Easy Simple Side Money

I hope you all are having a safe and fun Independence Day!  It’s a good time to talk about financial independence, which is the main reason why this site exists.

Financial independence probably means different things to different people but at the core I think it boils down to being able to make decisions independent of financial concerns.  To me it means being able to pursue your life goals without being constrained by money.

I think that being able to control your source(s) of income is an important step to becoming financially independent.  My thinking behind this is that if you can generate income independent of an employer then you have more freedom in terms of where you work, when you work, what specific work you do, who you work with, how long you work, etc.

Of course, finding ways to generate money independent of an employer takes time and most people can’t just jump into it full time because we all have bills to pay and mouths to feed.  But we can start something small in our free time, what Robert Pagliarini calls “Your Other 8 Hours“.

Side Business Examples

I have a former co-worker who’s found something he can do in his time after work that pays his mortgage each month.  He still works full time but he’s on the road to either leaving his job or his wife leaving hers.  I put together a video case study a while back for our newsletter subscribers that walks you through what he does to make extra money each month.

I’m going to be sending out more case studies like this in the future, if you’d like to get them you can get the free newsletter here.  There are things I’d do differently about the first video  to make it better but I think it’s still a pretty useful case study.

You can read how my friend pays his mortgage each month by selling Legos and get some ideas on how you can start your own side business.  Happy financial independence day!

This is the second of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the third chapter, finishing on page 51. The next entry, covering the fourth chapter, will appear on Wednesday.

Dave Ramsey is probably the loudest proponent out there of the “debt is bad” mantra and he makes the case for it loud and clear in this chapter. In his eyes, outside of a home mortgage (and that one should be paid off ASAP), all debt is bad.

I agree completely. The only problem comes in when this mantra is taken too far and overlooks the benefits of establishing a positive credit history. The positives of being debt free heavily outweigh the negatives of being heavily in debt, but being debt free doesn’t mean you should sacrifice a good credit history along the way. Let’s talk about this whole picture.

Not Using Debt Is Ridiculous?
The usage of debt for major purchases is definitely ingrained in the American psyche. At virtually every retailer you visit, there’s an offer to sign up for a credit card or finance the purchase you’re about to make. It seems so natural that many people assume it is natural. On page 19, Ramsey mentions this phenomenon:

[I]n the last several years, I have found that a major barrier to winning is our view of debt. Most people who have made the decision to stop borrowing money have experienced something weird: ridicule. Friends and family who are disciples of the myth that debt is good have ridiculed those on the path to freedom.

Given that financing usually means paying substantially more for the item over the long run, anyone who chides you for paying cash is actually chiding you for paying less - ludicrous, in other words.

My big issue here is how to deal with people who make comments like this. Whenever I’ve faced situations like this, I’ve found that explaining the truth doesn’t work - I’m usually met with a vacant, wide-eyed look that clearly indicates that the other person has no idea what I’m talking about.

Instead, my approach is to simply smile, nod, and do my own thing. Over the long run, my bank account will prove me right in paying cash as often as possible.

Risky Debt
On page 21, Ramsey argues that simply possessing debt is a risk, let alone paying it late:

My contention is that debt brings on enough risk to offset any advantage that could be gained through leverage of debt. Given time, a lifetime, risk will destroy the perceived returns purported by the mythsayers.

This is one of the most powerful arguments against debt, in my opinion. Most of the time, when people make the case for taking on debt, they make assumptions that involve a perfect, trouble-free life.

Sure, it’s easy to make a $400 a month payment given your current life situation, but what happens if you lose your job tomorrow? Or in a year? What if you suffer a major illness? What if your marriage falls apart? What if you get married? What if an unexpected child arrives?

Forecasting payments into the future can be smooth but the realities of our lives are quite bumpy, indeed. Lives don’t follow the smooth lines and curves of a debt repayment schedule, and saddling our lives with such lines and curves might enable us to get a car a bit earlier, but it also adds a lot of stress and worry if our life zigs when we expect it to zag.

Respect your complex, beautiful life and avoid unnecessary debt.

