Passive Income

Although this blog centers around passive income and its usefulness in providing financial freedom (see previous post for definition of FF), I don't think I really did a good job of defining passive income.

This is a fundamentally important concept, so I want to spend a post on it.

Definition

Passive income is income received while you do nothing.

Passive income is typically either investment income or income from PASSIVE businesses. By passive businesses, I mean one in which you can completely walk away from for a year and it will be making more money than when you left. (Hint - it still requires someone to be minding the business, it just doesn't have to be you!)

There are VERY few truly passive income investments (usually you are doing at least a little bit of decision making - e.g. whether to buy a certain mutual fund or stock), but I use the term for any income where you can either set it up and forget about it or you have the ability to highly leverage your time using: (1) systems, (2) other people or (3) assets (money or other assets).

Passive Income Example

As an example, let's look at the credit card tradelines I previously discussed.

The money I make from authorized users (usually about $100 for 5 minutes worth of work) - good compensation for the time as I am leveraging an asset (good credit), but not passive income.

I also get paid a fixed fee for referrals - not quite as good a compensation for the time as I am not leveraging anything.

Finally, I get a % of earnings from the referrals as long as they are earning money - THAT is passive income. Once I get referrals set up, I continue to earn and collect income without doing anything (except cashing the check - whoops, direct deposit has even eliminated that "hassle").

Passive income and THE BLOG

Now in this blog, I will discuss a lot of activities that are not truly passive, but at the very least I will try my hardest to avoid trading time for money (where you are compensated by the hour, month, whatever).

Some will have more involvement from me than desired (at least initially), but the hope from each is to be able to either turn it into completely passive income or produce great compensation for the time involved in order to invest that money in other investments or businesses that produce passive income.

I hope you will see the same usefulness in each of these opportunities. I realize that everything that I try (or even hear about) is not going to appeal to you, but my hope is that this blog provides you a "smorgasbord" of opportunities from which you can pick and choose.

Making money with your good credit

Many of you have now heard of this - it has gotten a lot of press recently, but I got involved with this back in April, before most people had heard about it.

The subject is "seasoned tradelines" or "piggybacking" - companies help people improve their credit (for a fee of course) by adding them as authorized users on credit cards of people that have good credit. This improves the credit of the new authorized users and does not affect the credit of the primary cardholder.

The company helping people improve their credit gets paid for playing "matchmaker" (and their knowledge and expertise of how to best improve someone's credit). The get paid by the person with bad credit and pay part of that to the person with good credit in order to use their authorized user spot.

The Industry

The recent press on the subject has stimulated demand (from people with bad credit) as well as supply (of people with good credit). I am worried that there are a number of questionable companies out there taking advantage of the situation - possibly outright fraud, but more likely charging large amount for questionable results.

The industry does not have storefronts - most companies are a handful or less of employees (probably located all over the U.S.) and then additional independent contractors acting as remote agents. Everything can be handled over the phone or electronically, so it is very important to make sure you are working with a company that is not going to disappear into the night.

The Criteria

In order to be able to sell authorized user spots, you have to have credit scores of 700 or better. You also have to have "qualifying" cards: preferably at least 2 years old, at least $5,000 credit line, perfect payment history, and keep balances below 20% of the credit line.

And only certain cards report the authorized users. As examples Citibank, Bank of America, and American Express are best, Washington Mutual also works, but Chase does not work.

Any decent company will have to pull your credit before being able to quote you rates they will pay for authorized user spots. Rates typically range from $50-$150 per spot (I most often see $80-100), and number of authorized users per card ranges from 2 to 10.

I believe most companies pay after the cards report (the only way they can verify you added an authorized user) at 30-45 days after adding the person, then remove the person at 90 days (after having enough time to positively impact their credit). If anyplace promises a better time frame than that, then are probably doing the person trying to improve their credit a disservice.

Citibank and Bank of America cards allow 9-10 authorized users, so if you have several of these cards, you can rake in a decent amount - $2,000-$5,000 every 3 month is not unreasonable.

Is it Safe?

One of the main questions people ask is can these authorized users actually make charges on the account? The answer is no. When you add authorized users to your account (typically online), the company sends a card to you (they don't even have an address for the authorized user). Because you have the card, they never have enough information to be able to use a

In addition, they cannot call up the credit card company to make changes because the card company has security measures (often your mother's maiden name and your social security number) to prevent others from accessing your account.

