Many of you might have noticed that I was quite slow on response this week, I even skipped a post and I didn’t comment on any other blogs. This is because I had my own God War in my bedroom.

Since last Monday, I am feeling the pressure of the God of Fever, suffering the lightning of the Goddess Throw-up, falling under the control of the God of Delusions (a.k.a God of Pills) and definitely missing the help of the God of Sleep!

I’m typing this post in my bed, still not fully back from my war but I am winning it! Hopefully I will come back next Monday in top shape!

Carnivals:

Carnival of Personal Finance

Carnival of Money Hacks

A New Hourly Rate Definition (guest post I wrote on Moolanomy).

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Well, partially. Many funds have been having very volatile returns of their owns. For a while, commodities were usually going in only one direction, up… But as they start to have less of a clear direction, funds invested in them have had very volatile returns of their own.

One example that has been making headlines (partially because one of its big owners is Lehman Brothers (LEH) who already had enough issues of their own is the biggest hedge fund ran by Ospraie Management LLC. The fund has been closed after a dismal 39% loss this year!!

The Ospraie Fund lost 26.7 percent in August, after a “substantial sell-off in a number of our energy, mining and resource equity holdings,” Anderson, 41, wrote in the letter today.

“I am extremely disappointed with this result and the fund’s sudden reversal in performance,” he said. “After nine years of striving to be a good steward of your capital, I am very sorry for this outcome.”

Another good example was Amaranth, a fund ran by Canadian Brian Hunter that got into huge positions thanks to a 8 to 1 leverage on 9 billion dollars. And guess what…? They ended up losing 6.5$B out of the 9$B and closing their fund.

And guess what, Brian Hunter did not even have to wait long to get a new job as he joined Solengo Capital Advisors although the fund managers said they would keep him on a tight leach… yeah right. Read an interesting article about it here.

Of course, some other funds have been on the other side of these trades and been putting on great returns. But usually those funds try to stay out of the spotlight as such big fund are usually not looking for new investors..!

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What was done

I tried a lot of things to save money first. A dollar saved, is 2 dollars made. Since I am calculating the $1,500 in net income, saving money was quite productive.

I first look at my financial situation. By restructuring our debts, I was able to save a couple hundred bucks. We basically consolidate what was left of our car loan into our mortgage. While decreasing the payments, it was surely increasing the amount of interest to be paid overtime. Still, having my wife with my children at home is priceless so it’s not a thousand dollar in interest that scared me.

Then, I looked at my insurance. I was able to save by consolidating my insurance (car and home) at the same place. I got a 2 year contract and increase the amount I have to pay in case of a declaration.

I also resisted to buying another car. By having one car, we can save a lot of money. We also made a few changes in the house so we can drop our energy bill by about $15.

On the income side, I changed job back in February. While this was giving me a very small raise for now, the bonus perspective over a few years is great. Therefore, this switch should bring more money on the table over the long run.

I also created an alternative source of income throughout a web site company. I will start receiving about $400 in dividend every month pretty soon.

What didn’t help

All my effort to increase my income over the past years also got a bad side effect. In fact, my government children allocations were decreased by about $200 a month. While having two children were increasing my overall budget, the government was giving less since “I am making enough” on my own.

The grocery bill keeps increasing since the price of oil is kicking us in the teeth day after day. We had to increase our monthly budget by about another $100. There is not much I can do on grocery since we are buying healthy stuff most of the time. I can’t cut on good food.

The Final Result

After all my calculation an effort, I was able to generate a net income of $700 a month. It is quite a deception and it was quite hard to admit to my wife. It is never fun to fail. While this is definitely not enough to achieve my goal (I’m only at 50%), it is still more money in our pocket in the meantime.

I will continue to work on my side projects and look for other ways to save money. Therefore, I have no other choice but to give myself another year to get to my ultimate goal: generating $1,500 a month.

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We started the project about two years ago, and started to work seriously on it back in April or May 2007. A year after (in March 2008), we were incorporating our business. Nothing wacky that was requiring thousand of dollars in investment; just something big enough so we can earn a few bucks.

