The financial situation all over the world doesn’t seem to bright, but that doesn’t kill the optimism of the personal finance bloggers. Maybe because your own wealth depends more on yourself than on anything else. Maybe because we just like to believe so.

Tricia @ Blogging Away Debt has published some interesting thoughts about the other costs of making homemade food. With the everyday increasing energy prices will it become cheaper to buy ready food?

On the contrary Jim @ Blueprint For Financial Prosperity has discovered that home grown vegetables taste better.

Few weeks ago Patrick @ Cash Money Life asked an interesting question: Is Frugality a Way of Life, a Game, or a Necessity?

Trent @ The Simple Dollar reminds that some alternative income methods don’t make sense. That’s just one of the many excellent articles Trent had on his blog this month.

The Silicon Valley Blogger has a suggestion where to put your money when the stock market tanks.

Nick @ Punny Money didn’t answer my interview request, but that’s not making him less interesting. He now suggests to build a giant anti hurricane wall.

David @ MoneyNing has discovered that people end up paying more when better options are available. It’s good to think about this.

Since the winter is coming David @ My Two Dollars is just on time with his 10 ways to save money on heating bills.

Are you seeing your full income potential? Pinyo @ Moolanomy can help you do it.

Ben @ Money Smart Life muses over quitting your job and becoming a better employee.

Do you want a six figure job? Free Money Finance has reviewed some options.

The Lazy Man has three ridiculous and stupid ideas that save you money. The ideas are really crazy, but some may like them.

Jeremy @ Generation X Finance has few insights about investing. Yes, I know you know them, but are you doing something about that?

Steve Pavlina has an inspiring post about raising your financial vibration. Requires careful reading and open mind like most of his articles.

Here is also an interesting article on avoiding paying interest on your credit cards.

And finally, check out Francois‘ post about the butterfly effect. It’s good to think about how the small things can make a big change.

Why do most personal finance bloggers write about saving small amounts of money?

Maybe because they have nothing else to say? Not exactly. Most people probably talk about saving few bucks in the grocery store because that’s all they do for improving their finance. It doesn’t take much effort – buy brown rice instead of white, buy from Costco, carpool to save gas, buy used stuff and save $5. Tremendous.

Photo by Daniel Y. Go at Flickr

Easy Solutions Don’t Work

When something is too easy, the effect of it is too small. That’s a physical law, a law in business, in life and everything. If you want to build muscles, lifting 0.5kg weights is not going to have any effect because it’s too easy. If you want to make money online, getting a ready template and putting up some affiliate products will not work. It’s too easy and everyone can do it (and so did everyone which resulted in millions of affiliate sites competing for the same customer). It’s much easier to just scatter some seeds on the ground rather than tilling it first, but the first method gives much less crops than the second, if any at all.

The “hard pays more” rule is one of the most important rules when it comes about money. Hard work pays more, because less people are willing to do it.

Then why do people expect to fix their finances by doing the easiest things? Do you really believe saving $0.5 today will have a big impact on your wealth tomorrow?

The Dirt That Works Best

If you want to be wealthy, you’d better get your hands dirty. Saving is easier than earning more, that’s why most people prefer it. Saving on small things is easier than saving big and regularly that’s why most people prefer to save few bucks on grocery shopping.

But the truth is that the harder things work better. Earning more is in general more efficient than saving because it is not limited to some amount. You could make $100 more, but you could also make $100,000. While if your salary is $2,000, you can save $2,000 per month at your best.

Working smarter works better than working harder, because finding the way to work smarter is harder than just working hard the way you already know. That’s why it’s easier to make $100 more this month than $100,000 more – you can just work a hour more per day for example and achieve it. But the effect of making extra $100,000 is so much bigger.

Saving can also be efficient, but if done the stiff way. Saving regularly, say $250 per month, can help you a lot if you add cumulative and compounding effect. Of course, committing yourself to save $250 per month is a stiff task. It’s so much easier to buy a piece of brown rice today and think you’ve done a big deal.

