow him to make money while he slept! His reply was, “Well, I’m really not an expert.” I tried strengthening my point by pointing out his long track record of working with friends and family’s vehicles who TRUST him and, through an observation he’d made earlier about how shady the local mechanics and shops are. But, he blunted the tip of every entrepreneurial spear I threw at him with self-doubt and excuses.

Wait a minute… hadn’t this guy JUST told me that he was having financial difficulties? And wasn’t he JUST telling me that he thinks investing is really important?? What am I missing here? Answer: simply put, it’s all about mindset & timing.

First of all, mindset…

In his own words, he’s a “worker bee.” That okay, the world is full of worker bees… the world is actually made up of them. It’s the out-of-the-box thinkers that are really the odd ones out. Trouble is anyone can be a worker bee. They’re like replaceable cogs in a clock. True, they are valuable. The world needs a LOT of ‘em. But from the perspective of the watchmaker or the clock itself - given the right dimensions - one will do as well as any another. Totally expendable. My friend is okay with that. I think most people are because to be otherwise requires tenacity, creativity and discipline. It’s not like he’d need to quit his job or anything. Just use reallocate some spare time from watching TV to writing some articles or eBooks… creating a website or an app. Do the work now so you don’t have to (unless you WANT to) later.

As for timing…

He’ll come around. Hopefully, by then it won’t be too late. I remember when I was a kid, I walked by my dad as he was fixing the dryer in the basement. As I passed, he noticed
me walking and called me back. “Ty, would you like to see what I’m workin’ on?” I replied, “What is it?” “Well,” he said, “I’m trying to fix the dryer… see, the exhaust pipe has been pinched closed and…” I interrupted him. “No thanks, dad, I’m on my way over to my friend’s house.” “You sure you don’t
want to see how I do this? You might find it interesting. And even if it’s not all that interesting to you, you might find the information useful someday when you have your own broken down dryer.”

Looking back, I wish I’d stayed for that free lesson now that I own a dryer that could break down at any time. I understand, though, that as valuable as my dad’s lesson was, the timing just wasn’t right.
I needed to WANT that lesson. It’s the same reason so many kids don’t do well in school. They’re not interested in being there. The timing isn’t right. They’ll eventually want the knowledge being offered (for free), but not yet. By the time they want the information, they’ll have to go to college and pay for
it. My friend (and many others like him) are exactly the same. They’ll be interested when they’re interested.

My take home lesson: Offer knowledge often - on the off-chance someone’s ready for it - but don’t be disappointed when the timing isn’t right. Conversely, when a lesson is offered, try to have the foresight to recognize the potential value of it, and to have the pliability to learn something new… you just might need it someday.

Retirement Home "Bricks"

It might seem a little odd that I’m thinking about retirement while in my early 30’s, but I do. I think about it all the time. I don’t envision myself being the type of retired person who sits around watching television. I like doing things and being busy with projects to work on. This is how I envision my retirement, too; working on projects and visiting my kids and grandkids.

The longer I work for an employer the more I realize that I can’t depend on my “JOB” to help me build my retirement. In fact, my job has really only barely provided me with enough to live on in the present (bills, food, travel, etc…). I’m not being pessimistic, I’m being realistic. If I were to work for my present employer for the rest of my working life, and if this were my only source of income, I’d be in a LOT of trouble. I can’t do it forever. No one can. Eventually I will have to stop working. I’ve seen it happen to good people. Either we get too old, too sick or too apathetic to keep working. Our expenses, however, will not only continue, but are likely to increase as our health decreases.

My parents’ generation, for the most part, worked towards broken & breaking systems like pensions and social security. My generation is different. I posit that my generation is a transitional one. We’re the bridging generation, taxed with phasing from one way of living to another. I believe that my parents’ generation marked the end of the industrial-age workers and my children’s generation will be the first successfully implemented information-age generation. My generation, in my opinion, is working out all the kinks between the two. Just look at all the current systems that are in turmoil and scrutiny; healthcare, global economic (currency) change, environmental awareness and sustainability, technological advancement and resource management to name just a few. My generation is largely transitional and transient by nature. Although we are probably this way because we’re free-spirited, part of me believes that we couldn’t live the way our parents did even if we wanted to. That ship has sailed. That way of living wasn’t sustainable. Well… not the pensions and social security parts, anyway.

Social security is pretty much dead and pensions are going, if they haven’t already gone, the way of the dodo too. Employers don’t want to support their employees’ healthcare during their employment, let alone supporting all their living expenses throughout their retirement! Nowadays, it behooves the individual to aggressively and passionately plan out and work towards their own retirement, and I’m not just talking about 401Ks!

