Make More Money to Invest More Money

Make More Money to Invest More Money

It’s time we talk about freelancing, side hustling, gigs, moonlighting, whatever you’d like to call it. So far, what I’ve found is that investing is the easiest way to generate passive income. Currently, that’s where all of mine is being made. Sometimes I think I should just stick to that but my goal here is to find opportunities, try them, and report back.

Investing issue

The problem with investing is that you first need money and second need to know what you’re doing so you don’t invest in something that’s going go wrong and waste your hard-earned money.

Let’s start with the first half of that equation; getting more money. Let’s assume that if you have a job right now, you could still use more money, and if don’t currently have a job, you definitely need some money.

Here’s where freelancing comes in. There are lots of people out there that will pay you real money to handle various tasks.

Turn active income into passive income.

Where can you make some extra money that you can use for investing? Let’s discuss

First, get active.

Fiverr

I used this years ago; at the time the only price for whatever job was need/offered was $5. At this point they’ve dropped the $5 limit apparently and you can find just about any kind of work on there you need. Or more to the point, want to offer. If you’re creative and can do a bit of graphic design you can start cranking out logos for $5 and up your prices as you get better or become more well known.

Types of work you can do

Illustrations, voice over, translation, social media things (like promoting people’s Facebook, Instagram, LinkedIn, etc.), SEO, data entry, etc.

But there’s more, can you use Excel? Program? Read and write? You’ll have to put together an offer and probably some kind of image to go along with your account. I saw one add on here that’s offering to remove duplicates from a set of data in Excel. This task would literally take me less than 30 seconds and he’s been paid 68 times for this task. That’s $340 for probably less than three hours’ worth of actual work.

On the other hand – hire someone.

If you need someone to get a job done, it’s a great place to search. Need a logo, banner, freelance writer, social media guru to drive more traffic? Hire someone from fiverr.

You should find a sponsored link at the bottom of the post – help me out and use this if you plan on hiring someone from fiverr.

Upwork

This seems a little more upscale/professional to me. I have a friend that does some freelance article writing through Upwork. I’ve even submitted proposals for some database and programming work.

Craigslist

What? Craigslist is still around? Yeah, I know but there’s a gigs section where people are willing to hire you for simple jobs. I wasn’t planning on accepting anything when I went there just now to take a look at the kinds of things currently available but happened upon one that seemed interesting. A local college student is looking for programming/database help. Since that’s what I do for a living I offered to do it on a pay what you want basis.

Craigslist is kind of a strange crapshoot land though. I saw a couple video game market research offers, some people need dog watchers for a few days, various study/focus groups, there’s even someone looking for a joke writer.

Guru.com

I don’t know much about this one but that’s not really the point. The point is that if you’re interested in making a little extra money on the side then you’ve got to get the word out that you’re open to it.

Uber/Lyft

Not easy and I don’t believe it pays well. My wife tried Uber eats for a couple months. She made something like $1,500 for the duration and just did it in her spare time. The problem here is that you have to pay for the gas out of that money and you can’t tell how far away someone is going to be until you pick up the food. However, if you make $1,500 in a couple months and use that to buy a stock that pays a 3% dividend then your hard uberwork becomes $3.75 of passive income per month ($45/year). Also, don’t forget that you’ll also need to pay taxes on the money you make from Uber, they’ll send you a 1099 and they do report to the IRS.

Make it passive

Once you have some extra money, buy some assets that pay you back.

LendingClub.com

If you have $25 of extra cash that you made from a gig, buy a note that pays you back $0.58 per month for five years (7%). How much is that? Here’s the math, $0.58 * 60 months = $34.80. Imagine the change in magnitude if you have $250 or even $25,000. $250 is just 10 – $25 notes ($5.80/month coming back in).

Hold on a minute though, if you have a Lending Club account and you’ve taken a look at the various notes you can buy, you’ll notice a very wide range of interest rates. Sure, 23% looks like an awesome return and if you’re doing the math then it’s something like, $25 (default note purchase price) * (interest rate (23%) divided by 100 (0.23) * years of note (let’s say 5) = 25*1.23*5 (simplified interest for example) =- $70.38.