Saving also works if you save a big amount once. If you are buying a new car and decide on a model/make that is $5,000 cheaper you are doing a big push to your finance. Just imagine how this $5k can turn into $50k for few years if invested wisely (use the calculator). But it’s too hard to change your cabrio for a Mini Cooper, isn’t it?

There is money in dirt they say. It’s ok to make small savings but don’t fool yourself that you are making big progress. Get your brain working and your hands dirty and you may start seeing how your finances improve. And don’t forget the same principle works for almost every area of life.

It’s hard to get people talking in the August, that’s why I haven’t published any blitz interviews in the last 1-2 months. But now the silly season is over and I am back with a nice one. This time my guest is a girl again – Tricia from Blogging Away Debt. Sweet, I like girls because they talk more *grin*.

Her blog is focused mostly on avoiding debt, saving and frugality. Let’s hear what she has to say:

SI: What’s working better for you in reducing your debt – saving money by being frugal or earning more by working more? And how would you prefer to continue – would you trade your free time for more money (working for alternative income) or you would prefer to keep the frugal lifestyle until you get out of debt?

Tricia: I believe that it is important to do both in order to really kick debt reduction into high gear. For a while there, we were cutting expenses and we were bringing in more money. We were paying hundreds of dollars extra towards our debt a month. But then our income decreased and our debt reduction rate slowed down.

After our debt is paid off, we will look for ways to increase our income and will keep our frugal lifestyle. It’s interesting because we have been transitioning to a life with less stuff and it feels great. We are heading towards a life of simplicity.

SI Note: She doesn’t say which is better. Probably any option is fine if you are committed to your goals. One advantage of making more money is that it is not limited in theory – while saving is limited to the amount that you earn (and that only if you learn photosynthesis).

SI: Has blogging helped you in any way to improve your financial situation?

Tricia: Very much so. I do run advertising on my blog so that brings in a few hundred dollars a month as side income. So when you look at it from a monetary standpoint – it has helped. But even more importantly, it has helped to keep me motivated. I don’t know how this happens, but when I am feeling down I usually get an email or a comment that lifts my spirits. Without blogging about our debt, I know I wouldn’t have been as focused on our debt reduction as I have been. It still boggles my mind that we have been at this for two and a half years. I’m not usually one to keep at things for that long, so blogging has definitely helped there as well. My readers are wonderful

SI Note: Oh thanks, we know we are wonderful So here is one more use of blogging except making money – to keep you motivated. When you share your goals with others, you become a lot more responsible in following them.

SI: Did you learn something from the failed business venture that you mention here? Would you try again or do you think people should not take such risks?

Actually, we are starting a new business and taking another risk. However, we have learned so much from the first failed venture. We weren’t really passionate about that business. We saw it as a means to be our own bosses and we didn’t really think things through. Everything you read says you should have a business plan. Believe it! We didn’t have our ducks in a row and the first business didn’t even get off the ground.

This new business venture is different. We are both passionate about it and it combines the talents of my husband and myself very well. It has very low start-up costs (unlike the first business). And most importantly, we have a solid business plan.

I do think risks sometimes need to be made. Sometimes you can get so used to a routine that it’s difficult to move forward. But you can gradually get yourself in a position that lessens the risk. For us, we are lessening the risk by reducing our debt and learning how to better handle our finances. Our financial position was very poor when we attempted our first business, and we only made things worse. We weren’t ready for the risk and we got a little burned.

Si Note: This is a very wise advice. Take the risks, just try to lessen them. Sometimes failure is the best teacher, but it’s still better to reduce the pain.

If you liked what Tricia just said, you may want to browse some more into Blogging Away Debt. Alternatively you can subscribe by RSS or email.

If you are not willing to get rich quick through hard work or don’t have the luck and chance to do it in the other ways, don’t worry. There are still few options left. Do you want a less risky one this time? OK, use other people’s money.