I don’t think most people see their retirement years for what they really will or could be (for better or worse). I don’t think most of us, in my generation, really take the time to do the math... to project into the future and actually calculate the estimated expenses. If they did, I suspect it would frighten them into doing about it. The numbers really are quite sobering when you do this exercise. With rising inflation & the cost of living increasing, with wages stagnating and the dollar dropping to all-time lows, it’s really not a very pleasant thought after all - no wonder so many don’t work it out on paper. Most of us are having enough trouble with just living from day to day, without increasing our stress by envisioning our potentially bleak futures. It’s gotten to the point where most of us are not even able to live on just ONE job anymore. The rising trend these days is for folks to have a day job and a “side job” or two. This doesn’t necessarily mean having another employer, per se (thank heaven), but perhaps just working more.

For me, this rising trend has been somewhat fortuitous. While many people prefer to come home after a hard day’s work and relax in front of the television, I enjoy having a constant side project to tinker with. I just like doing it. The other part of the trend that works for me is the fact that many of these new business-owners (side-jobbing self-employers) need logo designs to help their companies establish a face. Every business needs a logo, and logo design is what I do… on the side, ironically enough.

Most all of my, “on-the-side” projects, although extremely varied in their content, have one running theme. They are tools in my future-building arsenal. All of them contribute to my plan to have multiple streams of income pouring into my retirement years. Sadly enough, even logo designing isn’t sustainable. Although enjoyable, by its very nature this service requires my time and attention, not to mention my ability, availability and interest… all of which have an unknown but definite expiration date attached to them. Conversely, whenever I create a product, develop an invention or invest in a real asset, I place another brick in the structure of my figurative “retirement home.” My job (and logo designing) is merely meant to sustain my life & energy as I accumulate these bricks.

Because I know I’m limited on time, and because I’m not even sure how much time that is, I’m very proactive about the accumulation of these bricks. I read a very simple formula for provident living which states, “Learn to differentiate between assets and liabilities, and then spend your time and resources accumulating as many assets as possible.” Simple and powerful.

I’ve been working on many of these “bricks” for a long time. Some of them are small, and some of them have very large potential. Some of them are very exciting. All of them are extremely important to the structural integrity of my retirement home. But just like a home is build using many different materials, my figurative retirement home is being constructed with an assortment of brick types. Through my work on patent-pending inventions, commercial products, the writing & illustrating of several children’s books, investing in network marketing and development of other types of intellectual properties, I plan (literally) on creating a very aggregated retirement. I love this stuff. And it’s lucky that I do because, sadly, in order to build an even moderately comfortable retirement home, my entire generation will need to build likewise, like it or not.

Series I & EE U.S. Savings Bonds

In 2005, while listening to one of my favorite radio talk-shows (which has since been discontinued from my free local FM radio, but continues strong on the internet), I learned about a type of investing vehicle that seemed… well, like a no-brainer. As a conservative investor (aka, "chicken"), my tolerance for risk isn’t very high. After doing some more in-depth research on this type of investment, I jumped all over it. At the time, I was preparing to sell my first house near the top of the real estate bubble and cash in. After selling my house and making a good chuck of change, I invested what I had earned into 3 different types of holdings; first, I re-invested into real estate, second, I augmented my precious metals holdings, and finally, I began investing in U.S. Savings Bonds.

U.S. Savings Bonds were new to me at the time, but they caught my interest with their government-backed conservative features. The types of bonds I purchased back then were two types. Series “I” bonds and series “EE” bonds. Here are their at-a-glance bulleted highlights:

Series I Bonds:

General Facts:
* The “I” in I Bond stands for “Inflation”
* Their earnings rate is based on both a fixed rate and an inflation rate (CPI)
* They increase in value monthly and the interest is paid when you liquidate
* They are an accrual-type security
* They are sold at face value; i.e., you pay $50 for a $50 I Bond
* They grow in value with inflation-indexed earnings for up to 30 years
* Fixed rates are announced each May & November
* Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
* Up to $5,000 worth of I Bonds may be purchased per SS# per year
* Interest compounds semiannually for 30 years

Pros:
* They are electronic holdings, so they’re 100% manageable online
* In amounts as little as $25 each, they are extremely affordable
* They can be liquidated penalty-free after only 5 years
* They earn interest from the first day of their issue month
* When interest rates are high, I Bond yields go up
* The fixed rate of each I Bond remains the same for the life of the bond
* Composite rates never go below zero
* They are exempt from state & local income taxes
* Tax benefits are available when used for educational purposes
* Unlike other securities, minors can own U.S. Savings bonds

Cons:
* If liquidated before 5 years, the 3 most recent months interest are forfeited
* As semi-long-term investments, they can tie-up money for 1-30 years.
* They must be held for a minimum of 12 months
* When interest rates are low, I Bonds yields go down

