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A Few Hundred on the Side With No Time for Work?

November 19, 2012 by Lazy Man 6 Comments

If you scroll down this website and look at the right column, you’ll see a section of “recent comments.” At any given moment, you’ll see that a vast majority of them are on my articles about multilevel marketing (MLM) scams. Most of the comments from MLM distributors defending what I’ve shown to be pyramid schemes using the FTC guidelines are laughable to the point that there are a few people who subscribe to comments for entertainment value alone.

Rarely are there any comments worthwhile here, but there was one quick sentence from a JeffM on Friday night that was worth digging a little deeper. JeffM, a ViSalus distributor, said:

“If someone needs a few hundred extra on the side of their job and does not have the time for a part-time job, as a finance expert what would you recommend?”

I wouldn’t exactly call myself a finance expert. Even in my niche of finance, personal finance, I still have plenty to learn. Aside from that, there’s a lot going on in that single sentence.

My first thought was that I hope that JeffM realizes that MLM is a part-time job. In fact, in many cases it is another full-time job, one that pays less than minimum wage on average. In previous comments, he had said said that the people who fail are the ones that don’t put in the work. I doubt he’s found a magical time machine that allows him to do all that work in no time. It doesn’t add up. Time and again, I’ve heard how much time MLMs distributors put in. It’s quite common to see them marketing their stuff on social networks. You can see them spending their evenings and weekends at brainwashing training conferences. Finally, you can look at just about any MLM’s income distribution statement and see the average hours worked by distributors… the number is never zero.

From all this, one thing is abundantly clear: If you don’t have time for a part-time job, you don’t have time for MLM. It saddens me that people like JeffM could use this kind of marketing to draw people in so that they can profit off them.

With that MLM myth blown up, let’s look at the more important part… making money.

When you are looking for a few hundred dollars with no time for a part-time job, you are essentially talking about the quest for passive income. There’s a great analysis of whether passive income truly exists from Jonathan of My Money Blog. I suggest that you read that article for full analysis, but I like the conclusion: “I can’t really think of anything truly passive, besides maybe winning the lottery. So I suppose ‘passive’ really just means ‘less work than other stuff’.”

If you were looking for a more complete solution, I suggest that you check out Get Rich Slowly’s Make More Money: How to Supercharge Your Income. It covers such great ideas like how to Maximize Your Salary, Take a Second Job, Become Better Educated, Make Money from Your Hobbies, Start a Side Business, Start a Website (or a Blog), Become a Landlord, Sell Your Stuff, and Get Creative. There are several things in here that don’t answer what JeffM is looking for, but considering that his question is unrealistic, it makes sense to go with the best realistic ideas. The idea of making money from your hobbies is a great one and is probably the best workable solution to JeffM’s question.

Finally, I would suggest saving time and learning how to be more productive. That way you create the extra time to earn extra money. Books like Getting Things Done and Never Check E-Mail In the Morning are great. In addition to those, there’s my list of ways to save money… recognizing that a dollar saved is a dollar earned.

If you decide that starting a business is right for you I’ve got a few tips here, but I particularly liked Millionaire Fast Lane by MJ DeMarco as a great book on entrepreneurism.

The short, common sense answer is to JeffM’s question is that there is no simple answer on how to gain a few hundred extra without putting in some time. In order to make money others have to be willing to give you theirs. They typically don’t do that unless you provide them with value. Providing people with value takes your time… and there’s nothing wrong with that. A better question for JeffM would be, “What value does MLM provide people?” I’ve seen inanimate objects like a shelf at Wal-Mart or a virtual space like Amazon sell products and they do it much better than MLM.

Filed Under: Entrepreneurism Tagged With: income, making money, multi-level marketing

How many people make more than $250,000 per year?

August 26, 2011 by Lazy Man 41 Comments

[The following is an article from Kosmo at The Soap Boxers. The site has a variety of content covering many topics. He has previously analyzed tax return data leading to articles such as How Many People Don’t Pay Taxes and What Percent of Taxes are Paid by the Rich.]

The short answer: based on information from the IRS, fewer than 3% of tax returns (3.924 million returns out of 140+ million total returns) claimed more than $200,000 in adjusted gross income (AGI) in tax year 2009 (more current data is not available). By definition, the number making more than $250,000 must be less than 3% (since some will fall in the range between $200,000 and $250,000.)

