Posts Tagged ‘pension’

18 Types of Residual Income

September 23, 2011

When deciding how you would like to structure your personal finances with multiple streams of income and you are a full-time worker, you may wish to supplement your income with a second job.  However, just like your first job, your salary will still be subjected to income tax.  Moreover, the salaries from both of these jobs are considered linear income.  What you would like to do for yourself instead is earn residual income.

If the "linear income" you are earning from your day job is not enough, you should look into one of these 18 types of residual income to help you gain greater financial independence.What is linear income? It is the income you are earning from your full-time or part-time job.  With this type of income, the amount you earn is tied to how much you work.  The more you work, the more you earn; the less you work, the less you earn.  Let’s face it.  Sick time, vacation time and PTO can only cover so much of your off time before you start not getting paid for not working.

On the other hand, residual income (also known as “passive income” or “royalty income“) involves doing the work once and being paid for this work many times over, over a period of months or even years.

From the viewpoints of residual income, many types of professionals are not as wealthy as they appear.  Doctors, dentists and chiropractors only see a fixed number of patients per day.  Salesmen can only speak to so many potential customers per day.  Attorneys can only meet with so many clients per day.  Overall, these professionals are earning a linear income.

Because a linear income shows almost immediate results, people tend to get caught in the trap of viewing a linear income as being of little value to them.  For those who would genuinely like to live off a linear income in the future, the hard work must be put in now.  Once you’re working a steady job with a linear income, you can begin working on your plan to create a stream of residual income, setting aside two to four hours after work each day or part of your weekend to make this dream a reality.

If you do not know the types of residual income you can earn, here is a list to get you started:

Believe me, this is not an exhaustive list of the types of residual income you can earn.  Nonetheless, if you ask yourself this question right now, “What percentage of my day did I spend creating residual income?” and your answer is zero, you may wish to spend this evening or the weekend examining how you can turn residual income into a second source of income for you.  But as the saying goes, “Rome was not built in a day.”  With careful, consistent, and persistent planning, the royalties, profits, fees, or revenue earned from your endeavor will earn you residual income for years to come.

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Francis Unson

College Aid Opportunities to the Rescue

May 6, 2010

Parents often find the first bill from their child’s college a real eye-opener.  When they do the math, they realize their current cash flow and financial aid insufficient.  Where can parents and students alike turn to make up the difference?  Here are six college aid options to consider.

Where can parents and students turn to when their cash flow and financial aid are insufficient? Some options include Stafford Loans and PLUS, among other options.Federal Government Stafford Loans

You can apply to borrow money for your school until May of the current school year.  Undergraduates can borrow $2,625-$5,500 per year, while graduate students can borrow up to $18,500.  For the 2008-09 through 2011-12 school years, subsidized Stafford loan interest rates for undergraduate students drop to 6.0%, 5.6%, 4.5% and 3.4%, with a return to 6.8% in 2012-13.  Loans for graduate students throughout the same period remain at 6.8%.  The government will pay interest on the loan for students who can demonstrate need. Students who do not demonstrate need can defer interest payments until after graduation, but interest will be added to the principal balance.  If you must borrow from a bank, consider Sallie Mae, a bank affiliated with the Student Loan Marketing Association.

Parent Loans for Undergraduate Students (PLUS)

PLUS allows parents to borrow the total cost of tuition less the amount of financial aid the child is eligible to receive from the school, with a fixed interest rate capped at 8.5%.  Unlike the Stafford Loan, the interest on a PLUS cannot be deferred.

Deferred-payment

Although most colleges bill students twice a year, Academic Management Services offers a monthly payment plan to spread out the cost.

Home-equity loans

When applying for this type of loan, your bank will charge the prime lending rate plus one-and-one-half points.  The interest on the loan is fully tax-deductible.  Furthermore, the equity reduction in your home improves your chances of receiving more financial aid in the future.

Borrow against your pension

According to federal law, you can borrow against the assets in your tax-deferred pension, profit-sharing and 401 (k) plans if you need money for college.

Borrow from your IRA

Consider this your very last option if possible.  According to federal law, you can borrow funds against your IRA on the condition that you can replace the funds within 60 days.  If you cannot replace the funds within 60 days, you will be taxed on the amount withdrawn, but you won’t incur a 10% penalty because the funds went towards qualified higher education purposes such as tuition.

Families should become aware of the options they have at their disposal towards paying for the college education of their children with the understanding that they’re not alone.  The federal government provides loans with manageable interest rates and terms for students and parents alike.  Even if they don’t turn to the government for help, they have additional options.  Children should not be denied higher education opportunities just because of a perceived lack of funds or insufficient financial aid.  Families just have to know where to look.

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Francis M. Unson