Why you should be making money online

In the future I will discuss many specific ways that you can make money online. Remember key to our philosophy here at cut that bill is not just reducing expenses but keeping more of your money, investing it wisely and most importantly increasing your cash flow in to your household or business. There is quite simply no easier or more passive way to earn some additional money today then to do it online.

Let me be clear though, “how to do it”, is irrelevant until you get your head around the why and until you grasp how a very “small success” can drastically change your future. Let’s take three very doable numbers and consider how they could impact your life to really grasp how powerful an additional income stream from the internet can be. These figures are

• $100
• $250
• $500

Now trust me making these types of additional monthly income figures is very doable for just about anyone with a willingness to do some investing, learning and work. You will have to work harder in the beginning but such is life. Again though for now let’s stick to why you should and what it can mean. What do each of these figures mean to you,

An extra $100 dollars a month can smash 1200 dollars of out standing additional debt a year which is a good start. Paying off 1200 dollars in additional credit card or other high interest debt actually saves about 5000 dollars of long term interest if it is applied on top of your existing payments. Add 100 dollars to a typical house payment on say a 120,000 dollar mortgage and it can shave GET THIS almost 5 years off a 30 year loan. Invested at 10% and just put away it will add a quarter million to your retirement in 30 years, do it for 40 years and it is now worth about 600K added to your golden years. Remember that is only 100 dollars a month more!

An extra $250 is a lot more powerful as you might imagine, with investing you don’t just get 2.5 times the effect as compounding creates an exponential increase. Invested over 40 years of your working life that 250 dollars a month turns into over 1.5 million at simple 10% interest. Of course you can do much better then that with some creativity and participation in your financial planning. Turn to debt and you can pay down an addition 3000 dollars in debt annually which can save many in credit card debt over 20,000 dollars over the live of debt!

Step up to an additional $500 in income into your monthly cash flow and you can begin to really make a massive impact. Try 6000 dollars in additional debt destroyed per year. This alone would destroy the average of 20K in consumer debt most middle income Americans are living under in just over three years. Get out of that type of debt in three years or less and you can save massive amounts of interest. Investing gets interesting, 30 years of 500 a month at 12% interest equals GET THIS over 5 million dollars. There is even more power though!

500 a month would allow you to buy a modest second home if you wanted for vacations in some beautiful part of rural America. Don’t believe me? Fine I own a beautiful modest second home in an somewhat tourist area of the South up in the beautiful Ozarks. The place sits on 5 acres, is 15 minutes to town, 20 minutes to a beautiful lake and only about 10 people live all the dead end road the place is located on. Everyone owns at least 5 acres so the houses are very spaced apart. My total payment? With taxes and insurance 523 dollars a month. How I just looked hard enough.

Now the real beauty here is what I call my “Plan B”. Let’s say that my companies all go bust, I can’t find a job and my wifes income all of the sudden can’t cover our bills at our primary residence. Now this is not to say that everyone should invest extra income in a second/vacation home, it just begins to open your mind to the types of things you can do to build and preserve wealth with just a few hundred extra dollars of income a month.

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Why you should never buy whole life insurance

This is going to be a brief and short post, I am going to put this simply DO NOT EVER purchase whole life, universal life or any other name they ever come up with to try to sell it to you. This has been written on a lot so if you want to know more then I give you here, do a bit of research online and you will find a lot more information to back my suggestion.

Let me be blunt, Life Insurance is for when you die, nothing more and combining it with anything is a mistake. Your life insurance should be about 10 times your annual income if you are supporting a family. The reason for that is simple, 10% returns are quite doable with solid investments so your survivors can invest the proceeds, draw 10% a year and not deplete the money for a very long time. This effectively replaces your income for longer then your working life.

Now to carry that much whole life insurance would be extremely expensive, beyond the budget of most working Americans. An insurance agent will try to show you how whole life builds “cash value” but this is nothing but an illusion.

Remember life insurance pays out when you die! When you live a long time (most of us do) it is good for the Insurance company, you pay and they do not. So when you buy term insurance you pay the amount that very smart economists and math PhD’s have determined will be profitable for the insurance company based on average life expectancy. In other words a fair market price that covers you if you die during the term.

Now look at whole life, you pay a LOT MORE for the same amount of insurance (the risk incurred by the insurer) but the insurance company has the same level of risk. Now if you are a good stooge and pay way to much for way to long, they will then give you some of your money back some day. In the interim they invest your money at market rates of 10-15% returns. So they make that interest, they hold your money and they tell you how great it is that they will give some back.

If you like that how about this. Go get 100,000 dollars, send it to me and I will hold it for you, I will even pay out 2% interest on it. Twenty years from now you can have your 100K back, plus 2% interest per year or you can just let me keep holding it until you die. When you die, I will give the money to who ever you tell me do. Sound like a good deal to you? Of course not! Oh and yea if you ever need the money I will loan your own money to you and you can just pay it back with a bit of interest. Sound like a scam? It’s not you just pay in your 100K in installments and they call it whole life!

So here is what you do, buy the insurance you need on 20 year level term and invest the rest of the money in good solid investments. You make the 7, 10, 12 or 15% depending on your risk tolerance and ability, you retain the ownership and control of your money. If you die in the interim your loved ones are covered, if you live till the end of the term and have invested well then you should not need as much insurance. Perhaps you might buy a bit less for say 10 years and by then if you still need insurance you have done something very wrong.

Don’t let the insurance guy tell you how hard it is for a 70 year old to get insurance! At 70 you don’t need life insurance if you have done a good job of saving and investing. You are not leaving behind a young wife and 3 kids, you just need to be buried. If you can’t save enough money to get yourself put in an box and under six feet of dirt in 70 odd years something is drastically wrong.

I won’t be writing on this subject very often as it is pretty well known and accepted by most good financial professionals today. I just wanted to get it out right away because it is a huge mistake often made by young people who end up in front of a well trained but undereducated insurance agent.

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