In the 3 years that Seasoned Tradelines has been doing this with thousands and thousands of authorized users, they have never had an incident with any of the primary users' cards.

The Company I Chose

When I was looking back in April, I chose to work with Seasoned Tradelines because they have been around longer than the others I saw (since 2004), they responded promptly, had a referral program (to make extra money), paid the same as other companies, and I now know that they are also working on other ways to use your credit to make money without much work.

I also saw some contracts from other companies that had a non-compete agreement for years after working with them, and I knew I did not want that.

Once this concept started getting a lot of press and Seasoned Tradelines started getting overwhelmed with calls, I was offered what I considered to be a great opportunity. They said if I would call people back and answer questions, I would get the referral fees for anyone who decided to come on board.

Upcoming Changes?

Now FICO is threatening to change how authorized users get reported (presumably removing the benefit that authorized users can now get). My understanding is that they are going to start with one credit reporting agency in September and then do the same thing with the other two agencies over the next year.

I am still not convinced that this will happen in September (there are a lot of people - in this industry and outside it - that are very opposed to these changes). Even if it does, it will happen slowly, and I like the fact that Seasoned Tradelines has other ways to help people improve their credit and let people with good credit use it to make money.

How to Participate

If you are interested in participating yourself and believe you meet the criteria discussed above, you can give me a call (cell - 816-896-6566) or email (sfweller@yahoo.com). As I said, I work as a remote agent for the company, and my job is getting people's information so that we can provide a proposal based upon the specific cards you have.

It usually takes a day (or two) to get a proposal, then you just fax back the paperwork if you are interested. From there, you slowly get requests to add people to your cards and ultimately make money!

Like I said, they also have several other ways of making money with good credit that they are working on, so even if you don't have many (or any) qualifying cards right now, it is good to get your name on their list for future opportunities.

PS - If you want to improve your credit, I just need your name and phone number to have someone from the company who is knowledgeable about that side of things get in touch with you.

My first network marketing adventure - Part 2

So we needed to figure out how to get more customers or bigger customers.

We looked at what our sponsor did - a number of shows every year. You know, tradeshows, where vendors pay to have a booth and people pay (generally) to get in, and the only people guaranteed to make money are the ones putting on the show.

Well after a few tries (OK, probably 5 or 6), we got fairly good at converting shows into customers, but those customers would not always make that first order. We found that once customers made the first order, they generally stayed around for quite awhile because most people really like the products

We also got a few accounts (places that did oil changes or sold oil products) both through the shows and by just calling on local businesses. These accounts made a difference to the bottom line faster just because AMSOIL pays better (initially) for these type of accounts.

So we plugged away, doing 5-10 shows per year, spending some very long hours at some of those shows. (I especially remember the 10 straight days of 12-13 hour days at the Kansas State Fair.) We eventually determined that our effort was perhaps not yielding the rewards we were looking for, and we began to look for other opportunities (especially my business partner).

At the end of the day, we also realized that an LLC was not the greatest structure for a network marketing business, we split up the customer base (which was already largely done anyway), and we went our separate ways.

I still love AMSOIL products but I really don't market them aggressively. My wife's car is still covered in AMSOIL propaganda, but only because I am too lazy to try and take everything off.

Our checks now run $100-$350/month on an average of an hour or so of work. Nothing to set the world on fire, but the money on top of a great learning experience has been very nice.

Let me summarize some of the key points of my first network marketing business:

What I love about AMSOIL1) Fantastic products
2) Reasonably priced (much more benefit than other synthetic oils for just a little bit more)
3) Once customers start using AMSOIL, they keep using AMSOIL (goes back to #1 & 2)
4) Ability to earn money a lot of different ways (different account types, etc)

What I don't like as much about AMSOIL
1) The compensation is not competitive with other network marketing companies. Most of this stems from prices being too low - seriously, prices per quart of oil are only slightly higher than they were in the 1970s. People generally don't buy AMSOIL because of the low price, but AMSOIL (corporate) thinks they do. This does not leave enough compensation for dealers to make it competitive with other network marketing compensation plans.
2) AMSOIL is somewhat embarrassed to be a network marketing company. I don't know why this is, but they push direct sales to accounts rather than sponsoring other dealers into the bsuiness. I understand there is some stigma associated with network marketing, but you ought to embrace it if that is your distribution method.
3) Oil is complicated! Unlike other products (like nutritional juices, for example) where there are only one or two options, for synthetic oil and filters you have to look up the vehicle type in order to select from several different grades of oil and many different filter types. This is not convenient for either the dealer or the customers. The dealer has to be an expert, which hurts the duplicatability (is that a word?) of the business - and duplication is the foundation of network marketing (of course, see #2 above).

