Archive for the ‘Money and Finance’ Category

Today’s final post is a letter which I dearly wish I could send back in time to myself in the past; a younger me from ten years ago when I first made the leap from permanent employment status to Freelancer.   I think it will be useful to other freelancers who are either just starting out, or are struggling.

Without any further delay or waffle…

Dear younger and more inexperienced me,

As you read this, you will be just starting out freelancing. It’s a scary experience. There is nobody to hold your hand, or guide you, or give you advice. At least, I know it seems this way. But I wanted to drop you a quick line to reassure you about a few things. Plus I wanted to include some really good advice, which will stop you making some silly and expensive mistakes.

It may seem that you are own your own, but there are a lot of great resources out there. The web is full of freelancers who have gone through what you are going through, and some people have been kind enough to write those experiences down in books or web blogs (such as this one) – all it takes is for you to take the effort to read them, understand them, and follow the advice. But remember, if you don’t bother looking, or take that advice, and you make the mistakes other are trying to help you avoid – then there is nobody to blame than yourself.

I am sorry to say that there will be hard times, and tough times, times full of worry when you wont be able to sleep at night, times of self doubt, and times where things seem very unfair. All freelancers and small business owners go through this, but at the end of the day, you will do OK. Anybody who makes the effort to rise above the average, who has put in the hard work, and uses the resources that are out there will do OK – better than OK in fact. In the end, choosing a freelance life will be one of the best decisions you will ever make.

But there are things that will help you on your way. Dear younger me, please listen to these, because these are nuggets of wisdom from years of experience. These tips will save you time, money, effort, and will make the whole thing so much more enjoyable. They will also allow you to rise above the troubling times.

My advice to you as you start out freelancing is:

1. When times seem tough, don’t sweat the small stuff. If things seem unfair – that’s because they are – nobody ever said life was going to be a fair game. Either accept those things as unfair and move on, or change them. But don’t lose sleep about the small or unfair things
2. Build up your list of supporters from the start. Have a good bank manager who you can contact whenever you want, an accountant who will explain things to you in detail, and make sure your partner (wife/husband) is included in everything you do
3. Do not let the accountant run your finances. Keep everything close. Don’t let the accountant charge you too much or have your accounts vanish in to a black hole. Instead, use online accounting from day one (the accountant should be there to sign off the accounts and save your money). Having a clear picture of your accounts and cash flow every moment is key not only in making decisions, but allowing you to sleep at night.
4. Know what you are doing it all for. Have a set of goals, and review them regularly. Get hold of a copy of the success principles, and read it – twice a year. It’s the best book on the planet! Trust me on that
5. Do not waste effort trying to keep everybody up to date on project progress – you will end up stressing about projects and being overworked. Instead, invest in a cloud based project management system – the moment you do, your business world will change in leaps and bounds. You will never look back
6. Don’t chase the money. Customers will try to take you in directions you are not prepared to go. It’s ok to say no if the work does not interest you, is not inline with what you want to do, or how you picture your small company. Be strong with customers.
7. Don’t be scared to take on work involving skills you don’t have. Whilst you will be reluctant to do this initially, eventually you will come to realise that this will lead to you growing in skills and confidence, which will make your time more valuable.
8. Invest in time management tools. Your time is money, so use tools like Evernote to keep track of everything you do and create, and re-use it over and over again. When you start doing this, you will see your worth grow.
9. Get everything down on paper – simple terms, agreements and contracts – and get them signed. This will get you out of more problems than you could possibly imagine.
10. And get a mentor. Approach your old bosses, or a local mentoring group, and become accountable. It’s also a great way to make new friends and stay in touch with what is happening ion the business world.

Younger me, its important to remember to enjoy the ride. Yes, times will be tough, customers nasty, and sometimes money will be tight – but nether the less, enjoy the ride. Getting where ever you are going is half the fun.

Regards

A more experienced Me

And that’s It!!
At the start of 2012, I said that this blog would finished at the end of 2012 – and as I type this, it’s December 2012.  So that’s it – the blog is done.  There is no more.

Dear reader, whoever you are, I really hope that you have found this blog useful.  I have found it fun to create, and get my thoughts, systems, and processes down on (electronic) paper.   I hope that you have gained something from reading my advice.

My advice does work.  I am not perfect, I do not run the perfect company, I make as many mistakes as any other person out there, but my company has grown year in and year out using the tips I have written down.  Most of my advice comes from people who are far more experienced and successful than me – so if any of my advice, or systems I describe feel right to you – give them a try – see if they will help you grow your own company.