The Summary

Conventional investing and business rare make people rich unless they have large startup capital. If you earn 10% yearly profit on your $50k savings, it’s going to take a lot of time before you become rich. But if you can earn only 1% of 50 millions you will be rich right now.

There is a lot of free money chasing for good deals and waiting to be invested. Find a good investment, collect the money from investors and collect a small percentage of the profit as your fee. You can become rich next year.

What Does It Take

Unless you do it entirely informally you will need a license that is not easy to obtain.
Then you’ll need to find investments that are better than the investments offered everywhere.
Then you need to convince the investors that they need your mediation. Easier said than done.

The Examples

They are everywhere – just look at the hedge funds, venture capital firms and angel funds. They collect money from investors, find deals and make profits. Even the mutual funds are entirely structured around the OPM idea. You may not win much by investing in funds, but they always win.

But can you or the average Joe use OPM for his benefits? Much harder, because starting a hedge or VC fund takes a lot of capital.

The simplest form of using OPM without being a hedge fund manager is to get loans from friends and run a business or collect your funds together to fund some project. Pooling funds together helps you achieve much better your goals and gives you access to resources that you can’t access using your money only.

The Downside

Collecting OPM is as hard as it can get especially if you add all the legal troubles. If you choose just to pool money with friends without contract you may end up breaking relationships if the things don’t go as planned.

How To Start

You probably won’t start a hedge fund and maybe you will not want to collect money from friends without making it a legalized fund. So one eventually quick option is to search for OPM form loans or angel funding if you have a specific project in mind.

I don’t know why everyone calls it “9 to 5″. Here it is usually “9 to at least 6″ with one hour lunch break if you are lucky to get it. Anyway, I am not going to argue about the exact duration of the typical working day – I prefer to talk about its alternatives.

Photo by Jele! at Flickr

A Quick Introduction

I left the typical corporate world in 2003 when I was fired from the last company I worked for as a prepress specialist. (They called it “laying off”, but I know it was firing because we couldn’t bear each other personally.) Currently I am an independent IT consultant working remotely and I am doing some small web projects on the side. Since the time I don’t spend my day in a typical office environment, I have discovered my productivity to increase and am definitely feeling better.

This post is not about leaving your job and running your business, although this is one of the most valuable options. This post is about not working in the typical “9 to 5″ mode – and some of the options below will let you do it even with a regular job. Most people think they hate their job, but that’s not the real problem. If you have taken long vacations you know that – people are born to be engaged with something and don’t feel comfortable if they have nothing to do. So having work isn’t your real enemy. What really troubles you are the fixed working hours, the sterile office environment and the boss who is walking around all the day.

Starting Own Business

If you choose this way of escaping 9 to 5 you’ll need some initial capital and you will need to risk it. Prepare to work harder than you work in the day job at least in the beginning. Many people who start their own business don’t understand when is the time to stop working so hard so they keep doing it forever.

It’s a mistake to think that starting your own business is the wholly grail of financial success. It’s only one of the ways to escape from the cubicle and this way is not appropriate for everyone. Starting own business is often harder and riskier than the other ways you can take. A lot of people fail, and a lot of these who succeed don’t really own a business, but let the business own them.

I don’t mean to discourage you however. Running a business – if done successfully – is much shorter to financial freedom than passive investing for example.

Online Business

Online business is just a business but the difference is in the way it can be started. There is almost no real world business that can be started with just one computer, internet connection and $8 for a domain name. In most cases you can do it even without incorporating (although this can cause you a trouble in some countries).

The low entry and the global character of the online business causes a lot of competition. The portion of web sites who fail to bring profits higher than the costs of the domain name (not to count the hours of work invested) is probably more than 99%. Such ratio would be a disaster in the real world but it justifies the lower amounts you risk and is considered OK online. However it shows that running an online business is not as easy as many “gurus” want you to believe.

Freelancing and Consulting

A less riskier 9 to 5 alternative is doing what you do now, but without having a boss. Just skip the company and work directly with the customers usually from your home office or at customer’s place (that really depend on the kind of job you are doing).

