Year: 2019

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Why One Income Stream Is Not The Answer – Think In Terms Of Creating Horizontal Income Streams

This week’s money myth focuses around a common myth around making money.

I used to believe having one source of income that continued to grow was the most important thing. For that reason, I focused on crushing it at work and increasing my W2 income. What I completely missed to realize was the fact that exchanging my time for money was the main problem.

Having a strong W2 is great while you are early in your investing career, but having many income streams is even more important. Look at some of the most well followed financially independent influencers are will see more than one source of income.

If you have all your eggs in one basket, what happens when that basket is gone? What happens during a recession or if your company is trying to cut costs?

I wish I would have read about creating more than one income stream earlier on in life. Now that I know what I know, my main focus is around creating more than one income stream that produces monthly cash flow.

What Is A Horizontal Income Stream?

A horizontal income stream is something that produces cash flow for you. Your W2 job is a horizontal income stream. If you invest in index funds, the dividends they produce is a horizontal income stream. Anything putting money into your pocket on a monthly basis is a horizontal income stream. To be clear though, this does not mean diversification. By all means, you can diversify your horizontal income streams, but that is not the point of this post.

Why Are Horizontal Income Streams Important?

Horizontal income streams are important because they focus on one thing: make sure your money is working for you as hard as you work for it. That is right, ever took a second to think about this?

Is your money working as hard for you as you are working for it? For most, I would argue probably not. I know I still have some money currently sitting in cash that I would love to have working harder for me. I do have it in a high yield savings account, but that is only earning me 2% interest.

There is nothing wrong with having one major income stream. If you like index funds, and that is all you know, by all means knock yourself out. From my perspective, I want to create more than one income stream.

My Current Horizontal Income Streams

I am continuing to work harder to create more income streams. At this point, I would say that I have 7 different income streams:

  1. W2 – my current job where I make the majority of my monthly income
  2. Full Home Airbnb – First full investment property that is not a house hack! I am excited to continue to see how this home performs as I get a few months further in and come out of the slow months of the year.
  3. House Hacking Room #1 – first bedroom in my current house that I rent to a long term tenant
  4. House Hacking Room #2 – second bedroom in my current house
  5. House Hacking Room #3 – third bedroom I created in my home that I rent out. Checkout this post to see more details on how I identified this opportunity!
  6. Dividends from my index funds and companies I invest in. I am currently invested in VTSAX, VTI, Starbucks, and Walmart
  7. High Yield Savings Account – as mentioned before, I earn 2% in a High Yield Savings Account with Wealthfront.

What Are My End Goals

My end goal will be to continue finding opportunities to add more horizontal income streams. The more the merrier if they are cash flow positive.

I will continue down the path of purchasing real estate, house hacking, and indexing. There are plenty of opportunities out there even with the current state of the market. I pulled most of my money out of the market due to the volatility. I am continuing to invest $1,200 every week into the market in low cost index funds. This will help my Dollar Cost Average back into the market while I have liquid capital for some real estate investments.

Key Takeaways:

  • Take a step back and determine how many horizontal income streams you currently have.
  • One income source is not the best idea. Try to always have more than one income stream where money can flow to you.
  • Buy assets, things putting money into your pocket, not liabilities.
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Why Is The Tax Code Some Complicated? It’s 10.1 Million Words

If you were to ask me how many words I thought the tax code was, I would have guessed 60-70,000. Not 10.1 million!

Ever wonder why understanding the tax code is so difficult? This might be the reason why.

10.1 million words in today’s tax code. That is mind boggling to even think about. People wonder why there are loopholes and things the rich do with their money to pay minimal if no taxes.

Getting a good tax professional is important once you reach certain a certain point. If you are pretty straightforward I don’t think there is reason to pay someone to do your taxes.

What Defines Straightforward?

To me, straightforward is well, just that. Below is what I would consider to be someone who shouldn’t pay for their taxes to be done:

  1. You don’t have any taxable accounts you invest in regularly. These include IRA’s, 401k, taxable accounts, HSA, etc.
  2. You don’t have any investments producing cashflow for you.
  3. Your sole source of income is your W2

When Would I Get a Tax Professional?

Below outlines when I would recommend getting a tax professional:

  1. You have more than one income stream
  2. You own real estate producing cash flow
  3. You own a business producing income

My Current Situation

This will be the first year I have my taxes done by someone who knows what they are doing. I closed on my second investment property, have multiple income streams and I have maxed out my tax advantaged accounts. With those steps, it is going to be even more important to find someone who knows what they are doing.

There is one additional thing I am planning to do next week. Come tax time, people get excited when the receive a large tax return. What they don’t realize is this is not a good thing. The goal at the end of the year should be to receive as close to 0 back as possible. If you are receiving a large chunk of change on your tax return, that means you left money on the table you could have invested.

Think about it. If you receive $1,500 back in taxes at the end of the year, that money invested could be worth $1,600. All about perspective.

Key Takeaways:

  1. The tax code is complicated. Don’t waste your time reading it.
  2. Understand if your current situation warrants paying someone to do your taxes.
  3. Receiving a large tax return is not a good thing.
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Want To Become More Productive? Remove Notifications From Your Phone!

Inspired by a recent book I finished, Deep Work, comes this weeks challenge!

Remove all notifications from your cell phone! If you have kids you communicate with, ask them to call you instead of texting. Emails, turn off notifications. Social media platforms, turn off notifications.

Don’t know how to do this? It is simple, go to Settings in your phone. Go to notifications. Under notifications style select off for all apps. This exercise will take you less than 5 minutes. I bet you won’t. Stop finding excuses on why this won’t work for you. You can live for a week without notifications on your cell. What will end up amazing you is the amount of time you will get back in your day from doing this.

Technology Is Taking Over Our Lives

The day and age we live in involves us having many devices pinging us left and right. We are being trained to have our attention bounce between different things. Don’t believe me? There is a good chance you scrolled up to update your feed which is why you are now seeing this post.

Our devices are being designed with the thought in mind to give us constant hits of dopamine. Each time I get another like on a post, hit of dopamine. Each time I get an Airbnb notification, hit of dopamine. Each of these hits keeps us wanting to come back to the source. The source in this instance is the technology we are living with in our pockets.

Back In The Stone Ages

I remember in middle school when cell phones had become a thing. Before cell phones were a hit you had hefty phone books where you would write down all your friends numbers. That is right, you had to remember these 10 digit strings of numbers. The crazy thing was, I remembered upwards of 15-20 10 digit numbers because that was what you had to do. The crazier thing was you had to pick up the phone to call someone if you wanted to speak with them.

Now cell phones were a hit. You now had this mobile device you could take with you and call friends from. Not long after cell phones became a thing, texting was invented! I still remember to this day my thoughts on texting at the time.

My Thoughts On Texting

Why would I text someone when I could pick up the phone and call them!? There was no reason to text someone. If I wanted to talk to them, I would call. Six months after developing this thought process, the common thought was ‘why would I call someone if I can text them’?

Holy crap…how the world has changed even more with apps, social media, machine learning and artificial intelligence. We now live in a world where our technology own our life. They dictate when we wake up, how we interact with others and for a lot of people how they make money.

How times have changed. In this weeks challenge, challenge yourself to remove the constant distractions of technology.

Key Takeaways:

  1. Technology designs focus around providing dopamine hits. The hits you get when your phone sends you a notification is what keeps you coming back.
  2. Removing notifications on your phone allow you to get into a deeper sense of work and focus.
  3. Stop opening your dang phone!!!! Getting a lot of notifications isn’t a good thing!