Several days ago I received a Tweet from a reader named Carolyn saying:
“I’m an ex-newspaper reporter in Atlanta who just found your (old travel) blog. Would love to ask advice if you don’t mind!”
Well, I’m a sucker for helping ex-newspaper reporters in Atlanta (My regular readers will understand why!) So I emailed Carolyn and asked her to tell me more about herself. She replied:
“I’m 23 and have been craving a trip of my own for years. I’ve gone as far as planning it out, but I continue to let job/money get in my way. I was following (a journalism hashtag) on Twitter … and found you and started drooling over your blog. I’d love to hear your advice and tales!”
I wrote back:
“Since you’re a newspaper reporter, let’s do this in a fun way: Why don’t you interview me by email? Send me some questions, and — with your permission — I’ll post the answers on my blog.”
Carolyn sent me some great questions — plus permission to use her name — and she included a more detailed biographical sketch of herself. She says:
“I graduated from the University of Georgia in 2010 with majors in newspapers and English. I worked at a local newspaper for a year and covered the gubernatorial election, which was great, but then I faced some ethical issues with the management and decided to leave.
Now I work in the Honors Program at (the University of Georgia) as I decide what to do next, but it pays my bills, and I’m able to travel with the students — England, Ireland and South Korea in the spring!
What I’d truly like to do is figure out how to work for myself – or create passive income so I can work on my own projects without worrying about the bills.“
Ding ding ding! Carolyn said the magic words. How can I not do everything in my power to help Carolyn live her biggest dreams?
And if that wasn’t enough, Carolyn ended the email on this note:
“Wrapping it up: I come from a poor family with zero business savvy, so I feel like I’m already starting out on the wrong foot from my mom’s bad financial habits. I’m teaching myself to change those now, and I’m confident that I can successfully earn passive income, but I know it’ll take time.
After bills, the paycheck doesn’t leave much for me at the end of each month, so it’s difficult to build on what little I can save, but I’m trying. I’m finding some great tips on your site.”
Wow. I want to give her a hug through the computer. Her head and heart are in the right place.
Carolyn, here are my answers to your questions. I hope they provide some guidance. And while I can’t speak for my readers, I’m pretty confident the whole Afford Anything community is cheering you on.
(Note: Carolyn’s questions are divided into 4 topics:
- Launching Your Own Business
- Passive Income
Read it all, or skip ahead to whichever topic you’re interested in.)
The First Topic: Newspapers
Q: What sparked your interest in journalism?
My sense of adventure. I wanted to be on the front lines of fires, floods and famines. I wanted to interview Presidents, sit in the courtroom for murder trials and — document history in the making.
Q: What caused the “ex” in ex-newspaper reporter for you?
Two weeks before I quit the newspaper, a suicidal bomber threatened to blow up Boulder (Colo.) Hospital’s emergency room with a detonator strapped to his wheelchair. A SWAT officer shot him in the chest after a 2-hour standoff.
Sound exciting? In reality, I spent the day glued to my desk talking to public relations hacks on the phone: What time did the standoff start? Does the alleged bomber have a history of psychiatric treatment?
Snore. The questions became even worse the next day: “Will the hospital revamp its security procedures in light of Monday’s standoff?”
I know there’s a compelling human element to all these stories. The bomber’s family is trying make sense of what happened (and they’re sick of talking to reporters). There are frightened hostages in the hospital (whose identities can’t be revealed due to patient privacy laws.)
I want to tell those stories. But I couldn’t do it from behind a desk. I had to break free.
The Second Topic: Travel
Q: When did you begin planning your trip? What age were you when you left?
(Note to new readers: Carolyn’s referring to the two-and-a-half years I spent traveling across the Middle East, Asia and Australia.)
I started planning it 5 years before it happened. Sorry — that’s probably not the answer you want to hear!
I was 19 and I had just returned from a study abroad trip to Japan (paid in full by a scholarship). My time in Japan had bitten me with the travel bug, so I set a goal to travel for 2 years without a job or any responsibilities. By the time I was 24, I was ready to launch that dream. (I should add that I was a baby — barely 21 — when I graduated from college and started working my first ‘real’ job.)
Setting a clear goal was important. If I had been willing to work while traveling, I could’ve joined the Peace Corps or taken a job teaching English overseas.
But I had a clear vision of being able to travel freely, without responsibilities tying me down. And for the next 5 years, most of my financial decisions revolved around this vision.
Q: Did you have any hesitations about leaving? When/how did you finally decide, “OK, I’m doing this”?
Climbing to the next rung on the career ladder inspired me to leap off that ladder. When I was a reporter, I offered a letter of resignation. My boss countered with a promotion and a $10,000 raise.
I gave into temptation and stayed on staff for another 8 months. Then I spotted an opening for an editor position at a wine magazine. The job sounded perfect — travel to vineyards across the world! Sip wine and edit a magazine! I applied, and out of 100 candidates, I made it into the running for the final 2 candidates.