As I sign off from my blog, I wish you dear reader well.  I hope your company grows as you want it to, and I hope to meet you in the real world at some point.

As for me, I will continue on with growing my business, heading towards my goals, but now without the need to document it here.  This blog will remain on the net until the end of 2013, at which time it will then be consigned to the great internet dustbin.

Goodbye and good luck.

Jaffa Brown
Author of this Web site , Freelancer, Small Business Owner and passionate goal setter/achiever
December 20^th, 2012.

According to the Federation of Small Business, the economy across Europe and the USA is continuing to ‘fail to improve’.

In a new year report just published, the FSB says that whilst more jobs are being created (which is keeping unemployment down), wage levels are declining and the amount of money that businesses and individuals have available to spend is declining every month – with no end in sight.

As a result, companies and individuals continue to tighten their belts and are on a constant lookout of ways to cut costs.
Whilst I am constantly reviewing all of my spending (both personal and within my Small Business), we as small business owners always need to be wary of cutting costs too far and on the wrong things, which can lead to damaging the cornerstones of our business.

Keeping our Business Cornerstones Intact
Regards of the type of business you run, the size, how successful your business is, or the services/products you offer, there are a few things which every company needs to do to stay viable; marketing, sales, invoicing, accounts, payroll and paying taxes. Without any one of these, a business will soon hit problems and start to die.

So whilst cutting costs are fine, trimming the fat in any of the cornerstone activities can lead to problems. Take marketing….

When times are tough and money short, it’s a very easy decision to cut back or kill any money spent on marketing – adwords can be cancelled, postage is saved by not sending out mailshots, transport costs reduced by no longer attending networking events. Or we may just decide to stop marketing to spend 100% of our time doing billable work.  Cutting costs in marketing can see an instant win in terms of cash flow and reduced costs – but what will be the impact in the future?

You may have work at the moment, but what happens if one or more of your existing customers cancels work, goes under or cuts their own costs (with less work for you). Marketing effort takes time, and by the time you realise you need more work, the damage will be done and it may take months or years to start finding new customers again.

Taking advantage of the downturn and avoiding the future hits
One of the advantages of the continued down-turn is that with other companies cutting costs, competition is fierce. This competition produces a double win for a company willing to keep investing in their cornerstones.

Firstly, with less companies spending money, there is less demand for services so offers are on the table. If you use services such as Google Adwords (or the Bing/Facebook equivilants), this reduced competition means that advert placement is cheaper, which means you can now get more exposure for the same money (in my own adwords campaign, I am getting almost 13% more exposure for the same money as last year simply because there are less companies bidding on my key words).

In addition, the fact that people are spending less means that for the savvy shopper, there are plenty of deals to be snapped up should you need to invest in outside services, training, hardware, rental or finance arrangements. You just need to be wary of headline ‘discounts’ which are not quite as good as the advert pretends to be.

But the main concern in cutting costs on the key aspects of your business is that it could lead to more costs down the road. For instance, trying to save costs by putting off paying taxes (PAYE, VAT, corporation tax, etc.) will lead to all kinds of future pain including additional late payment penalties, interest charges and more detailed scrutiny in the future on top of the actual taxes which still need to be paid.

So by all means, continue to review your costs and outgoings and trim the fat where it makes sense to do so – but always have another eye on the cornerstones of your business, and the ability to take advantage of the downturn where your available cash allows.

In the last post on the series regarding my freelance Passive Income project, I wanted to wrap it up with where I am now, and how it all worked out for me (so far).

I started my passive income Buy-To-Let project in the spring of 2012, and I am writing up this wrap-up entry at the end of December 2012.  So in theory, the project has been running for 8 months.

How long before I made Money?
As I said in my previous post on my buy to let project, the purchase of the rental property completed on Wednesday, 25^th July.   We spent the next week with decorators in making the place fit to live in – they decorated the walls and ceilings, we replaced all the light fittings, replaced the curtain poles, purchased new white goods (washing machine, fridge freezer, put in a dish washer).  We then selected the property management company, and on the July 30^th, the agents went in to take pictures and advertised the property.

The management agency initially advertised the property at a rate of £750 per flat per month.   We had budgeted for £700 a month, so we were initially delighted.   But a week of no interest and a bit of right move research showed there were a lot of similar properties for rental at £725 – so we instructed the agents to reduce the price to £720 a month per flat.