The good thing about passive income is that it can grow exponentially. By working on your project on a steady basis, you are able to make your income grow slowly but surely. In a few days, I will be able to write a check form me (inc.) to me (personal). This will be the start of a long series of payments produced by our company.

Since we want to make more money in the future, we decided to leave 40% or our income within the company so it can increase its income overtime. We think we should be able to double the income within the next 12 months. I told you, passive income is exponential

I’m writing this post to show you that you can have an alternative source of income but that requires time, effort and patience. At first, it was simply a dream; we were working on this side project for fun, thinking that someday maybe… But we are now crossing the border of imagination to land into reality. This thing is really making money!

This should generate around $400 a month in my pocket for the time being. Still not enough to keep my wife at home, but it is definitely a start. I will actually use this money to pay down my debts until it makes enough to compensate my wife’s income.

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Was it done by anti smith manoeuvre? People that think using a line of credit as an emergency fund is crazy? Or by Primerica agents who think I am the devil? V, are you behind this? He he he!

However, things went sour the day after. Google reported my site as an “attack site” and therefore strongly suggest internet surfer to not go to TFB. My traffic dropped by 60% in a single day.

What happened?

I couldn’t find what the problem was. After all, I am a finance guy, not a techy ;-). The worst part is that my fried that’s taking care of the technical aspect of the site, Pierre, was in New York at the US Open (GREAT TIMING!).

I downloaded AVG and noticed that my site was directing some readers to some spam site. I also used Google Webmaster tool in order to scan TFB and find the source of the problem. Since many pages seem to have the same problem, we decided to switch theme and try it out again.

It appeared that our theme was hacked to redirect people to another site. Instead of working on our previous theme, we simply decided to change the design and start from there.

Luckily Google did a review of TFB fast enough to bring back normal traffic within 48 hours. I am glad to announce that we broke our traffic records by getting more than 10,000 visits in August! A big thank you to all my readers!

I also want to thank the following blogger for their help by either notifying me of the problem or checking my blog once in a while to make sure it works now:

Frugal Trader at Million Dollar Journey

Silicon Valley Blogger at The Digerati Life

Pinyo at Moolanomy

Richard at Richard Hancock

Moving forward, regular post will start on Monday, even though it’s Labor’s day We will be working on our new design in the upcoming weeks and suggestions would be appreciated. I want to thank everybody again for their patience!

I didn’t have time to read articles this week but here are some good carnivals:

Carnivals:

Carnival of Personal Finance (Editor’s Pick Baby!)

Investing Carnival

Carnival of Financial Planning

Carnival of Money Stories

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We decided to switch the theme right away and ask Google for a review of our site. So we got rid of the garbage and it will give us the opportunity to get a new design in the upcoming days.

Regular Post should come back early next week (so you are now free to go outside ).

A big thank you to all bloggers that advise me of the problem and gave me their feedback during this week!

And another thank you to all my readers for their patience!

Stay tuned!

I am sorry to announce that, for a few days, I will not post since we are experiencing problem with our site.

Some of you may have receive a notice that the site may be “an attack site”. Don’t worry, nothing has been included on the financial blogger to arm your computer. I just have to review my code and find the problem so everything goes back to normal.

Once  again, I am sorry to interrupt my posting, but I must concentrate on this problem first.

Thank you for your patience!

Mike

Ok, I am now taunting your creativity; imagine an investment where you can withdraw money up to the amount of your initial investment without paying taxes. And I will continue to push the limit: imagine that this investment will only trigger capital gains instead of interest and dividend income!

Now you can open your eyes again and read the rest of this post. Unless you want to take down your financial advisor’s phone number to call him right after this read because such investment exists. It is called Corporate Class Funds.

How does this work?

Corporate class funds can be viewed as a big bag with several mutual funds. You have the possibility to select the funds you want according to your investment profile. You are also able to switch funds in the same family (same bag) without triggering capital gains.

When you withdraw money from the bag, you are first deemed to take back your capital. This option is called ROC (Return of Capital). This allows an individual to withdraw all his capital first and therefore report taxes in the future. One of the basics of tax planning is deferring taxes as far as you can.

Once you have taken all your capital, you are left with the investment growth. Regardless if it was created through capital gains, dividend or interest income, it will become capital gains when you take them out of the bag.