Lessons from my first Network Marketing Experience
1) Have products that you love! It is no fun learning about products and talking to people about their applications if you have no interest in the product itself. People also buy based upon emotion and justify with logic, so the emotions you convey are supremely important.
2) Have products that people buy more than once a year! There are a number of reasons for this. It is good to have relatively frequent contact with your customers. It is
3) Have higher-end products available for your best customers. Most businesses have more expensive, more profitable products for those customers who want the best or just more. With AMSOIL, that is very limited - there is better oil that costs $2/quart more retail or there is transmission fluid, grease, etc, but these generally last even longer than the synthetic motor oil.
4) Have distribution that matches your products. When AMSOIL was the first synthetic oil for cars and cost $5/quart in 1972, network marketing was the correct distribution method. In 2007 when it is selling for less than $6/quart and other synthetic oils are selling for more than $5/quart, I am not sure network marketing is the best method.

(By products, I of course mean products or services, depending on your particular business.)

Hopefully someone got some value out of that long story. It certainly helped me to verbalize some of my frustrations with AMSOIL's business model over the past few years as well as review all of the things I still like (which is why I still sell the products).

I do not recommend AMSOIL as a business for those looking to earn a "rockstar" passive income. I estimate the top earners in AMSOIL make in the $300,000-$1,000,000/year range, where top earners in other network marketing companies make 10x that.

On the other hand, $300k+/year ain't too shabby, and this could be a great business for someone passionate about cars and interested in becoming an expert on the products.

Stay tuned for "My second network marketing adventure...", coming in a future installment.


PS - If you want to go check out the AMSOIL products, use this link to go to my store. Unless you're analytical and love trying to figure things out for yourself, though, it is easier to call (816-896-6566 cell) or email (sfweller@yahoo.com) me for the best solution for your particular situation, even if it does not involve AMSOIL! After having been very active in the business for 3 years, I know more than anyone should know about motor oil and filters :)

My first network marketing adventure - Part 1

Just so it is clear during my discussions about network marketing - I am a proponent of it, I currently have a couple of network marketing businesses that produce small incomes, but I am not actively growing either business.

With that out of the way, let's talk about my first adventure with network marketing!

The year was 2003. A co-worker of mine had recently returned from a field assignment that had lasted about a year. When he got back, he was ready to start a side business.

I was just as excited as him, so we formed an LLC together. Only one problem - we had NO idea what we were going to do!

So we had a business, we had a bank account, and we even had business cards. We just didn't have a business plan or a way to make a profit. Small hitch, that.

So we first looked into rental real estate. We listened to some Carlton Sheets materials that we borrowed from someone else and read a few other books. We went to a few foreclosure auctions at the courthouse steps, but (thankfully) decided that real estate was not our first choice based upon what we knew then.

About the time we were deciding real estate was not for us, my business partner "stumbled" across a company called AMSOIL. The rest, as they say, is history.

He was looking for a bypass filter system filter system for his almost new Toyota Tacoma pickup (the same kind of filter system they use on steam turbines in power plants where they don't change oil - can you imagine a 15,000 gallon oil change?). The advantages of such a system would be extended engine life and not having to change the oil nearly as often, which he hated doing.

He found this company called "AMSOIL" that had these bypass filter systems as well as just a 25,000-mile, 1-year oil change. He called the local dealer to get a quote.

Well, the bypass system cost about $200 at the time, but you could pay $30 to become a dealer, which would drop the price of the system to about $150. That seems like a no-brainer.

So we decided to go out on a limb and pay $30 so that we could get the products (synthetic oil and filters) at better prices. (I should also mention that my wife and I were driving about 50,000 miles per year combined, so changing oil twice a year instead of 16 times a year REALLY appealed to me.)