Freelancing and consulting doesn’t require big capital – I remember starting with $0 – but investing a bit in a website, incorporation and paying for some service that can bring you quality customers certainly helps.

On the risk scale freelancing and consulting is somewhere between running a business and telecommuting which is discussed below.

Telework and Telecommuting

If you have been a typical 9 to 5 person for years you are most likely to like telecommuting most of all the ways you can take – because it combines the [false] security of having a job with the comfort to work from home and see the eyes of your boss no more often than 1-2 times monthly (in most cases).

I have a lot of reasons to believe that telecommuting is the business model of the future but it will take a while before most company CEOs “get it”. Until then you may need to leave your current job first and replace it with such in a company that is open to teleworkers. You may get surprised on how many they are especially if you are in IT or a creative field.

Working Part Time

When switching to part time job you will have to solve a big dilemma – do you want more money or more time. If you have a high paying job now or have used to live frugally it will be much easier to switch to a part time job.

I am sure you will be more than happy to work half day, but the real question is not whether you can find such a job (you can even if you have to change the field), but whether you make enough per hour to afford working less hours.

Besides being a great way to break 9 to 5 pattern, working part time gives you one more advantage as opposed to most of the other options. You may use the extra free time to enjoy life or to try running own business, online business or freelancing. This is really a great low risk method to try going on your own without losing the regular job income.

Choosing a Mobile Profession

Finally, choosing a mobile profession like a contractor, insurance agent, realtor, PR, journalist, sportsman, landscape designer, farmer etc. – just to name a few of the many – can offer you a lifestyle very different to the standard 9 to 5. Don’t forget however that each of these jobs has its disadvantages. They may all look attractive from your bored office-self, but the reality isn’t always so bright.

A general change in the profession is much easier when you are in your early 20, but you can do it even if you are 40+ – don’t let fear and conventional thinking put you off your ideas and desires.

I don’t think there is anything wrong with 9 to 5 in general – it’s just fine for a lot of people. If you ask an average low qualified farm or factory worker if they want to work from 9 to 5 in a comfortable office, the answer will most probably be yes. In the past all people have dreamed about such a job. But now there are a lot of people (like you?) who just hate fixed working hours and the smell of an office. If you are one of these souls ask yourself why do you go everyday to a job that you hate, when there are so many alternatives.

If you are reading this blog from the beginning you may remember that it had a strong focus on managed trading accounts and especially forex. I invested quite a lot of time and energy to research, review and follow the performance of various managed accounts.

Now, about an year later from the start of this blog and after about 2-3 years of watching the forex managed accounts business I can tell you it’s a lost cause. Many of these services seem very promising in the beginning so you can easily start to believe that they can make you wealthy in 5-10 years. Then after 1-2 years at best each of them crashes and goes nowhere (if it have had a positive performance at all). How is that possible? There is simple explanation – we are able to find a lot of promising ones because only they are advertised. For each managed account that has good performance in the first 1-2 years there are 100 who have failed yet from the beginning but you never hear about them. So you are finding mostly services who have had the luck to start positively. The stats prove that it has been only luck – because all of them crash after a short period of profits.

Here is a quick update on the accounts that have been reviewed here:

GalleonFX lost more than 70% this year and stopped trading. My loss alone is about 60% and those who were unlucky to invest at the last December may have lost 80%.

FXCM didn’t perform better and also removed all their managed account services from their site.

FXFareast have hidden the performance from their site but you can find independent comments showing that they started to stink yet at the end of 2007.

Best Trading Systems disappeared many months ago without a track. I have not heard from anyone what has happened with the trading.

DEV was doing so-so until June this year. I don’t know what’s the status after June.

Capital Blu have also hidden their data, but a quick research shows a mention of 85% drawdown.

Milbay Finance is showing performance only till Aptil this year and then nothing. I don’t see big losses so far, but who knows what has happened in the last 5 months.

If you want to know how much Devrim and BTRFX suck, just read the comments on the review.