Relatives Shouldn’t Be Lenders
One of my biggest personal standards for money is to not lend money to family. If I decide to give someone a helping hand, it’ll be in the form of a gift, not a loan. Ramsey makes the case on page 26:

Hundreds of times I’ve seen relationships strained and sometimes destroyed. We all have, but we continue to believe the myth that a loan to a loved one is a blessing. It isn’t; it is a curse. Don’t put that burden on any relationship you care about.

Do you love your mortgage lender? How about your credit card company - do you look forward to getting together with them at Christmastime? Ever felt like inviting your car salesman to your New Years’ party?

The reason is that the lending/borrowing relationship doesn’t mix well with great interpersonal relations. If you borrow money from someone, you suddenly have a financial obligation to that person. You have to pay them back or incur some sort of retribution.

Retribution? That’s not exactly a concept that mixes well with close relationships and family events. Nor should it. No one wants to spend time with a person that’s demanding money from them. Thus, after a loan between friends or loved ones, it’s natural to expect that relationship to decay in some way.

No relationship is worth that decay. If you’ve decided that you really must help someone out, make that help into a gift, not a loan.

Look Good or Be Good?
On page 33, Dave digs into the difference between putting up appearances and actually having something to back it up:

Having been a millionaire and gone broke, I dug my way out by making a decision about looking good versus being good. Looking good is when your broke friends are impressed by what you drive, and being good is having more money than they have.

Something has always troubled me about the phrase “fake it ’till you make it.” I can understand it in some situations, where you have to put up a very polished front in order to further your career.

The problem comes when “fake it ’till you make it” becomes a life philosophy. If you find yourself leasing a BMW so that you can “fake it” and put up an appearance of being financially affluent when you’re really not, you’re entering into a trap.

Sure, you might be able to put up an appearance of “making it” with that purchase, but your income will be devoured by that car instead of being able to take advantage of other opportunities. In three years, you’ll have nothing in the bank and a car that just went off lease.

Instead, if you “fake it” a little less, buy a low end car and make it look as nice as you can, you can build up that bankroll, build some security, and eventually purchase that car.

You might be able to “fake it” now, but if you want to “make it” sooner, you’ll tone down on the fakery and keep yourself out of debt.

On Buying a New Car
On page 37, Dave makes a case against buying a new car:

A good used car is as reliable or more reliable than a new car. A new $28,000 car will lose about $17,000 of value in the first four years you own it. That is almost $100 per week in lost value.

I understand where Ramsey is coming from, but it doesn’t take into account several factors.

First, the only cars that depreciate like that were junk to begin with. If you have a car that depreciates 70% in the first four years, that car has a very poor record for long-term reliability. Reliable cars simply do not depreciate that fast.

Second, the first four years are the most worry-free for a car. During that period, they’re under warranty, meaning if something goes wrong, it doesn’t come out of your pocket. Once that warranty ends, you’re on your own. It’s during that warranty period that you can figure out whether the car is actually reliable or it’s not without a cavalcade of big bills.

Third, in a down economy, there are huge incentives to buy new. Sales, rebates, and other offers pop up all over the place, some of them impressive. There are often tax breaks for new car purchases as well, passed by Congress in a short-term effort to boost spending.

I am not saying that buying new is better than buying used. Instead, I am merely saying that it is a mistake to automatically exclude a new purchase, particularly if you can afford it.

Ramsey overstates his case here, though I understand why he does it. A forceful case on behalf of a good principle is a great tactic for convincing people of the principle. I do agree that buying used is often the best deal when buying a car, but to ignore new cars does the buyer a disservice.

Mortgages and Credit Cards
On page 39, Ramsey talks about why you don’t need to build credit to get a mortgage:

You will need to find a mortgage company that does actual underwriting. That means they are professional enough to process the details of your life instead of using only a Beacon score (lending for dummies). You can get a mortgage if you lived right.

Ramsey’s absolutely right here - you don’t need credit to get a mortgage, as long as you have a good housing history and a good record of paying your bills on time. A manual underwriter will dig these things out. An aside: if you’re in this situation, visit your local credit union first. They’re more likely to do manual underwriting.