As mechanical engineers, these products made A LOT of sense to us:

1) Generally cost less than regular oil changes over the course of a year (fewer oil changes),
2) Saved gas on top of that (1-4% better efficiency/performance),
3) Protected your engine better (so it lasts longer),
4) Are guaranteed for the longer service (yeah - if something breaks and it's the oil's fault, they pay for the engine repairs or replacement).
5) Reduced oil waste and gas consumption (I thank John Wachholz for my environmental awareness).

We figured if we thought this was cool, all of the other engineers we worked with would think it was cool as well.

As with many network marketing products, your friends and family don't always immediately join your excitement for the products that you are now marketing, and AMSOIL was no exception.

We got a few customers from work and family that started using it. And let's face it, a customer that switches to AMSOIL generates very little commission initially because they only need to buy product once a year! For me even now a customer that is only changing oil on two cars is worth about $8. Especially considering the time it took to get a sale, that is not a great wage.

So we needed to figure out how to get more customers or get larger customers (or both), and that is where I will pick up in Part 2...

The book that started it all...

While I had started looking for other opportunities in general before this, the book really took all of my endeavours to another level. I'm talking of course about:

T. Harv Eker's "Secrets of the Millionaire Mind"


I first read the book...OK, confession time - I bought the book but never read it, but I have listened to the unabridged audio version read by Harv himself about 6 times...back in about March of last year. There were a lot of great ideas, but I never really did much with them.

The cool thing about the book, though, is that you get 2 FREE tickets to a 3-day seminar about really changing your mindset about money. The retail price for two tickets is $2590, but you get them free. (Full disclosure - now it costs $97 per person when you register because you get a lot of materials with it - they found that the learning was more effective when people had materials to take home.)

Now, I'm notoriously cheap, as I have previously mentioned, but knowing what I now know about the seminar, I would have happily paid full price for it. It was absolutely worth $1295 per person.

Why would he give away so much value? The most effective marketing being employed right now involves giving away a lot of value in order to establish a relationship and generate revenue from customers down the road. In this case, many people will sign up for more seminars offered by Harv's company (I sure have!). The people that are willing to go to a free seminar are also likely to pay to go to more seminars if they get a lot of value out of it. If they won't go to seminars in general, most won't go to one, even if it is free.

Back to my story: I went with some good friends - Chris, Kelly, and Nate - to a 3-day seminar in December 2006, and I can safely say it changed my life. Not only with respect to money but also improving my attitude toward life in general and relationships with others.

Ever since then, the opportunities have abounded, and things have really taken off. I can safely say that I never would have started this blog had it not been for "Secrets of the Millionaire Mind" and the 3-day "Millionaire Mind Intensive" seminar.

I loved the seminar so much that I went back in February 2007 with my wife (Rebecca). Apparently I "dragged" her to the seminar (this is what she told 800 people at the end of the 3 days). She also told those 800 people that it was one of the best weekends of her life, and she was so glad I brought her.

We are going to volunteer for the seminar in Dallas in November 2007 and "drag" as much of our family with us as we can.


I've actually bought 110 of these books to sell and give to family, friends, and business associates. Now I did get some cool bonuses for buying this many books, but at the same time I strongly believe that everyone should read the book at some point.

Not everyone is ready for the book - you have to be open, which means you have to realize that you don't know everything already. That may come as a bit of a shock to some of you (it did for me :) ), but it is true.

Please - check out the book. Not because I want to make $0.46 or whatever it is from you buying the book off Amazon, but because everyone has great potential to achieve locked up inside them, and this book just might help you release that. If you know me personally, I can get you an even better deal on the book than you can get through Amazon - just let me know that you want one.

This is my strongest recommendation so far - if you can't spring for $14 for a book that will change your life (even if only in small ways), then what else are you going to do to break out of your rut? Think about it.


PS - If you do happen to buy the book and decide to go to the 3-day Millionaire Mind Intensive seminar (did I mention that I highly recommend it?), please use the following referral code: 403014. This does two things: 1) I get paid for turning you onto the seminar (kinda like network marketing!), and 2) it allows Harv's company to determine where the seminar attendees are coming from (whether word of mouth or just picked up in a bookstore). I think it is fair for them to know where their people are coming from.

Again, use referral 403014 when registering for the seminar - thanks!

Network Marketing - ewwwww!

I don't feel this way about network marketing, but a lot of people do, so I want to address some of the common issues around network marketing businesses.

First of all, network marketing is just one way of distributing product and services - getting it from the producer to the consumer.

