Money might not be able to buy us happiness but we sure can’t live without it too. Everyone’s yearning for financial security, to fortify our livelihood and savings. One way that I’m doing this is by looking at my alternative income. What is alternative income, read on to find out.
I caught Moolanomy’s 40 alternative income ideas and resources through my feed-reader this week. It’s a great article with a lot of tips (40 of them obviously). However as I was going through them, I realized that we don’t share the same definition of alternative income. This was reinforced by the comment that Dividend Growth wrote on my last alternative income report, “If you get a part-time job at Wal-Mart, you can increase your “alternative income”…
Defining alternative income is very difficult. I think many people may consider it adding any type of income stream. I can’t agree with that view. I would simply call that additional income. In my opinion alternative income has to be something different. Here are a few things that I’d look for in my alternative income…
- Position Not Paid Hourly – If you want to get a second job, I’ve found that there are many of them available. However, trading a fixed amount of my time for a fixed sum of money is usually not what I’m looking for in alternative income. It’s good for regular income – provided that the the money:time ratio is right. If that ratio is high enough, I’d be interested, but it has to be exceedingly high or it will be a long time until you get your financial freedom.
- Salaried Positions that Don’t Require “Face Time” – I have friend who recently got a job with a company on a contractual basis. Instead of getting paid hourly, he priced his offer by the month. He’s an extremely smart individual and realized that he can accomplish the task in limited time. As he gets more and more experienced, he increases that money:time ratio.
- Don’t Require Exhaustible Resources – I see people list “selling items on Ebay” all the time as alternative income. Most of the time it involves selling items that they bought at full price. In general, this transaction loses money which isn’t really income. (A good Ebay business to be in, is a middle man. You get a contract to buy many widgets at $X and you can sell them at $X + $Y profit. These kinds of things are hard to find because there is no barrier to entry – anyone can put things on Ebay to make $Y profit for themselves. Often they do and you are forced to lower your profit margins until it’s no longer worth it.)
These restrictions make earning alternative income really difficult. This is a large reason why my alternative income consists of three things… money made from investments, money from real estate, and money from online ventures (such as this blog). The first two are limited because they require you to have money to start with. The last requires a lot of sweat equity with essentially low pay before it starts to pay a decently hourly wage. That’s if it ever pays a decent hourly wage, I’m still waiting on that. I welcome other ideas of alterative income in the comments below.
Great definition Lazy. And I would call your definition of alternative income being the IDEAL state. My definition is broader and I recognize that some are passive and some are active (or require exhaustible resources). As I build up my alternative income streams, the ultimate goal is to move as much of it into the passive category as possible.
Dividend growth investor says
Thanks for your explanations Lazy Man. I realize that somewhat we have different definitions of alternative income. But some of our definitions match closely ( dividend income).
I do agree with you though, that if you sell things on ebay at a loss, you have an alternative outflow. :-)
I like the way you define alternative income here – it’s more than a second job.
I teach at a local university for additional income, and even though my hourly rate (now that I’ve developed all of the cirricula and power points, etc) is about $120, I am not sure if I’d count it as alternative income.
I agree that a second job isn’t alternative income, but merely additional income. By definition, an alternative needs to offer something different. A second job isn’t something different, it is just more of the same.
Walk With Me says
I agree with you. The ideal alternative income is where little to no “maintainence” is required to generate continual income. I like business opportunities that generate residual income, although I’m not very good at sales as I’m only earning chump change each month. I need to start promoting it on my blog or something. I’m doing better with my blog. Gotta start small somewhere. =)
When I have personal discussions on this subject with people, I find that most people are truly just lazy (Lazier than LazyMan, jk)!
It takes less than 100 bucks to start a website and couple hours of your time. NO Excuses!
@Walk With Me:
What you’re talking about is referred to as passive income – the best source of alternative income.
There is an inherent conflict in your distinction between additional income and alternate income, at least with respect to your inclusion of blog income. In both cases, you are trading time for money. Rental real estate and stock dividends are true, passive income that require very little time input after the intial purchase decision. Perhaps the key concept in your definition is that you control the means of producing income, rather than an employer who could turn the income stream down or off.
To the poster above me: you obviously do NOT have a rental because they take a TON of time. Rental real estate is no walk in the park, and actually takes more time than a lot of “non passive” methods of additional income.
Lazy Man says
@Tom: It’s pretty impossible to not trade time for money at some level. The only exception I’ve found is by trading money for more money (through the use of time) – i.e. dividends.
If you look at the distinctions I made, I said that I wouldn’t want a position paid by the hour unless it is at a very high rate. The thing about blogging is that it’s not paid by the hour. I know some blogs where after a lot of time/work, can work very little and create a sizable income. There is no inherit limit with the money that it can make. Software Engineer on the other hand reaches a limit.
Timothy Horrigan says
Blogs and the like are fun… and it’s a good way to make yourself visible. The way you make money off them is to make ad space available through Google AdSense/AdWords and through other pay per click programs. What I have found with my site, however, is that hardly anyone click through to the ads. In fact hardly anyone clicks through to anything… the typical web surfer finds pages through a search engine looks at the landing page and 98% of the time looks at nothing else.
Dough Roller says
Lazy Man, I think you sum up alternative income well. I too have stock market investments, rental properties and of course a blog. The stock market takes almost not time, rental properties a fair amount of time, and the blog ALL my time. But the alternative income is nice; it all goes to the bottom line.
I like your definition, but I understand why other people use different definitions as well. I especially agree with Dough Roller’s statement – my blog takes up a very large portion of my time! But I enjoy it, and I make money from it. I consider it alternative income because it is not from my day job.
Passive vs. active income… that is another issue entirely! :)
Writer's Coin says
I’ve been trying to get my alternative income to go up for a while now without any luck. Then last week I noticed my Adsense finally notched some nice gains. Then I referred a couple of people on ING, I saw Amazon finally moved up from $0, and then I got a check in the mail for the freelance job I’m doing. And it was so great and rewarding (even though it was a total of less than $100), I feel like I’m finally on the right track! I finally have enough to track and see how it grows from month to month.
I’ve debunked about 10 of those alternative income ideas in my blog posts and in my downloadable seminars.
I don’t confuse my readers between ads and content and I use multimedia for a reason.
Lazy Man says
I missed you Dave.
I don’t use multimedia because I can’t quickly skim it to find if there’s anything interesting in it.
Profitable Small Business says
When you say real estate and then passive… are saying passive equity? We don’t include rentals as passive I hope. Real estate has been a great investment. But will it continue?
Think about this… if i gave you 500k, and you bought 5 houses for 100k ea. Then rented them out and each cash flowed 600 per month, you would theoretically have 3k per month right?
Ok. Say I gave you 5k and asked you to put my idea, which was information that would save someone at least 400$ (time)off a learning curve or litterally save the 400 bucks. I asked you to formatt it so I could sell it. If i sold two per day anywhere in the free and unfree world at a profit or cost really of 50 bucks. I would have 3 k per month.
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Crude Oil Trader says
Online work [blogging,etc] may seem to be passive as it takes no investment. But it takes a lot of work. You will not be successful without interacting with your community 2-4 hours a day. It’s work. It may not be digging ditches, but it is work.
As always, great post!