FX Master disappeared without track.

FX Street was closed more than 6 months ago due to bad results.

Do you want more? I don’t. I officially declare no longer interested in managed forex accounts. Forex trading does not add value to the world anyway.

A couple of months ago in a guest post for Cash Money Life I spoke about investing in yourself as your best asset (in agreement to Patrick). If you have not realized yet that you are your greatest asset and are still hunting for the big money in forex, maybe you’ll prefer to skip reading further.

Photo by Melody Campbell at Flickr

If you are still here, you may want to dig further what investing in yourself is all about. While seen in general it all comes to personal development, let’s distinguish a few main directions.

Investing In Your Formal Education

Some people understand investing in yourself only as investing in formal education. Depending on the route you choose in your life, it may be very important or has no importance at all. In any case I think seeing formal education as your only internal asset is remarkably stupid. But what could you expect from people who spend all their life chasing for diplomas and papers which to prove their personal value?

Neglecting formal education totally is not a good idea either especially if you prefer to earn your income as an employee or some kind of licensed service provider. In this case the relationship between getting a better degree and receiving higher income is almost proportional. So if you wonder what to spend few thousands bucks on and you are happy as an employee, probably the best idea is to do it on some additional degree or license.

In some professions getting a PhD may be one of the best investments to make – for example if you work in some research and development department PhD can help you obtain much better perceived value.

The key is to know if getting a formal degree is going to help you or not. Most people don’t make the difference and put too much emphasize on it. But how useful the degree is for most entrepreneurs?

Investing In Your Informal Education

Most entrepreneurs and almost all other people as well can benefit a lot more by getting informal education. It’s not the papers that make you successful and professional – it’s what you really know and can do. Even if you are just an employee, knowing more about your job helps you become much better in it. This gives you the chance to get a raise or move to a company that pays better.

The real world skills are the most valuable asset of the self-employed professionals and independent consultants too (ok, maybe after their reputation). If you are getting paid per project or service, the quality you deliver is directly tied to your income.

Some entrepreneurs may not work directly on their business (if they really own a business and the business doesn’t own them), but they still can benefit a lot by educating themselves about the business specifics.

Besides the professional skills that you want to acquire, there are some universal ones which help almost everyone to raise the value of their informal education. Such skills are communication (speaking, negotiating etc.), writing, basic math, business skills etc. So if you wonder if it’s a good idea to attend a business education, most probably it is – provided that the education is good of course.

Investing In Your Personal Development

While formal and informal education are also part of your personal development, you may want to pay special attention to learning and training skills that are not directly related to work, business and money. They are more about developing your inner self as a person and more conscious human being and exactly they are the main skills that make some people live fulfilling (and often wealthy) life.

• Self discipline. Do you imagine a soldier and military order when you read this? If yes, you are on the wrong way. Self discipline doesn’t mean to put your life on rails and have no fun. It simply means to have the power to follow the route you have chosen regardless the obstacles. For example if you want to adopt a new habit, you’ll have to fight the resistance in yourself and the people around you and still walk your way. Imagine you decide going to the gym every day – you’ll come across the resistance of your own body (laziness, tiredness) and maybe of many of your friends who will invite you to drink beer instead of going to the gym. Self discipline is to be able to say no and follow the path you have choosen.
• Courage. The lack of courage is what keeps so many people poor and unhappy. And yet they prefer to keep their current level of poverty and unhappiness than to take the risk and try to improve their life and financial situation. You probably have seen and maybe experienced this yourself – people go to job they hate and receive a salary that is not enough for their needs just because of the fear to try something better. (Of course you can fail while trying, but very often failure is the first and most important step of the success). Courage means to be able to take reasonable risks instead of just talking about them. You’ll barely meet any wealthy people without courage (except those who inherited their wealth or won the lottery).
• Health. Do you neglect your health just because it’s not a skill and not so obvious connected to your financial prosperity? Do you prefer working long hours for external resources (money) while putting your health at serious risks? The odds are not in your favor. Being in good health is not only important to be happy, it’s also directly connected to earning money. So taking care for your physical and mental health turns out to be one of the best long term investments in yourself that you can do.