Obviously traditional retailers (producer to wholesaler to retailer to consumer) is the most common method here in America, but direct order (catalog, TV, or now Internet) is another common method that is somewhat similar to network marketing. There are many others, but suffice it to say that network marketing is just one of many distribution methods.

I think most of our negative connotations with network marketing stem from 2 things:

1) Bad experiences with network marketing in the past. Most people that get into network marketing are very excited but have not received good training on how to introduce the products or business to others. Unfortunately, this can lead to "amateurs" approaching friends and family (the favorite first prospects) and really straining some relationships :)
and
2) Our general distate for promotion. This is one of the most dangerous mindset issues that keep people from achieving true wealth. Most people resent when people are "promoting" a product or service. Yet, how else do we expect to find out about it? We may not be interested in that product or service, but that doesn't mean we should be opposed to hearing about it - we may know someone who could really use that particular item.

But network marketing is really an effective way for distributing certain products that require more education or explanation. A couple of examples:

Let's say you had a synthetic oil that is guaranted to last 25,000 miles or 1 year without having to be changed, yet it cost 10-20% more than other synthetic oils (more about this later :) ). If you saw this brand that you had never heard of (which also costs more) next to the other synthetic oils on the shelf at Wal-Mart, would you even spend enough time looking at it to see this special guarantee?

Similarly, when you go to the drugstore to look at vitamins and you see a $20/month vitamin with what looks to be about the same ingredients of the $75/month vitamin, which one are you going to pick?

In both cases, education as to the specific benefits of the products is required to fully explain the value. It does NOT mean that everyone will be interested even after the explanation (some network marketers don't seem to understand that the majority of people will not be interested in your product even after you explain it). Some people will be interested based upon the educational process (which conveys the product value), whereas almost noone would have been interested without that education.

So network marketing can be a great distribution method for products that require more education or explanation to really explain their value/differentiation.

As an aside - there are a number of network marketing companies (I would say the minority) that created a product just to make money. There is little or no real value to the product, the company just needed to create something for their marketing engine to promote. This also happens in all other forms of distibution as well, but network marketing is more prone to it in my opinion.

Network marketing also allows quick promotion of products with very little money upfront from the producer of the product or service. Some very large corporations have launched products this way because of their ability to spread quickly without a lot of money upfront (money is only made by network marketers by sales of product - commission only). No money is paid out to your network marketing sales force until actual sales are made.

The potential rewards (especially passive income) attracts a lot of talent to network marketing. I mean incomes of $100,000-$1,000,000 per year are achievable. There are a lot of people in network marketing making that kind of money and more, but there are also a lot more people that tried it for a little while, didn't experience any success, quit, and now say "network marketing doesn't work." Of course, like many other things, it does work but not for everyone.

This discussion is prologue to my own experiences with network marketing that I will share shortly. Stay tuned...

HELP! - How to make money with your blog?

Or to use the proper "lingo" - how do you efffectively monetize your blog?

I wish I had all of the answers on this one :)

As stated in the purpose of this blog, my primary intent for this blog is to journal my journey to financial freedom and share my successes (and not-quite-as-successfuls) with others. At the same time, I have put in some Google advertising (Adsense) blocks in an attempt to not only generate some revenue from the site but also provide more relevant content.

Adsense makes great sense (no pun intended) to me because many readers will stumble across my blog looking for information on a certain topic. You may or may not get value from the information I provide (hopefully you will!), but the ads provide information on similar topics that you (the reader) may find useful. If you do - it's a win-win - you get information you were looking for, and I get some advertising revenue.

My attempts to monetize this blog effectively (note also the link to Amazon.com for the 5-day book) are part of a larger goal of mine:

I hope to start a road trip blog where the revenues from the blog are what I have to live on each day. So no revenue would mean no gas, no place to stay, and no food.

Of course it would be critical to get some revenue generation before starting out because the blog about me sitting in my car in my driveway waiting for some revenue would be pretty boring (potentially very amusing, but still boring).

So that's where I need your help. How do I effectively make money from a blog? Adsense is easy to drop onto the sites, but any tips on generating click-throughs? Targetted advertising? eBooks? A "recommended reading" list linked to Amazon? I would welcome all ideas here - please make a comment to this post if you have an idea.