The long answer is pretty long – more than a thousand words long, judging by the length of this article. While I am not a CPA , or even a practicing accountant, I do have a degree in accounting and thoroughly enjoyed my income tax courses in college (yep, glutton for punishment). I’ll make an effort not to get too bogged down in technical terms in this article.

Why the question?
For whatever reason, $250,000 has become a benchmark amount. During the 2008 presidential campaign, President Obama had a tax plan that would raise taxes on couples making more than $250,000. A bit later, the US House of Representatives passed a bill that would impose a 90% tax for recipients of bonuses paid by companies that received bailout funds. This tax would be imposed on people making more than $250,000.

Why the source?
The IRS is in the business of determining how much money people make and have a vested interest in the accuracy of their data. I have a synopsis of their data in the table at the end of the post, and have also linked directly to their spreadsheet.

Definition of terms
Household – I am defining a household as any entity that filed a tax return. Note that people who do not have a tax liability are not required to file a tax return. These people tend to be on the low end of the income spectrum.

Income – This is definitely the tricky term. There are a few different things we could measure.

  • Total income (line 22 of form 1040). Essentially, this is the result of adding up the money that comes in from all sources during the year – with the exclusion of tax-exempt interest income and the tax-exempt portion of some retirement benefits. This does include capital gains and business income (or loss). This is the largest of the three amounts I will describe.
  • Adjusted gross income (AGI) (line 37 of form 1040). This is total income with a few deductions. For the typical person, the deductions would be for student loan interest as well as contributions to retirement accounts and health savings accounts. This amount will be smaller than total income, and this is what is used in the IRS statistics that I have used as my source.
  • Taxable income (line 43 of form 1040). This is determined by taking the AGI, subtracting either the standard or itemized deduction, and then also subtracting the amount for exemptions (for tax year 2008, you would multiply $3500 X the number of exemptions – basically, the number of people in your household – and subtract this amount from the AGI.) Taxable income is used to determine your marginal tax rate. (Note: the marginal rate is the rate that is applied to the top slice of your income – it is not applied to your entire income. Income is taxed on a stair step basis, with each chunk of income taxed at a higher rate). In the case of Obama’s tax plan, he would be referring to $250,000 in taxable income, not total income or AGI.

You can quibble with the numbers a bit. You may claim that some people cheat on their taxes, so that the number of people who SHOULD be claiming an AGI of $250,000 is higher than the amount that actually do. You may claim that full-time students or single people should not be counted as households (of course, that argument could be countered by the argument that there are valid households that are not filing tax returns). However, it seems unlikely that you’re going to move the needle very much. The fact of the matter is that very few households earn more than $250,000.

Other stats:
66% of returns had an AGI of less than $50,000. 88% of returns had an AGI of less than $100,000.

0.08% of returns – a total of just 350,000 filers out of a total of 140 million – had an AGI of $1,000,000 of more. This is down from 0.26% in 2006.

8,274 returns – roughly half of 1/100 of one percent – had an AGI of more than $10,000,000. This is down from 15,196 in 2006. Why the sharp decline? A decline in the stock market is a likely explanation.

The average (mean) number of exemptions per return was 2.02. The number of exemptions in the “less than $5000 AGI” category is 1.01 (many are students who are claimed on their parents’ returns and thus cannot take themselves as an exemption) and peaks at 3.05 in the $50,000 – $100,000 range. This makes quite a bit of sense. The lower ranges are often going to have a higher concentration of single people, since those people have half the income of a dual-income married couple in a similar career.

"But nearly everyone I know makes $X. These numbers are wrong.”
I have had people tell me that these numbers are too low, and that $250,000 is not a lot of money in their location (big cities). It might be true – and probably is – that there is a higher concentration of the higher income jobs in the bigger cities. However, the vast majority of the households in these areas are still going to be below $250,000.

I also think that people tend to look at their own situation and assume that it is typical. If you are college educated, you are actually not typical. Only 30 percent of adult Americans have a degree. Likewise, if you have a household income of $100,000, you are not typical.

It’s very easy to fall into this trap, though. Our friends have tendency to have a income level that is similar to our own – even if we don’t make a conscious effort to ensure this. Why? Think of where your base of friends comes from:

Work – If these people have similar jobs, then it’s quite reasonable that their income will be similar to yours.

