Alternative Income

Could I Retire Now?

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Last month my alternative income was larger than my expenses.  This is the first time that has happened.  If I could continue to do that I could potentially “retire” now.  It would be more accurate to call it semi-retirement.  I’d still do things to make money I just wouldn’t have a job and I could set my own schedule.

There are several factors that keep me from being able to retire now though.  The first is that last month my income was unusually high and my expenses were unusually low.  In a normal month my expenses will still be higher than my alternative income.  Also, once I’m finished with school I’ll have to start repaying my student loans.  I’ll be on an income-sensitive repayment plan so my payments might not be more than I’m paying towards debt now but there is a chance they will go up.  One more thing is even if I do get to where my alternative income is usually higher than my expenses I need to have a safety net for emergencies and unexpected expenses.  Right now I only have about $3,000 in savings outside retirement accounts.  I don’t consider that anywhere near enough.

For me to be able to retire I need to increase my income so it is consistently more than my expenses.  My expenses are already pretty low so I can’t cut much more there although I do believe I could still lower them more.  I need to focus on increasing my income and saving money outside of retirement accounts and I still have a long way to go on those.  The fact that my income was higher than my expenses last month though makes me feel good about my chances of retiring at 50.

Alternative Income: Peer-to-Peer Lending

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Peer-to-Peer lending (P2P) also known as social lending is a way for people to borrow or lend money without going through a bank.  The main P2P site is Prosper.com.  Another P2P site, Loanio, just recently launched.  Lending Club is another P2P site but it is not currently accepting new lender registrations or loan committments and its future is uncertain.  To get a good idea of how these sites work read the faqs and overview articles on their sites.

These sites can be a good way to make extra money and have worked out well for me.  I have nine loans with Lending Club and two with Prosper and haven’t had any late payments or defaults yet.  The average interest rate on the loans is over 11% which compares very favorably with the negative return of my stock investments.  Some people view these loans as risky but I don’t think they’re overly risk for the return on investment.  If you just want to keep your money safe you can put it in an ING Direct or FNBO Direct savings account.  You’ll only recieve 2.75% APY or 3.50%APY though which doesn’t compare well with the over 11% returns available from P2P lending.

I haven’t invested much in P2P loans yet because I wanted to see how they would perform.  It has only been ten months since I started making loans but I’m pleased with the results so far.  I’ve seen other bloggers who’ve had bad results.  I made loans mostly to people with high credit grades and relatively low debt to income ratios which seems to have helped reduce my risk.  Or maybe I’ve just been lucky.

I plan to invest more in P2P loans once I start making extra money.  The monthly payments would work out very nicely if manage to retire early.

The $25 referral bonuses the P2P sites give is also a nice source of income. I’ve already made more in bonuses than I’ve invested in loans so I’m kina freerolling now.  If you’d like a referral for a $25 bonus send me an email or leave a comment.

Making Money on the Side

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One part of my plan to retire at 50 is to continue to make money on the side. That might more properly be called semi-retirement. However, if I don’t have to work and can make money when I choose to that is good enough for me.  Any money I earned would be to do things beyond my ordinary budget or to provide a larger cushion of savings.

There are many ways to make extra money.  I’ve covered a few of them with my alternative income ideas.  There are a lot of blog posts out there on how to make extra money.  Here are a few of them:

“Need extra income? Here are some ideas”  from MSN Smart Spending.

“11 Great Ways to Earn More Money” from Free Money Finance.

“5 Ways to Earn Extra Cash” from Get Rich Slowly.

“26 Ways to Earn Extra Money” from The Wisdom Journal.

Not all the ideas are non-job ways to make money but there should be a few ideas there that will work for you.  If you focus on thinking of ways to earn extra money more ideas will probably come to you.

August Income- $1389.60

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Here is a breakdown of my income for August.

Job

$864.82

Online Income

$355.50

Bank/Referral Bonuses

$135

Interest

$16.88

Surveys/Selling Stuff

$17.40

Total

$1389.60

My income was decent considering I only worked for about half the month.  M y online income should be up significantly next month.  I use the cash method of accounting, I had a good amount of affiliate sales in August that won’t be counted until I receive them this month.  It will be difficult to make up the $864 in job income though.  I’m working on some ways to increase my online income but it will probably be a couple months before I see any results.

Alternative Income- Cash Back

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This isn’t really an alternative income source since you have to spend money to get it. If you only purchase things you would spend money on anyway though this provides a little extra money. There are two main ways that I get cash back.

The first way is through online cash back shopping portals. The ones I most commonly use include Ebates ($10 signup bonus), Big Crumbs, and My Points. There are many more out there but these are the ones I’ve used and know.

I’ve mainly used Ebates for online shopping.  Their cash back is good but they only let you cash out four times a year and you have to earn a minimum of $5.01 not counting referral bonuses to cash out. This is a problem for me since don’t shop online(or offline) that much.

I’ve just started using Big Crumbs but I think it is going to be my main cash back site now. They pay on a monthly schedule. One of their big draws is that they allow you earn cash back on Ebay purchases. The other thing I most like about them is they allow you to earn money on your referral’s shopping activity. If you have a lot of referral this could be a decent amount of passive income.

MyPoints I don’t actually do any shopping through. I just get paid to read their emails and occasionally do a survey. I joined them earlier this year and it looks like I’ll make about $20 a year in gift cards from them. If I were more active I could increase that amount.

The other big way to get cash back is through the use of cash back credit cards. My personal favorite is the Chase Freedom(SM) Credit Card. I earn 3% back on my top three categories and 1% on the rest. If you wait until you have $200 cash back accumulated you will get a bonus $50 which effectively turns your cash back rate to 3.75%. I should have $200 accumulated by early next year and I’m waiting to cash out until then.

The other cash back card I use is the Discover® More(SM) Card. The trick to getting the most out of this card is to focus your purchases on their bonus 5% cash back categories. They switch these four times a year giving you a variety of categories to save money on. They currently have 5% cash back on gas which I’ve already earned my maximum amount of $20 on. I’ll now set the card aside until I can use it for the next 5% cash back promotion.

You can view some more cash back cards here.

Remember if you buy something you don’t need just to get the cash back you’re not saving any money.