I plan to experiment on this site with revenue generation, so be aware of that. If you see things on here that you think are good ideas, please let me know. Likewise, make me aware of things that really "turn you off". I want this to be a positive learning experience for all of us.

Many people have great knowledge and experiences that they can share with the world. I think blogs are a great way to do that. If we can figure out the best ways to make some money at the same time, I think that would certainly provide more incentive for people to share via a blog.

Thanks in advance for the help!

Home sweet 4-plex

The financial freedom discussion was important background for this topic, which falls under the reducing expenses side of achieving financial freedom.

For those of you that don't know me personally (and how "frugal" I can be), you may find this interesting. My wife and I were recently looking for new digs in our new hometown of McPherson, KS.

Now McPherson is very interesting. Although it is a small town in Kansas (population of about 14,000, not including livestock), it has a great, stable industrial base which keeps the average wages among the highest in Kansas. As a result, home prices are almost as high as those in Kansas City (for those of you on a coast, that may seem low, but for those of you from rural Kansas, you know that seems high).

So we looked for houses on some acreage (like the one we currently have outside of Kansas City) and found we would have to pay just as much for houses that were about 80 years older.

Instead of buying what we considered to be an overpriced house on acreage, we instead decided to buy a 1920s house that had been converted into four 1-bedroom/1-bath units. And further reinforcing that this was God's plan for us was the fact that two of the four units were occupied, leaving the two larger bottom units open for us!

The way it worked out, we got a 100% loan on the property from a local bank. We ended up getting cash back at closing (we got the renter's deposits, pro-rated taxes, etc - I need to go back and look how we pulled that off - I didn't expect it), and the two renters will ending up paying about as much as the mortgage payment (we have some repairs to do, and we are going to roll that into the mortgage, so I don't know the final amount yet).

Now we do have to pay some common utilities and all of the taxes and insurance for the property, but overall, we will be living in 1400-1500 square feet of space - 2 bedrooms, 2 baths, for very little money.

It is also in the middle of McPherson, so we can walk or ride our bikes most places in town that we need to go (except in bad weather). Very importantly these days that will minimize our gasoline usage.

Just one more step towards financial freedom!

Financial Freedom

I did not really define this well up front, so I want to make sure and define what financial freedom means to me. I think one of Harv Eker's (or T. Harv Eker when he's an author - more on that later) declarations sums it up well:

"I have more than enough passive income to pay for my desired lifestyle."

In other words, you have more than enough income coming in without you having to work for it (from investments, passive businesses, hands-off rental income, etc) to more than cover your expenses.

There are several ways to achieve this financial freedom: 1) increase your passive income until it more than covers your desired lifestyle, 2) simplify your desired lifestyle until your expenses are less than the passive income you have, or 3) some combination of the two.

You can have financial freedom and still be generating an active income from work - you just have the freedom to stop working if you want and still have enough income to live off of. (Yes, I use dangling prepositions because the "correct" grammar just sounds wrong.)

The freedom to work or not as you desire and still have your desired lifestyle - this is financial freedom. I want us to have this common definition for future discussions :)

Health Savings Account (HSA)

One of the joys of joining the ranks of the self-employed here in America is finding all of those benefits that we take for granted as employees. I have been calling and comparing plans today and thought I would share what I had learned.

For those of you that don't know (don't feel bad, I was in this boat just a few hours ago), health savings accounts act just like a savings account and are coupled with high-deductible health insurance policies. Let's take a look at each piece separately:

Health Savings Account

The health savings account itself acts much like a regular savings account, except that contributions are before tax (an above-the-line deduction - it reduces your federal adjusted gross income - the bottom line on the front page of the 1040 Form). Distributions can be used tax-free and penalty-free for the folowing:

• Qualified medical expenses defined by Section 213 of the IRS Code
• COBRA insurance
• Qualified long-term care insurance and expenses
• Health insurance premiums for individuals receiving unemployment compensation
• Medicare and retiree health insurance premiums, but not Medicare Supplement premiums

After age 65, distributions can be taken for anything penalty-free, but you have to pay tax if you do not use the money for one of the above categories.

The maximum HSA contribution for 2007 is $2850 for an individual or $5650 for a family.

The other nice benfit is most HSA plans pay interest on your savings. I have seen 4-6.15%. http://www.ushealthgroup.com/ claims to pay the highest rate at 6.15%, and I have not found any higher. My understanding is that this interest is tax-free if used for medical expenses as well.