I realized that if I accepted this job, I’d never leave. I’d never see my vision come true — a vision of traveling without responsibility, of seeing where the world would take me. At best, I’d get to occasionally take a business trip to Italy, where I’d have a nice dinner, gather a few quotes, snap some photos, and fly home after 4 days. That wasn’t the type of travel I wanted. But it would be “okay enough” — satisfactory enough — to keep me in the job.
That became the catalyst. I had to get out now, or I never would.
The Third Topic: Launching a Biz
Q: When you returned from the trip, how did you adjust to a settled life and decide what to do next?
During the two years I traveled, my friends kept asking me the same question: How can you afford this?
It was actually fascinating to watch their assumptions. Many people try to “let themselves off the hook” by pointing fingers.
The most common assumption I heard was what I call the “Someone Else Must Be Rich” theory. My friends assumed my family was rich. My family assumed my boyfriend was rich. And on and on. Everyone pointed to someone they’d never met and declared, “That person is rich and he/she/they are footing the bill!”
There were other theories, too. Some people assumed I went into massive credit-card debt to fund the trip. One close friend from college thought I made a killing in the stock market during the height of the 2006 – 2008 bubble.
I don’t care what people assume about me. That’s their problem, not mine. But I do find it sad that people — people I love — disempower themselves by deciding that their dreams are out-of-reach.
So I decided to start a blog that encourages and inspires. Originally I was going to create a travel blog, but then I thought — there are SO many dreams out there. Why not encourage everyone, no matter what their dream is?
As for the first part of your question — “How did you adjust to a settled life?” — I never settle. I still travel frequently, and when I’m at home, I’m motivated everyday by a higher purpose — helping others through this blog.
Q: Was it difficult to set up your first venture? Does one escalate into another?
“Difficult” in what sense? Is it a lot of work? Yes. It’s a ton of work. Early mornings, late nights, lunch at my desk. Do I love every second of it? Yes. Not to get too spiritual, but I feel like this is a higher calling. This is my creation and my contribution to the world.
And yes, one venture definitely leads to another — though I wouldn’t say it “escalates” so much as it “connects.” I’m not escalating, or climbing, a corporate ladder anymore. I’m weaving a web.
So my blog leads to writing and speaking opportunities. And my writing and speaking leads people — like you — to my blog. And on it goes.
The Fourth Topic: Passive Income
Q: What is the best way for a person to generate passive income when starting from scratch?
The two most common roads are dividend investing and real estate. Dividend investing means investing in companies that pay big dividends. The idea is that you hold on to the stock and simply live off the dividends.
For example, if you had $1 million invested in dividend stocks that paid a 4% yield, you could live on $40,000 without selling off any of that stock. Or — more realistically, if you’re just starting out — if you have $10,000 invested, you could collect $400 a year, enough to pay your car insurance. If you have $1,000 invested, you can collect $40 a year and treat yourself to a birthday dinner. (Of course, if you want to reach $1 million, you’re better off re-investing that $40 dividend).
The other method — which I prefer — is real estate. Frankly, I like this method because I understand it better, and to paraphrase Warren Buffet, you should only invest in stuff you understand. Don’t be afraid to shrug your shoulders and say, “Um, I just don’t get it — and so I’m not going to invest in it.”
The key to passive income through real estate is to buy the right property. Find a property in which the water + trash + insurance + taxes + mortgage + maintenance + 1 month per year of vacancy = less than the rental income. In some cities, like Manhattan or San Francisco, this is nearly impossible to find. In other cities, like Atlanta and Cincinnati, these properties are everywhere. I own a 3-unit building in Midtown, Atlanta, that matches this description.
My most popular post, If I Had a Million Dollars, I’d Go Into Debt, outlined both these strategies. And next week I’ll share my story of trying to buy a few more properties — which I’m in the midst of doing right now.
There’s a third strategy, as well, and that’s creating a business that becomes so successful that it produces passive income. This requires a ton of work, and I’d recommend you only try this IF your goal is growing a business. If you’re motivated by money — rather than by pure love for the work — you’ll probably burn out.
Q: When your friends (and blog readers) ask for advice about passive income, what do you find is the biggest mistake they’re making?
Expecting it to happen quickly. It won’t. It takes a long, long time. I started working towards passive income one year ago, and I got two lucky breaks that put me ahead of the game (I’ll go into detail about those lucky breaks on Monday, Oct 17., when I describe my current attempts to buy more real estate).
Despite those lucky breaks, I reasonably estimate it will take me 25 years to earn enough passive income to support me. I’m 27 now — turning 28 on Wednesday (happy birthday to me!) — so I expect to be living on passive income by the time I’m 53. If I got ambitious, I’d set a goal for 50. If I got super-ambitious, my goal would be 45.
Carolyn, if your goal is to travel within the next 5 years and you’re starting from scratch, your best bet is to save for your trip, enjoy it, and launch your passive income journey when you get back. Of course, you could also choose to live and work overseas and start your passive income journey from a hammock in Bali.
And I’d like to give a huge thanks to my friend and mentor Len Penzo for running a guest post from me, 4 Surprising Truths You Must Learn Before You Can Be Rich. Check out his blog — he’s a fantastic writer.