Saturday, August 26, 2006

Making Extra Money - Part One: Get a PayPal Account

This is the first in a series geared toward making extra money. Some of these ideas are long term plans to make some extra cash. Other ideas are quick one-time shots at making some extra money. In any event, we have to start somewhere. In this article, I will discuss the reasons for setting up a PayPal account.

PayPal is the most popular online system for making transactions. I used my PayPal account extensively. I use it to collect fees from auctions on eBay, accept payment for mystery shopping, and withdrawl funds from various online programs that you can use to get paid to perform tasks.

PayPal was purchased by eBay a few years back. It has been tightly integrated into eBay to the extent that it is easier to buy and sell using eBay than any other method.

When I evaluate a program that can make money for me, I first check to see if it pays via PayPal. Payment transactions with PayPal are immediate. Also, I have a PayPal debit card that allows me to use the funds. This works out well for shipping items, as I receive payment before I ship, and I then use my PayPal debit card to pay for the shipping costs.

So, sign up for a PayPal account, link it to a savings account, and then order your debit card. It will take a week or two for the card to arrive.

Thursday, August 24, 2006

Cost of Living Advantages

On Free Money Finance, FMF is discussing the advantages of moving to a city with a lower cost of living. The idea is simple, move to a location that costs much less, but try to keep your salary from decreasing proportionately. My idea is the reverse: move, or just work, in a higher cost of living location, temporarily, and try get your salary to increase more than proportionately.

I live in one of the top 20 largest cities in the country, but the cost of living is very low. For the first time (I don't know why I never thought about it before), I checked the job market outside of my metro area. In this case, I checked New York City. In this case, I found a job similar to mine that paid twice as much (and I am not on the low end of the scale for my location). In New York City, my pay would need to be a little bit more than what that job offered to cover the cost of living increase. So, this is not ideal. Further, I have argued against moving with my wife for some time, and this would be me supported the worst possible situation for my family. If I was single, this could make since because I could reduce my costs drastically just to get by, and then it would work out. If I were able to save the same percentage of my income that I save now, it would be double, in a nominal since. Then, when I had enough of it, I could move back and have twice the money saved than I would have.

So, New York City doesn't look like it would work out. However, being in the Midwest, there is the third largest city in the country: Chicago. Chicago is only two and half hours away. I have known people (and I thought they were crazy) who travelled two and a half hours to work out where I live, this would be about the same thing. Gas prices are outrageous, though, so I might take the fuel costs and apply them to renting a room somewhere, and then just save the wear-n-tear on my vehicle. I could come home on the weekends, and the family could stay with me during the summer. Heck, maybe I could even telecommute a few weeks each year, in addition to vacations, and have more time at home than I expect.

You can use Sperling's Best Places to figure it out for yourself. At a round number, like $50K, someone in my area would need to make over $69K to have the equivalent salary. As a side note, I don't make $50K (and I will not say it is higher or lower... you can speculate). The percentage increase is what is important, and it is 38.6% higher in Chicago to be equivalent to my current location. So, now I will head over to to see if I can find a job similar to mine that pays 38.6% or more than my current job.

Well, what do you know? I found a job that certainly had to potential to much more than a 38.6% increase. As a matter of fact, it could be up to a 72% increase! And the skillset is nearly identical to what I do in my current position... and the title is very similar, as well.

While I am not anywhere near ready to leave my current job, it is certainly something to consider when that time comes. With Chicago being so close, I could very nearly maintain my current cost of living. Further, if I could turn it into a Independent Contractor style position, I could write off all of the increased costs associated with traveling on my taxes.

Wednesday, August 23, 2006

Reaching Retirement: Pulling Partial Benefits or Waiting for Full Benefits

I have been itching to write about this very specific topic for time. As an early post, it may seem ambitious, but I have done the calculations and I am here to tell you this: start pulling your Social Security benefits as soon as possible. However, I have one caveat: invest it.

Since this blog is very early in its life, I must qualify my position on Social Security. It is:

  • Unconstitutional
  • Unsolvent
  • Force
  • a Lie (it is not guaranteed: see Fleming v. Nestor)
  • Sucking the Financial Livelyhood from Younger Generations
  • ...fill in the blank

That's right, I hate it; plain and simple. It goes against personal responsibility; it provides a false sense of security; it provides horrible returns; and what's worse, it is not guaranteed like the government tells you. I think personal accounts are a step in the right direction, but So-so Security really just needs to go away.

Now that we have that out of the way, I can give a brief overview of the different choices required when receiving Social Security benefits. Afterwards, I will give you the basic calculations that prove my point, which is, you should certainly begin receiving your benefits as soon as possible.

Regardless of whatever Social Security was supposed to be, or where it should go, it is now considered a safety net for retirement. When you have paid into Social Security for ten years, you begin receiving annual statements that explain what benefits you may receive. Along those lines, you have two ages that you can begin receiving benefits (unless you become disabled or die). There is an age that you can receive full benefits that starts at 65, but is stepped up based on the year of your birth. You can determine the age at which you can receive full benefits on your own. I am among the last tier that has to wait until the age of 67 to receive benefits. In the coming years, there may be more tiers. However, at the age of 62, you can receive reduced benefits. The reduction is based on the same tiers for full retirement benefits. The idea behind the reduced benefits is that you can receive these lower benefits, but it is probable (based on life-expectation) that you will be paid the same amount of benefits over your lifetime. However, this entire guide is really for those who are approaching that time in the very near future.

Now, I will give you a very simple and conservative set of calculations that will prove to you that you should indeed receive your benefits sooner, rather than later. Given that we are looking for those who will be 62 soon, we need to get the data from the tier for birth years 1943-1954. Full retirement age for these people is 66 and partial benefits will be reduced by 25%. What this means is that for every $100 in benefits you would receive at full retirement age, you will only receive $75 in benefits at partial retirement age. So, we have to make up for $25 for each block. For simplicities sake, we will assume that the full retirement benefit will be $100 per month, and the reduced benefit will be $75 per month. Regardless of the actual benefits, this will apply to your situation as long as the returns are the same.

This plan assumes that you start receiving partial benefits at the age of 62 and invest them getting a very conservative 8% return. What we will do is build an savings schedule. We have four years to meet the goal. If we meet the goal before four years, then you get that as early retirement! The goal is to replace the $25 reduction in benefits.

You can build savings/amortization schedules yourself using time-value software. Let's see the results:

On the 45th month, the interest paid on this money exceeds the $25 reduction. You have two choices, now. You can retire three months sooner with full benefits, or you can wait three more months and get more than full benefits.

Remember, this is based on an 8% return, which is highly conservative, but still not guaranteed. If you choose to do this, it is your own responsibility. I am not responsible for your outcome. That being said, you might exceed that 8% return, easily.

To me, this just proves how ridiculous Social Security really is. Use this to your advantage, because Social Security will be in a deficit situation in about ten years. This may mean a reduction in benefits or outrageous tax increases.


Welcome to Rational Cents. The purpose of this weblog is simple: I like to do things for myself, and by doing so, I provide something that is to the liking of some other individuals. This is essentially the "Hidden Hand" theory. If you haven't guessed it yet, I am pro-capitalism and pro-liberty. What can I say, I am an American, and I believe that because of having free markets we developed the largest economy that has provided for the most people.

This blog will discuss fiscal matters, mostly of a personal nature. So, you could classify this as a personal finance blogs. By most accounts, I would say this will be accurate. However, it may get somewhat political... but I will be as reserved as possible.