High-Deductible Heath Insurance

The high-deductible health insurance is intended to cover larger expenses that you cannot cover with your HSA money. Key things to look for in the insurance coverage:

Make sure providers you plan to use are in network. You get the contract rates (discounts of up to 90% off "list price") and some plans only pay 100% of expenses above the deductible if you use providers in the network. Otherwise you may have to pay 10-20% of the additional cost.

100% coverage above the deductible. Some plans offer lower monthly rates for 80/20 coverage up to a cap. That means you still have to pay 20% of expenses above the deductible up to some cap ($24,000 on the one I saw). If you choose to go 80/20, make sure you can afford the base deductible plus the 20% up to the cap if something bad happens. It's not worth it to me...

Look at the lifetime maximum benefit. $3 million is typical, but I found Celtic Insurance Co. (1-800-477-7990) that has a $7 million maximum.

Confirm all expenses (including office visit and prescriptions) count towards the deductible. There are lower rate plans that exclude certain items.

"Bonus" coverages - as an example, Humana offers $300 of routine wellness coverage per year. This can be a good deal if a) you know that you are going to use it, and b) it costs less than $300 more than comparable coverage from someone else.

Maternity coverage - not an issue for us, but this is something that you typically have to add separately. Make sure you get it if you expect to be expecting :)


Well, that is all I know right now. I hope that information helps other people that might be looking at the HSA option. I certainly welcome any comments you might have on the subject so that we can all learn more.

Renters

It seems as though when I talk to people about rentals, the first words out of 80-90% their mouths are something along the lines of: "oh, I will never have rentals because I don't want to be fixing toilets at 2 in the morning."

It really saddens me that people first reaction is potential negatives instead of the potential positives (like "mailbox income" and great cash flow). I used to be this way, so I understand how devastating this mindset can be.

As with any potential downside, you can always do things to avoid it. The cleanest way (if you have enough cash flow) is to hire a property management company. They typically charge about 10% of gross rents, but some markets are lower (around 7%). They deal with all of the typical headaches - collecting rent, coordinating maintenance, paying utilities (if some utilities are paid by owner), running ads for new renters, taking applications, and getting new renters in. They typically pass through the additional charges (for maintenance work and sometimes advertising), and they typically charge a fee for each new lease they get signed.

This is all background to a story:

Late last week, we got our monthly check from our property management company for our investment property (5-unit house). Along with it was a long description of the various incidents that had recently happened with the tenants in one of the units.

Apparently, there were several incidents where the father in this unit pulled a gun on other people. This apparently was not the first time as he had pleaded no contest to a similar charge within the past year (before we bought the property). The offended parties refused to press charges, though one police report was filed.

I suppose such incidents would discourage some people from owning rentals. Not me - that just makes me more determined to be successful.

I am VERY thankful that I have a property management company in place for that property so that I don't have to deal with such issues myself. I am also really looking forward to the property manager screening the tenants - the background checks they do should avoid most such issues in the future.

The moral of the story is that anything you don't want to deal with in business (rental real estate or otherwise) can be outsourced to others. Even as a very "frugal" person (my friends have less nice words they would use), I see a lot of value in paying other people to do the things I don't want to do and am not very good at.

Where there is a will, there is a way.

5-day Sale Results

Well, the 5-day sale results were somewhat disappointing. I sure am glad that the whole thing is non-binding!

To talk generic numbers, let's say we hoped/expected to get $100 out of the sale. According to the 5-day formula, the number we put in the add is 50% of that, rounded down to the next "magic number" in the book. In our case that was about $44. We would have been OK with anything above $89.

The written bids (before the round-robin auction started) got up to $59. The highest bidder after the round robin was $71 - less than the liens (1st and 2nd) on the property and less than we paid 6 years ago for the house.

I can think of a few things I would do differently next time:

1) Ads - I would use the words "Will be sold Sunday night to HIGHEST BIDDER" instead of "House will be sold to HIGHEST BIDDER" so people know when it will be sold. There were two versions in the book, and I did not see the other one until later.
2) Neighbors - We never got around to talking to our neighbors about our sale, and I wish we would have. I would have encouraged them to tell people they know about the sale. It would be good for the neighbors (they get to help pick their future neighbor), and gets people out that likely already know the neighborhood.
3) Bidders - I think we could have done a better job with visitors to the house, especially sitting down with them after they had looked at the house, explaining the process again, and encouraging them to bid (even if only a penny).