The problem here is that a mortgage is not the only avenue through which good credit can help you. One’s credit score is used in lots of ways: determining insurance rates, aiding in many job application processes, and so on.

That’s why I think limited use of a credit card is actually a good thing. Leave the card at home most of the time. Only use it for specific purchases that you would otherwise make, like gas or groceries. Then, at the end of the month, pay off the balance in full, which should be trivial since you’re not buying more because of the card.

This accomplishes the big goal of improving your credit score without incurring debt. Having a good credit score improves your hiring chances and makes you eligible for better insurance rates, putting money directly in your pocket. Later, if you do get a home loan, you can simply trash that card if you so with.

If you’re already doing that, you might as well choose a card that helps you in other ways. For example, if you’re buying a card just to buy gas on to help your credit, get the Visa or MasterCard available from your gas station chain of choice (like BP). That way, you’ll get rebates on the gas you buy along the way - another way to save.

The trick is to simply leave the card at home. Don’t use it for any other purchases besides the ones you plan in advance, like gas purchases, and keep it somewhere safe outside of those opportunities.

Do you have any other thoughts on the third chapter of The Total Money Makeover? Please share them in the comments - and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Wednesday, we’ll tackle the fourth chapter - Money Myths: The (Non)Secrets of the Rich.

In April and May, National Public Radio featured a series on inexpensive gourmet dishes entitled “How Low Can You Go?” Although many of the dishes looked quite tasty, most of the dishes weren’t actually all that inexpensive, often narrowly getting below $10 to feed a family of four, and many involved arduous cooking processes. I decided to try out some of these recipes throughout the summer to see how I could take the recipes and reduce them down to a simple and very inexpensive form.

While digging through the submissions, I came across this interesting recipe by Wendy T., who states that she’s “writing a cookbook of economical meals for working people - this is one of my husband’s favorites.” Intriguing. Here’s what Wendy offers up:

1 lb ground beef
1 slice white bread, crumbled
1 tbsp ground coriander
1 tbsp ground cumin
1 small yellow onion, minced
2 cloves garlic, minced
1 tbsp olive oil
1 egg, beaten lightly
1/4 cup flat leaf parsley, minced
1/4 cup mint leaves, julienned
1 cup plain yogurt (preferably whole milk)
salt and black pepper

In a small bowl, mix the yogurt, a large pinch of salt, and the mint. Set aside.

Crumble white bread crumbs over ground beef and parsley in large bowl.

Place a large frying pan over medium low heat. Add the olive oil and sweat the onions and garlic until translucent. Add 3/4 tsp salt and the coriander and cumin, and saute a minute more. Cool a minute and then add to the meat-bread crumb mixture. Add the beaten egg and mix with hands lightly just to combine. Form a test meatball and fry - taste for seasoning and add additional salt if necessary.

Form into meatballs. Fry in batches in the pan on all sides until cooked through. Drain on paper towels if necessary.

Serve the meatballs with the yogurt-mint sauce. Delicious as sandwiches with pita or naan bread.

A few things popped out at me immediately that indicated this recipe would be a lot of work. First, the ground coriander - dried coriander in the store is not the same thing at all. Ground coriander needs to be freshly ground or it loses most of its flavor. Second, the julienned mint leaves - meaning you’re slicing the mint leaves into thin strips - will be significant work as well, and likely the most expensive aspect of the recipe if you don’t have a source of fresh mint.

In order to try out the recipe as is, though, I did both of these.

I also went through the cupboard and the freezer to see what we had on hand. The only ingredients that we didn’t already have in spice jars were the mint leaves ($2), the yogurt ($0.99), the onion ($0.30), and the ground beef ($2.49 for a pound of lean meat), for a total cost of $5.78. We did, of course, use lots of spices and other materials we had on hand.

Here are the ingredients as I used them.

(The horse statue in the picture is a Breyer version of Man o’ War, included at the encouragement of my three year old son.)

I made one major change. Instead of mincing the onions, I coarsely chopped them, because I love the caramelized flavor of onions and felt it would add to the meatballs.