My experience

Well, let me tell you from experience, a big chunk of these will default and you’ll get nothing. Some will pay off the full $70 but that’ll be offset by your losses. There’s a very good reason that these people have lower credit ratings and the higher interest rates they have to pay are higher so that people will be more willing to take the risk and lend to them. The C through F credit ratings are kind of a craps shoot. It’s not necessarily bad if you’re willing to be more aggressive but these shouldn’t be the bulk of your notes.

Playing it safe on Lending Club will get you a decent return. Notes with A and B ratings are pretty safe and still give you around 6-10% return. I typically stay in this range these days.

Investing in Stocks

This is for when you have more money to invest. If you try to invest tiny amounts you’ll likely eat up any of your profit with the trading fees. You’ll probably want at least a few hundred dollars at least just to get into investing.

Investing of course can be pretty risky if you don’t know what you’re doing. In fact, even people who know what they’re doing aren’t making the big deals where they’re buying startup Microsoft or Apple stocks and then quickly becoming millionaires. Most people buy stocks through their 401k accounts and sit on the stocks for most of their careers while only dabbling in purchasing stocks they specifically want to own.

Dollar-cost averaging

One strategy of investing is called dollar-cost averaging (DCA). Using this strategy, you’d buy the stock you think is undervalued a little at a time over the course of many years. Sometimes the stock will be high, sometimes it’ll be low, but overall, you’re buying all the time with the understanding that you’re going to be achieving an average rate of return on the stock when you decide to sell it in the end.

This strategy is for people who know that it’s really difficult to time the market and make big money on buying and selling all the time. However, this is not the kind of strategy I’m really interested in getting into on this site. If you need more information on dollar-cost averaging, once again I’d recommend (once again) I Will Teach You To Be Rich by Ramit Sethi. He covers this topic and why it’s a good idea better than I likely will, given that DCA is not part of the passive income strategy I’m writing about.

Value stocks

I’ve said it before but I’ll say it again. Stocks that pay dividends regularly are known as value stocks. Typically, they’re pretty stable and pay out regular dividends so you can rely on getting some regular income out of them. The dividends are usually, by default, automatically reinvested to buy additional shares but you may be able to specify that you want to have the funds put into your investing account instead (check with your investing institution). I typically just let them get me more stock. More stock means more dividends in the future.

Here’s the hard part.

You need to do some research and if you don’t know how to do some research then you need to do some reading or take a class and get educated. If you’re just buying stocks blindly then you’re just gambling. I’m not suggesting that you need to do a full valuation of the company but you should have some knowledge of the basic financial indicators (EPS, PE ratio, yield, beta, price/sales, price/book, etc.). I’m warning you, if you get into some stocks without doing your research, you’re on your own. Ok, either way, once you start investing, you’re on your own.

Once you get yourself educated.

Buy some stocks that have a yield, that’s a dividend yield (if you’ve actually got yourself education, I shouldn’t have to tell you what yield is). Some pay barely anything back and some pay back lots.

Decide what’s best for you, buying one share of $100 stock that pays out 5% will pay you the same as 1000 shares of a $0.10 stock that pays a dividend of 5%. What’s the difference? You can bet that the penny stock isn’t going to be around much longer (which you should know if you understand their financials at all). Stay away from the penny stocks. If their price is that low, there’s a reason. Spend the money you have on a good company.

Final words on investing

Seriously, it’s a good way to make money but you can always lose it too. Investing in stock should also be fore the long run. If you don’t have patience, it’s probably not for you. It will go up, it will go down; periodically check to see if the business is still worth owning. Also, know the difference in taxation between selling a stock that you’ve had for less than a year and one that you’ve had more than a year. If you sell in less than a year you’ll pay more in taxes. Speak with an accountant if you need it.

Cheers.



Categories: Business, Freelancing, investing, P2P Lending

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