This is the fourth installment tracking of my alternative income streams plan and progress. This month I’m showing very good progress in creating more money outside my job. I had at least 6 Prosper.com loans get verified in the last two weeks and this blog has been getting a little more popular. With a total of $51 this past month, it would cover my Internet, cable, and phone usage. Before you get too jealous, those numbers are halved as my fiancee covers the other half.
| Date | Alternative Income | Necessary Expenses | To Go |
| 10/15/2006 | $17.00 | $1,699.00 | $1,682.00 |
| 10/31/2006 | $26.00 | $1,689.00 | $1,663.00 |
| 11/20/2006 | $33.00 | $1,689.00 | $1,656.00 |
| 12/3/2006 | $51.00 | $1,689.00 | $1,638.00 |
I’m disappointed that I couldn’t make a huge payment towards my HELOC as I intended. I had the money to, but wanted to keep a little more money around. It’s been a little harder to come by as I’m making a big run to reach 15K in my 401k. When I started this plan, my company didn’t offer a 401k Plan.
How about taking some of your cash and buying some dividend paying stocks? At least that way you are a bit more diversified. I’m not sure about the tax system in the US, but in Canada, dividends have a huge tax advantage over interest income (like prosper.com).
Joe
http://www.StingyFinance.com
I’ve definitely thought about it. One reason I haven’t is that I have a lot of stock in my retirement accounts – approximately $100,000 worth. My Prosper account is around $2500 now. Granted these accounts have different purposes and timelines, I’d feel comfortably diversified if it was a 10-1 ratio. Plus my Prosper loans are split amongst many people, so my exposure there is that the company itself isn’t stable. Having reviewed their business model (heck, I thought it up years and years ago, but didn’t act on it), I think people will talk of Prosper in 8 years how people talk of Ebay today. It might not be quite as common as it’s more of niche, but it will be regarded with that kind of stability.
Really the biggest reason, I’m using Prosper so much is that I feel it isn’t an efficient market yet. I think I can make better returns than the stock market averages for the risk I’m taking on. According to Eric’s Credit Community, I’m making a 17%+ return AFTER adjusting for risk. I think that may be optimistic, but even if we are conservative, let’s call it a 14% return.
While there are some significant tax advantages to dividend paying stocks, I don’t feel it’s enough to make up the difference (I think it’s 25% for interest income vs. 15% for dividend income). Does anyone know what the average dividend stock has returned over the long term in terms of appreciation and dividend combined? I’m curious to know. I don’t have the amount of money to buy them individually and be properly diversified. Brokerage commissions would eat up some of my gains. I think there hurdles could be cleared with a mutual fund or ETF of some sort, but I haven’t looked into them for dividend purposes. If I did go the EFT route, I’d want there to be a commission free way to reinvest those dividends. I don’t use the alternative income now, just want to measure it and expand it from a book-keeping perspective.
How about purchsing DRIPS from various steady dividend stocks?
I think DRIPS would work. 2 Million Blog talks quite a bit about them. I’m intregued, but a few things stopped me. It seems like it’s a fair amount of work to set up. Maybe something like Sharebuilder would be easier, I’m not sure.
Also I’m not sure it makes sense for me. As he states:
For those DRIPs that require 1 share, you have to get at least 1 share from somewhere else. If you don’t already own the stock in certificate form or don’t have a friend/relative that will “gift” you a share of stock then the DRIP probably doesn’t make sense as a holding vehicle for you.
Essentially it will cost me a bit to get started. And then I’d have to do it for quite a few companies to diversify. Also, I’d have to make sure that those companies represent long-long term buy and holds. With Prosper, I’m only tied to a borrower for 3 years and only for $50.
Joe, you have some great suggestions and I think I’ll be using them at some point, so keep them coming.