Once the work of prepping the ingredients is done, the recipe itself is pretty easy. First, I made the yogurt-mint sauce by putting a pinch of salt, a cup of yogurt, and the mint leaves in a bowl and mixing them.

I then tossed the onions and garlic into a frying pan along with the olive oil and cooked them over medium heat until they were nicely caramelized - taking on a light brown color roughly the same as caramel. I then added a pinch of salt, the coriander, and the cumin, and cooked it for a minute more.

When that was finished, I let it cool for a bit. While doing that, I added the bread crumbs and the beaten egg to the pound of ground beef and mixed them together with my hands, then I added the onion mixture to the meat and mixed that in. The result was a large ball, ready to be shaped into smaller meatballs.

Making meatballs is easy. Just pinch off a bit of the meat - whatever size you like - and roll that bit around in between your hands until it forms a round ball. If you’re not sure what size to make, just divide the ball into equal halves, divide each of those halves into equal halves (four bits), divide each of those halves into equal halves (eight bits), then divide each of those halves into equal halves (sixteen bits). Each of those sixteen bits will make a nice meatball.

So, I rolled up the balls and tossed them into the frying pan.

Obviously, if you chose to mince the onion, you wouldn’t see the large pieces of onion in the meatballs.

I simply browned these in the pan over medium heat, rolling them around about every minute or so. When they became dark brown - the color of a cooked hamburger, roughly - I cut one in half and checked the insides to make sure it was no longer pink. Here they are, about halfway cooked (with some sides looking finished, others still pink, and yet others in the middle):

I chose to serve the meatballs with the mint sauce on the side, a long grain rice and vegetable medley, some steamed broccoli, and a glass of Wandering Grape 2007 Cabernet Sauvignon Shiraz (a free trade wine). Here’s how it looked on the table:

And there you have it!

Did we like it? This meal was a big hit. The kids were not big fans of the mint sauce, but the meatballs were completely consumed with gusto - no leftovers at all. Both my wife and I liked everything - I wound up drowning the meatballs in the sauce after trying them together.

Our total cost for the main course and the mint sauce (ignoring fractional items we had on hand): $5.78. Our cost per meal: $1.45. Not bad. But we can do better - and we can certainly make it less involved.

Changes I Would Make to Save Cost and Time
First of all, I’d skip the coriander and use more cumin as a substitute. If you don’t have a grinder, smashing the coriander seeds will take forever and it doesn’t contribute substantially to the meal, especially when you can easily substitute a bit of cumin for nearly the same effect.

Second, if I was pinched for time, I’d substitute dried mint for the fresh mint leaves. I’d just add dried mint - probably two tablespoons full - to the yogurt to taste and skip the julienning of the mint leaves.

Third, I’d substitute garlic powder for the minced garlic cloves. Although you miss the caramelization of the cloves, you also save the work of peeling the cloves, cooking the cloves, and smashing the cloves.

Fourth - and I did this in my own version above - I’d skip the fresh parsley and use dried. I used 1/4 cup dried parsley and it was perfect.

These changes modify the recipe a bit, but it also reduces the cost and vastly reduces the time. Here’s the new recipe, as I’d do it:

1 lb ground beef
1 slice white bread, crumbled
2 tbsp ground cumin
1 small yellow onion, chopped
1 tbsp garlic powder
1 tbsp olive oil
1 egg, beaten lightly
1/4 cup dried parsley
1/4 cup dried mint
1 cup plain yogurt (preferably whole milk)
salt and black pepper

In a small bowl, mix the yogurt, a large pinch of salt, and the mint. Set aside.

Crumble white bread crumbs over ground beef and parsley in large bowl.

Place a large frying pan over medium low heat. Add the olive oil and gently cook the onions until caramelized. Add 3/4 tsp salt and the cumin, and saute a minute more. Cool a minute and then add to the meat-bread crumb mixture. Add the beaten egg and mix with hands lightly just to combine. Form into meatballs. Fry in batches in the pan on all sides until cooked through. Drain on paper towels if necessary. Serve the meatballs with the yogurt-mint sauce.