Now think how much time and efforts do you spend in building external resources and don’t you sacrifice some internal resources because of that – like health or intelligence that you lose by doing a boring well paid job. Maybe you need to reconsider your priorities?

The first way to get rich quick hides significant risks and requires hard work. The second way reduces the hard work in exchange to even higher risk. The third way we are going to discuss now. It is flexible enough and lets you trade risk for hard work or money for risk.

The Summary

Pick a gamble that you like, be consistent and eventually you’ll make the big hit. If you don’t want to rely entirely on luck, you can try sports betting or high risk trading. There is one big difference between the gambler’s way and the first two ways of getting rich quick. In the first two you either directly or indirectly provide value to the world. You are solving a big problem or helping someone else reach the people who need their solution. The gambler’s way is only about your riches – you don’t provide any value to the others. If you choose this way, leave with that and don’t pretend to be saving the world.

What Does It Take

It takes either a lot of luck, a lot of money or a lot of persistence – that’s why I wrote that you can trade hard work for risk or money. To make fortune by gambling you have to be lucky or to work hard in betting many times, calculating, following, keeping tracks etc. And finally, you can increase your chances for profit if you bet with large amounts (especially valid for sports betting where you can almost guarantee your winning by placing money in many combinations).

The Examples

The examples of people who became rich by gambling are everywhere. The examples of those who kept their wealth few years later are much less – not only because easy money is easy spent, but also because many of people who win the lottery don’t have any idea about business and investing.

If you approach gambling or betting professionally, your chances to keep your riches are better than those of the lottery winners.

The Downside

First downside is the risk. You may develop strategies and play for years and never win big. Worse, you may get attached to gambling and lose everything you have. There are many examples of such people.

There is another big downside of this approach that many don’t think about. With the “problem solver” or the “big deal” you are able to see real progress. If you work on a startup you will see how your product or service comes to completion step by step. If you are hunting for big deal, you’ll probably first make a progress by doing some smaller deals. With gambling your progress is not linear – sometimes you win, sometimes you lose. It’s hard to track some measurable progress which depresses a lot of gamblers who can’t win quickly.

How To Start

First ask yourself do you want to start at all. Gambling and betting can be a nice way to have some fun, but isn’t the best way to become rich. It’s not even a good way to become rich.

August is the laziest month in my part of the world and it’s no surprise there have been less posts on this blog this months. But the fellow bloggers don’t sleep – or at least not as much. They have provided a lot of interesting articles. Let’s check them out:

Connie at Blueprint for Financial Prosperity thinks that babies are expensive. Can you argue with her?

If the dropped prices of the houses are still too high for you, check out what does it cost to build a house yourself. Carl‘s blog have a lot of information about that as well.

Jeremy at FMF is giving Two Steps to Being a Millionaire and Retiring in Your 40′s. Easier said than done, but not impossible.

glblguy at Gather Little by Little has published a kind of tutorial about envelope budget method.

The Lazy Man is sharing ideas about making money on ebay. I have never tried to do business there so far, but maybe some day.

The Money Crashers have completed a list of The 5 Best Cars For College Students. May I add one suggestion for college students? Take the bus.

Pinyo at Moolanomy has a lovely article saying why and how to become a part time entrepreneur. He has collected a bunch of very good links along with the article.

Jonathan at My Money Blog has published a good interview with the balloon art entrepreneur Irina Patterson.

David at My Two Dollars offers 13 ways to save money and go green. There are few excellent tips inside.

Can public speaking be a source of alternative income? Of course, it can. Some make thousands per hour doing it.

Alan has posted a guide on starting an investment club at his money blog.

Trent at The Simple Dollar always has a ton of interesting articles. In my eyes the most important from the past month was The Big Debate #5: Chasing the Dreams or Chasing the Money?. What’s your choice in the debate?