financial planner Stephen Zelcer

Government Shutdown & Income Diversification

government shutdown and what to do

Well, the government has shutdown.  Many of us are now in non-pay status, which can impact our accrual of leave hours, our future Social Security benefits, and – if the shutdown lasts REALLY long – can affect our Federal Pensions.

But the loss or reduction of future benefits is likely overshadowed by the immediate loss of pay.  For many, their Federal job is their only source of income!

It is for this reason that I write this article.  We all have heard the old adage “don’t put all your eggs in one basket.”  This concept is applied in any area that carries risk of loss.  In finance we apply this principle in multiple areas – we just call it “diversification.”  We diversify our investments, we diversify our exposure to taxation (ie. Roth vs. Traditional), we even diversify our survivor protection (ie. survivor pension vs. life insurance).   However, it is rare that people diversify their income sources.

When it comes to people’s sources of income, many put all their eggs in one basket.  And days like today get us to rethink our stance.

Here are a few common ways to add additional sources of income to your income portfolio.

  1. Interest or Dividend paying vehicles:  You may already own stocks or bonds that pay dividends or interest.  But many simply re-invest that money.  Granted re-investing is generally a wise thing to do, however, it may be worthwhile to receive your dividends and interest during times when your main source of income is suffering.  You can easily elect to have your dividends or interest checks mailed or direct deposited to you.
  2. Rental Property:  Owning a rental property doesn’t always involve expensive properties with large down-payments.  You can buy a property with 20%-35% down payment, and you can write off the mortgage interest and depreciation and a bunch of other expenses to reduce the taxation of your rental income.  Nor does managing a property have to be a time consuming job.  You can always higher a property manager, or if the property is small enough, you can manage it yourself.  Also, consider investing with a partner and –get this- “diversifying” the management and the financial investment!
  3. Secondary Business:  Employing one’s self is also tremendously rewarding.  Having a business that you build in off-hours can really blossom over the years.  Starting small, developing a product or service and a client base is very realistic over time.  Whether you’re good at home improvements or auto repairs, web development or writing blogs or books, business consultation or some form of therapy, etc.  Everyone has a special skill and interest which they can monetize.
  4. Getting rid of “Stuff”:  Everyone has “stuff.”  If you have free time, use it to get rid of accumulations of unwanted/unneeded things.  I’m not just talking about a yard sale to clear some space in your home.   You may have accumulated “points” or “miles” on your credit card.  Many people let those “points” or “miles” expire.  Did you know there are secondary markets which will pay you for those “points” or “miles?”  This is very new to me, but there are people who have been doing this for over a decade.  Some people make their entire livelihood by buying and/or selling “points” or “miles.”  I personally know someone who has a full time job during the day, and he sells miles at night.   He tells me that he makes over $15k a year doing it and it takes him just a couple hours a month!

The point of all this is that a furlough or shutdown may be a blessing in disguise if it taught a person to diversify his/her income sources and unearth some money-making talents.

Wishing you and yours all the best,

Stephen Zelcer

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