Where is the catch?

Honestly, I didn’t find it yet. In fact, Corporate Class Funds have higher MER’s than regular funds. They are usually about 0.30% more expensive than a regular mutual fund for the same category. They are also not sold by banks either (unless you are dealing with a broker). In fact, I really don’t know why they are not really promoted in our industry. I guess the market is just not ready to answer their clients as of to why they didn’t sell such product in the first place!

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This how I would describe the simultaneous connection between my first sip of coffee and my laptop starting up at the same time. The paradise kingdom has opened its door and my day is ready to start!

In my mailbox, I had an email from a loyal reader and regular commentator, Nancy Zimmerman aka Money Coach aka… bank EVANGELIST! While I am still not sure what is a bank evangelist yet (I that bank could buy out churches and make people listen to their new god; money! Hahaha!). Seriously, I would not mix religion and money but that was Citizens Bank of Canada marketing choice anyway.

This post is definitely going in every direction since the very beginning, but rest assured, I’m going somewhere with all of this

She asked me to mention my readers that Citizens Bank of Canada will be offering a revolutionary chequing account starting September 16^th. This “virtually no fee account” is offering unlimited POS, unlimited bill payments/cheques (and physical cheques themselves are free) - pretty much unlimited everything you can think of PLUS (what can you expect more actually?) they pay for your international ATM charges!

In Canada, you have this unlimited access in any Exchange Network ATM (that is pretty much any credit unions, National Bank and HSBC. In other words, unless you are stuck in Nunavut, you are pretty much set with a no fee chequing account.

There is no free lunch

Everything for free and there is no counterpart? That is still to be proven. Since I don’t work for the Citizens Bank of Canada and the product is not out yet, we can’t say if there is a catch or not. However, I insist that there is no free lunch in life. In fact, what would be the incentive, on a company perspective, to offer a costly product (not expecting any revenue from a product seems pretty expensive to me!) for free at large?

It can really be only a promotion (read a loss leader), to get people on board and offer them other products. Anyway, for now it’s advertised as being free and if you want more details, I suggest that you contact Nancy Zimmerman through her blog : moneycoach.com.

image source : flickr

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We are not 100% passive

I always found the expression “passive income” hard to define. Technically, it should be described as a source of income requiring no attention from its holder. You wait and you get paid. However, which kind of income could meet 100% this characteristic? None! Even dividend investing requires research to pick the right stocks and time to follow-up the evolution of your investment. Real estate properties require maintenance, administration and renters management. Blogs? This is where I am; blogging in the bus every single morning to make sure I am ahead in my posting schedule. Each night I answer emails to readers, submit article to carnivals and read other blogs to keep me up to date.

Based on this premise, I based my “passive income” definition on the following: it’s an alternative source of income where your earnings are not linked to an hourly rate but rather on its capacity of creating wealth.

Time sucks

Passive income is probably the best kind of income you can make as it is still going in your pocket when you don’t actually work. However, this is the kind of income that requires the most effort and time to build. Even getting dividend income is a pain; how much money you need to put aside before getting $500 a month from your stocks? If you are smart enough to buy BMO that gives a 6% dividend return, you would need $100,000 to create such passive income. Then you get to the second step of passive income: how to make that first 100k?

Real estate properties and companies present the same problem; you need a lot of time and effort before you can withdraw your very first dollar. While our internet company is less passive than these methods, it also requires less time to produce income. I would guess that there is a positive correlation between the level of passive income versus the time required before getting money back.

Even though we created M35 back in March, I still didn’t cash in any money yet? Is it because I can’t make money off internet? Definitely not! The problem is, again, laziness. The company is setup, websites are making a few bucks BUT we took a lot of time to setup our accounting and share structure. Therefore, we didn’t want to cash in money when we didn’t know what was optimal according to our situation. The worst part is that it’s not that complicated, we were just too busy doing other stuff and since the money was deposited into a company account, the rest didn’t matter much to us.

So if you want to earn passive income, you will have to setup a well defined plan, work hard and be patient. If you are persistent in your efforts, you will surely make passive income one day!

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