Passive Income Stream or Debt Elimination Strategy?

by Scott on June 30, 2008

If you could find a way to pay $1.99 for gas, would you tell others about it? If you knew that you could buy your favorite Starbuck’s drink for half the price, would you get excited? What about finding $50 on the street? Would that put a smile on your face the rest of the day? I love helping friends get creative with finances and find other ways to tackle problems such as gas prices. Many of my friends wish that they had my Toyota Prius, as gas prices here in the Bay Area are touching $4.55 a gallon. They actually don’t need a Prius, they can keep the same car or SUV that they currently own. How? Change the way they look at the cost of an item. Sure gas is $4.55, but the Starbuck’s coffee they drink cost $4.05 or a Pespsi from 7-11 cost $1.50. Get creative and look at debt elimination as a source of passive income. How can it be passive? You will continue to pay yourself each day, week, month, and forever. Each time you make a smart purchase or cut out fat, you will create passive income for your family.

Here’s a quick idea I discussed with a friend this weekend. He told me he can’t live without his cell phone for work and needs to come up with some extra money for gas and food. Well, what about his home phone? Yeah, but that’s only $30-40 a month he says. Well, since he needs gas and food, he should consider canceling the home phone. Also, think of that home phone as a passive investment that would make you $480 a month? If you could live with a cell phone as your primary phone, it would be similar to earning $480 a year in passive income.

Want another. Same friend has cable. I know, we all love it and have to have it. He didn’t think the home phone would save him enough money. His phone, internet, and tv is over $100 a month. What about cable and internet? He could use free internet. What? Come on, those darn banner ads? He doesn’t use the internet 24/7 and could also use his cell phone to check email. Cable? That’s going to be a hard one. He could buy rabbit ears and watch standard tv, or go without it. He needs gas and food for his family, saving or earning $100 extra a month is worth it. That’s $1,200 a year.

So many times, we think of having to earn more money. Sometimes we just need to cut back and think smarter about our expenses. Do we have to have a home phone or cable tv? What about just cutting out premium channels or long distance from your home phone? If you needed to earn another $50-100 a month to pay for gas and food, what would you cut out of your budget? If you wanted to create another passive investment stream for your family, what would you suggest you cut from your expenses? Would you consider these ideas a passive income stream or debt elimination strategy?

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PFI Weekly Updates - July 8 (2008) | Passive Family Income
July 8, 2008 at 4:32 am

{ 7 comments… read them below or add one }

1 Saph @ Walk With Me July 1, 2008 at 8:57 am

It’s all about cutting back on the extras, the non-necessities. We ourselves never had cable and don’t think we will anytime in the near future. We usually watch movies on DVD. We already watch too much TV anyway. And now, there are so many places to watch movies and TV episodes online.

2 lulugal11 July 1, 2008 at 10:54 am

Tell your friend he can look for gas rewards cards that will give him cash back when he buys gas…so it is like getting a discount on the gas.

He can also check out the drawing for a free gas card on my blog. :-)

3 The Baglady July 1, 2008 at 5:47 pm

Great post. A penny saved is really better than a penny earned.

4 Connie July 1, 2008 at 6:41 pm

Yes saving and cutting back on expenses is something we all need to be doing now. We’re back to using coupons and shopping for sales. We also stopped renting movies and video games. We can get movies for free from our Public Library. Our daughter is learning to make do with the games she has and find other things to keep her happy & busy like playing with her toys and playing outside.

5 passivefamilyincome July 2, 2008 at 9:49 am

Good perspective. I guess I have a hard time considering cutting back on expenses as passive income. I think of it as an asset that I can use to generate more passive income. Basically the same thing – I guess?

6 Scott July 8, 2008 at 2:20 pm

@saph: I agree, cutting back on extras can really help improve the monthly paycheck and make your budget stretch further. We have friends that don’t miss cable and borrow dvd’s to watch occasionally.

@lulugal Thanks for the gas card recommendation. My buddy is not allowed to use credit cards as his wife has but a limit on his spending. But, if the card was only used for gas, that would help them save a little more. I wonder if they have a prepaid gas card that would give you some additional savings.

7 Scott July 8, 2008 at 2:26 pm

@baglady Penny saved, penny earned would make my grandmother smile. She always said that :)

@Connie Yes, the public library is an amazing resource for families. They have more than just books. Cds, dvds, internet access, and all the magazines in the world to read. Great tip!

@passive family income You are correct. Passive Income is derived from an asset, although some friends of mine are having a tough time meeting immediate expenses. I try and explain that cutting expenses can be similar to earning more money for them.

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