College friends – Do they have similar majors, and thus similar occupations?

Neighbors – Your neighbors can all afford homes in your neighborhood, which essentially places a floor on their income level.

Parents of your kids’ friends – School districts in many cities are not particularly heterogeneous. This is because certain sections of town have neighborhoods containing homes in a particular price range. If you put an elementary school in the midst of these neighborhoods, the children are going to come from families with similar economic backgrounds.

The Numbers

Table based on data from IRS Website (Excel file)

AGIReturns%cum %% aboveex/ret
Under 500012,959,5609.22%9.22%90.78%1.01
$5,000 – $10,00012,220,3358.70%17.92%82.08%1.31
$10,000 – $15,00012,444,5128.86%26.78%73.22%1.76
$15,000 – $20,00011,400,2288.11%34.89%65.11%1.85
$20,000 – $25,00010,033,8877.14%42.04%57.96%2.00
$25,000 – $30,0008,662,3926.17%48.20%51.80%2.02
$30,000 – $35,0007,679,4585.47%53.67%46.33%2.01
$35,000 – $40,0006,692,1894.76%58.43%41.57%2.06
$40,000 – $45,0005,828,8594.15%62.58%37.42%2.06
$45,000 – $50,0004,967,5533.54%66.12%33.88%2.09
$50,000 – $55,0004,547,8613.24%69.35%30.65%2.17
$55,000 – $60,0004,118,1002.93%72.28%27.72%2.23
$60,000 – $75,00010,028,9337.14%79.42%20.58%2.40
$75,000 – $100,00011,463,7258.16%87.58%12.42%2.61
$100,000 – $200,00013,522,0489.62%97.21%2.79%2.84
$200,000 – $500,0003,195,0392.27%99.48%0.52%2.96
$500,000 – $1,000,000492,5680.35%99.83%0.17%3.05
$1,000,000 – $1,500,000108,0960.08%99.91%0.09%2.97
$1,500,000 – $2,000,00044,2730.03%99.94%0.06%2.97
$2,000,000 – $5,000,00061,9180.04%99.98%0.02%2.95
$5,000,000 – $10,000,00014,3220.01%99.99%0.01%2.92
$10,000,000 or more8,2740.01%100.00%0.00%2.91

Legend
Column 1 – Range of adjusted gross income
Column 2 – Number of returns that fall into this range
Column 3 – Percentage of total returns
Column 4 – Cumulative percentage (percent of return that have this AGI or lower)
Column 5 – Percentage of returns that are above this range
Column 6 – Number of exemptions per return

Columns 1 and 2 are taken directly from the IRS spreadsheet. The other columns are calculations based on information from the IRS spreadsheet.

For more great articles from Kosmo visit The Soap Boxers.

Filed Under: Tax Tagged With: income, making money

The Best Money Blog You Aren’t Reading

August 1, 2011 by Lazy Man 23 Comments

I’m even Lazier than usual today. Rather than write some article that blows, I’m going to introduce you to a site that I know you’ll love: The Smart Passive Income Blog. Why will you love it? Because it’s what I wanted Lazy Man and Money to be when I started it. Somewhere along the line, I got lost and never got there.

Pat Flynn (who doesn’t know I’m writing this) writes about how he makes passive income. Each month, he gives the details on how much he made (just as I do). He also breaks down the sources of his income (something I don’t do). The majority of his passive income comes from an eBook he sells at In The Leed.com. I don’t know what the LEED is, but that’s really not the point. He’s created a product and does well with it.

Smart Passive Income has become daily reading for me. Each article is, well, smart. There are a lot of sites that give out general information – stuff like “Save Money, Spend Less than You Earn, etc…” Smart Passive Income isn’t one of those sites. It’s got specific, actionable information. You read about Pat’s experiment making money with eHow. You read about the process of how he started his own company. He’s got a great site design and does something that I haven’t been willing to do – put his name and face out there.

I could continue gushing over his site, but I should mention that it’s not perfect. I noticed a couple of months ago Pat put up a picture of himself in an LaDainian Tomlinson shirt. When you bleed Patriot Nation blood as I do, that’s simply inexcusable ;-).

Filed Under: Great Sites Tagged With: ebook, making money, passive income

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