Series EE Bonds:

General Facts:
* They increase in value monthly and the interest is paid when you liquidate
* EE Bonds issued after May 2005 earn a fixed rate of return.
* They are sold at face value; i.e., you pay $50 for a $50 EE Bond
* Fixed rates are announced each May & November
* Up to $5,000 worth of EE Bonds may be purchased per SS# per year
* Interest compounds semiannually for 30 years

Pros:
* They are electronic holdings, so they’re 100% manageable online
* In amounts as little as $25 each, they are extremely affordable
* They can be liquidated penalty-free after only 5 years
* They earn interest from the first day of their issue month
* The rate of each EE Bond remains the same for the life of the bond
* They are exempt from state & local income taxes
* Tax benefits are available when used for educational purposes
* Unlike other securities, minors can own U.S. Savings bonds

Cons:
* If liquidated before 5 years, the 3 most recent months interest are forfeited
* As semi-long-term investments, they can tie-up money for 1-30 years.
* They must be held for a minimum of 12 months

Using my own “LYDS” rating criteria, and on a scale of 1 to 10 (10 being the best), I give series I and EE bonds a general 7 out of 10 (70%). Here’s the breakdown:

Liquidity: 7 (although you’d lose the 3 most recent months worth of interest for doing so, you could liquidate your I and EE bonds after only 12 months of their purchase date if you had to)

Yield: 3 (Interest rates for EE bonds are fixed once they’re purchased, which is good, but they’re very low yielding investments. Good for long-term, and definitely NOT an aggressive investment. I bonds are much more volatile being integrally linked with the CPI, but they are completely at the mercy of the Fed’s whims for interest rate changes.)

Duration: 9 (Having the ability to liquidate after just 12 months with minimal penalties is attractive. Having the option to liquidate penalty-free after 5 years is also reasonable. And having the option to long-term invest over a maximum of 30 years is phenomenal).

Seed: 9 (Both series I and EE bonds are extremely affordable at only $25 minimum each - easy and legal enough for kids, in fact. The fact that one can invest up to $5,000 per year might be a little bit too restrictive for some, but generally adequate for most).

"LYDS"

Probably the most important part of investing in anything is to understand the “LYDS” of the investment. This research should be done before you sink any money into anything. What are the LYDS, you ask?

Liquidity – How easy is it to access your money and get out of the investment?
Yield – What is the interest rate/dividend amount per month/year/term?
Duration – What are the minimum & maximum maturation time periods?
Seed – How much does it cost to start this investment / will it require more later?

The major purpose of ListQuest is to explore and answer these research questions for my own quest to acquire as many streams of income as I can. I’ll be documenting my findings here to hopefully help you too. Each investment explanation will include a LYDS break down of each of these points as I discover them to clarify and classify their general characteristics.

Without understanding the liquidity of an investment before investing, you risk locking up the money you could possibly end up needing/wanting to access earlier than expected. Liquidating an investment early is NOT a good investing practice. For most investments this could result in early withdrawal penalties, which might even defeat the whole purpose of having that investment in the first place. The last thing you want is for an investment – which is a tool designed to augment your overall holdings – to end up costing you anything. Money needed within a few days, months or even a few years should never be tied up in investments that are meant to mature over a 5, 10, or 30 year period. There are many types of investment vehicles that have short or even NO maturation periods, though admittedly, these typically have lower yields.

Long term investing is most effective when you use money you DON’T depend on for anything else, such as bills, debts, or daily necessities.

Often, highly liquid investments produce lower yields. This is true for investments with shorter life spans too. This is generally because lenders or creators of investment vehicles need time in order to re-invest that invested money. The duration of an investment is one of it’s most important features. The longer they have access to it, and the more certain they are that those monies ware available to them, the more confidently they can re-invest it, and the more they can make with it. It’s as though someone were saying, “Look, I’ll pay you to let me invest with your money. The longer you let me invest with it, the more I’ll pay you.” Therefore, it is in the best interest of banks, lenders, governments and other investment creators to motivate their investors to keep their money invested for as long as possible. The incentive is typically a higher yield, and the bi-produced requirement is less liquidity.

Having your money “locked up” isn’t necessarily a bad thing, either. One of the benefits of finding investments that are not easily liquidated is that you tend to leave them alone (out of necessity), giving them a chance to grow for you. Sometimes these liquid-proof restrictions can serve as all the discipline we need to keep our money invested and working for us.

Yield is mostly determined by how long the investment is active, and by the risk of that investment. Speculative and more volatile investments often need higher rates of return in order to attract high-risk investors. Similarly, but in the opposite way, long-term investments usually need to have higher yields to attract qualified conservative investors.