While I would do it again, I hoped the method was a little more foolproof. We had a lot of calls and emails (probably 50-60), but we only had about 26 famlies/couples come tour, and 14 bids.

We will probably end up listing with a realtor so that we can focus on our "new" house - getting it fixed up and in good shape to live in.

I'm afraid that this is going to discourage a lot of people we know that are very interested in this method from trying it.

We definitely want to try this method on some other things the author recommends: cars and rental properties (for rental, not for sale).

5-day Home Sale

This week we will be selling our home using the 5-day sale method. I ran across the book that describes it on Amazon.com just completely out of the blue. (Though I truly believe that everything happens for a reason.)

We decided to use this method because we know exactly when the house will be sold, and the price from these sales is usually just as good as you get with a Realtor.

The summary is this: you advertise thoroughly Wednesday through Sunday, have the house open for inspections on Saturday and Sunday, and people leave a bid if they are interested (even if it is only $0.01). Sunday night, you call through those who left a bid, from highest to lowest - you tell them the current bid and ask if they want to advance the bid or drop out. you keep going until there is only one bidder left. The bidding is non-binding on both parties, but the idea is that both parties will go through with it (and if the winning bidder drops out, the second bidder is probably only $500 lower).

You do have to put in a lot of work to get the house ready, assemble information on the house, take calls, and man the house for inspections (like an open house) on Saturday and Sunday. Definitely more work than would be involved with a Realtor, but for us it is worth it to get our house sold on our timetable.



I will let you know how it turns out, and I have attached a link to the book in case anyone is interested in this method. As he says in the book - might as well try this method first, then fall back on the Realtor sale if you are unhappy with the results.

Costa Rica

We've got a lot going on right now that I will eventually get in the blog, but the thing I am most excited about is...Costa Rica!

My success coach told me about this program, so I had to check it out myself. Ed Mercer is the largest (I think) land developer in Costa Rica. He is currently developing 3,000 lots around his private home.

The basics are this:
- Lots start at $60K USD (1/4 acre and up)
- 2 bedroom / 2 bath custom-built luxury home, fully furnished costs $190K USD
- The development will rent your home out for you when you aren't there for only 10% of the gross rent
- If you put 20% down ($50K) and get a 30-year mortgage for the rest, you can cash flow about $10K per year, after ALL expenses (including mortgage)
- Appreciation in this area has been averaging 30-35% per year for the past 5 years
- In March, Costa Rica announced a new international airport with the longest runway in Costa Rica will ge going in about 20 minutes from this development
- You have a place to stay if you ever want to vacation in Costa Rica (who wouldn't?)

We (Rebecca and I) are excited about going down to Costa Rica later this fall and checking everything out. We will go either in later September or November (October is the worst part of the rainy season).

We had a once-in-a-lifetime opportunity to get a 3-year price freeze on lot/house combinations in this development - no limit on the number! With current appreciation rates (and I don't expect them to slow anytime soon because the airport opens in 2010), this could be worth a LOT of money.

Ed Mercer said that anyone who comes down with us when we look at property will have the opportunity to get that same price freeze as well if they purchase property. The employees that we with him could not believe he agreed to that (they couldn't believe he did any price freeze in the first place).

If you are interested in learning more, check out http://www.best-costa-rica-real-estate.com. If you are interested in going down with us (we already have several people that are coming) in order to potentially get a 3-year price freeze, let us know ASAP. We will let you know dates as soon as we do (probably by first week of August).

There's lots of other cool things like very healthy environment, very healthy food, no taxes on capital gains & income (some additional work required here), and just a beautiful spot to vacation (from what I hear), but I expect to know much more about those things after venturing down there.

A Beginning

Well, this is my first post on my first blog. Somehow I thought it would be more exciting than this...

This site is dedicated to documenting my quest for financial freedom. I am 30 right now, and my promise ("promise" is more committal than a "goal") is to have enough passive income by the time I am 35 that my wife and I never have to work again.

My purpose for this blog is to share my journey and especially some of the passive income opportunities I run across - many people don't even know such opportunities exist.

My eventual goal is to start a newsletter and forum to develop a community of like-minded people to share their ideas and success stories.

To the future!