And finally, the amount with which you begin investing does matter. I wish I had a dollar for every time I heard some investing guru say, it doesn’t matter how much you invest, as long as you invest something. While I don’t think this is actually false, I do believe that it DOES matter how much seed money you invest with originally. For example, let’s take the interest rate (or yield) of 7.9%, which, as of today, is the rate at which spot gold had appreciated over the past 12 months. Let’s say that one year ago, as a timid investor you had invested $100 into gold bullion. Today (taxes and fees notwithstanding) your initial seed investment would be worth $107.90. You would have earned just $7.90. Hardly exciting. Now, let’s say that you were a much more confident (aka, well-informed) investor, and you had invested $10,000 into gold bullion just one year ago. Your initial investment would now be worth $10,790! You would have earned $790 in the same amount of time!

Now, not everyone has 10 G’s lying around waiting to be invested. However, my point is that when you only invest a tiny bit, you’ll only get a tiny return regardless of the interest rate. Even at a 100% rate of return, that first example would only be augmented by $100, while the second would be worth $10,000 more! The trick here is to become confident in your investment through research, and then really GO for it.

The Purpose of ListQuest

Until the 1960's, a typical family was able get by on just one-income. Fathers, usually, were able to provide for their families, while mothers primarily stayed home and nurtured their children. Among other influences, inflation caused the cost of living to increase while wages were unable to keep up. For many, this forced the family to modify it's income-generating model.

By the 1970's many women had begun sacrificing their roles as homemakers in order to take on part-time jobs. Through the 1980's many families continued struggling to make ends meet with only one and a half incomes. To compensate, many women went to work full-time. Things only got more intense financially, however.

By the 1990's, even two incomes often didn't seem to provide enough to maintain the comfortable conditions of a conservative lifestyle. The costs of food, clothing, rent and utilities continued to rise. In addition to their full-time jobs, many hard working men and women began taking on second part-time positions, leaving them with less time to spend with those they were working so hard to support. Homebased businesses started to emerge as an alternate way to suppliment incomes, and the Internet greatly contributed to the accessibilty of these options.

In this decade, which is nearly at an end now, this same inflationary pattern forces many families to sustain very difficult working situations. Children are being raised in daycare facilities instead of their own homes and people are being force to cut back where they already have little. Savers have become losers, and retirement keeps getting delayed. Times are tough, and their destined to continue being tough. For some they'll get even tougher. The pattern of working more to sustain a bare minimum is not sustainable. At some point, one will catch up to the other leaving families fewer and fewer options.

Like most people, I've inherited the income-generating methods of my parents. Work hard at a job for a steady and secure paycheck. In short, work for money. This is the only method I was exposed to as a kid, and it was practical, functional, and appropriate for the average person. There's nothing wrong with this method if you enjoy what you do. As so many often remind me, "If you love what you do, you'll never work a day in your life." At least there WAS nothing wrong with this method while my parents were younger and working full-time. Now, however, things have changed. The time has come for this idea to be updated in order to fit with the times. Today, I believe that there's nothing wrong with this method as long as you enjoy what you do, and as long as it's not the ONLY thing that you do. This brings be to the whole point behind this new blog...

Multiple Streams of Income.

There are literally hundreds... perhaps thousands of different ways to generate income. The older I get and the more exposure to life I have, the more of them I discover - probably just because I'm actively looking for them. While I'm sure I'll never identify all of them, however, it is very likely that all of them can be placed into only a few categories.

A while ago I read a book called Multiple Streams of Income, by Robert Allen, which really made a valuable impression on me. Only a small number of the many streams described in this book were newly introduced to me through it, but as I read, my perspecive on generating income shifted. I've been through that book several times now, and each time I pick up something new.

Simply put, I am now on a quest. I have compiled a list of ways to generate income, and most of them are achieved passively. My objective is to aquire as many of them as I can, but at least one from every category. The purpose for this quest is 3 fold. First, I want to secure my financial future through, among other things, diversification. The more of these income-generating methods I employ, the better my chances of achieving this goal. Second, I want to learn. The more I learn about the various ways to generate income, the more probable it will be for me to become secure in my financial future. Third, and finally, I want to teach others what I learn. If I can eliminate time and hassle for other would-be investors who might travel this road behind me, I'll be satisfied. Perhaps it'll only be my own children, but that'll be more than enough.

This is blog will never intend on being a "how to" guide. Rather, it should be read as a "how I did it" record. While I hope that it helps others its true purpose is primarily to document my own thoughts, insights and lessons learned with regards to the many intequecies, nuances, and processes of securing various ways to generate income.

That having been said....