That was the right move – within days, viewings had increased through the roof, and by the 8^th August (2 weeks after completion), we had tenants agreed on all flats.  In fact, on the majority, we had multiple offers and we were given different options about which tenants we wanted – all tenants were offering the £720 asking price – so we were above budget.  Happy Days.   On two of the flats, prospects got into a bidding war, on on these flats, we ended up accepting a higher offer of £750 a month.   Even better!!!

How The Money Works
At the start of the project, I created a spread sheet with the budgets for the project (per flat).    But, now that money was coming in, I double checked the income, which worked as follows:

The block of flats we purchased

Each month a tenant would pay £720 (2 were paying £750).   Of this, the funds initially worked out as….. £520 went back to paying back the loan on the property – interest and principle (so the tenants were paying off our loans – nice!), £49 went to the managing agent (their fee for dealing with finding the tenants, collecting rent, dealing with any tenant problems), which left £151 profit per month per flat.

However, we decided that ever 4 months, the extra income money would be then transferred back to the loan payments.  Our lender had a clause which said when we pay off a chunk on or above £500, the interest is recalculated.   So paying the additional income not only reduced our debt amount, but also changed the monthly payments back to them.  So on month 5, the £520 loan payment reduced to £507, which means that each month our profit increased to £164 per flat.  It may not seem a massive leap – but its compounded – every 4 months the loan payments went down and the profit went up – exponentially.

And of course – this is cash in profit (from rent).  On top of this, our share of the property increases (as the loan is repaid) so that increases the net worth, and if the properties increase in value, that’s triple bubble on the passive income.

 It’s a rocky Road Ahead
Of course, is a great picture now.   My company owns more property, which hopefully will increase in value, and in the mean time, my tenants pay off my loans which means that in a few years, I will own the property outright (and so will double my originally invested money).  Once the loan is paid off, all rental income is then passive income.

BUT, despite all the efforts of the central banks, Europe, the USA is in a desperate financial state (and soon Asia will join them).  This means that interest rates could change very quickly from the current historical lows to shocking highs – who knows.    My own predictions are that in the next 6 to 12 months, interest rates will drop further (to ZERO %?!?), before starting to grow – but that is why we are keen to reduce the loan amount as quickly as possible.

However, if you are thinking about following me into the Buy-To-Let passive income route, careful consideration should be given to the turmoil which may follow in a few years time.

In Summary
when I started this project, I was looking for a passive income stream, and I found one that I am happy with.  Yes, its not as ‘freelancery’ as say writing e-books, or developing a sell-able software product or generating money through advertising, but all of these seem to be hard work for little return.   For my investments, I am already generating a reasonable amount of money.  And whilst the monthly income may not be shockingly high, it compounds up very nicely and very quickly, and will generate a big pile of catch with little no no risk or work – just what I was looking for.

It’s still early days in this project.  I am not looking for a quick win or to make millions – but it is going to generate cash over my ten year plan.  If things continue in the future as they have done in this project, I will certainly be looking to expand into more properties whenever a major non-passive (regular day job) project generates sufficient cash to allow additional investment.

So, that’s it – that’s my passive income project.

What do you think??

In the penultimate entry on my series of my passive income project, I want to talk about managing agents.

I have talked about wanting my passive income buy-to-let project being as low risk as possible – and for me, having somebody to manage the whole thing from start to finish was the best way to de-risk the project.  It also means that the project really is passive – I have very little to do to make it a success.

Different Levels Of Service
Letting managing agents can be found on most high streets.   They will all offer a full range of services – you simply pick the level of service that you need.

Services offered will range from finding a letting tenant (usually for a fixed amount around £600), to moving the tenant in (for a fixed amount, typically around £250) through to a fully managed service.  A fully managed service covers everything – finding a tenant, running a credit check, moving them in (including doing a property inventory), dealing with the deposit, collecting rent, chasing late payments, eviction and moving them out at the end of the lease term.

For it to be passive, with as little involvement as possible (other than some initial project management to get the property decorated and fit to live in), a fully managed service was the preferred option.  For this, you (and I) are charged a % of the rent collected.

The charges – Factoring them in
One thing I did from the start (as I do with anything to do with money), is that I factored the charges in from the management company into my maths (see the original spread sheet for passive income growth).

I have heard some horror stories about landlords who have based their calculations on the assumption that they would be getting all the rent charged from the tenant, only to be disappointed and stretched when the money hit their bank accounts (minus the management fees).

I factored the management fees in from the start, and even with those fees, it still turns a nice healthy profit.

What I pay, and What it means
Now different leasing companies will charge different percentages depending on the level of service and their own success (at finding and managing tenants).  For my passive income buy to let project, I was happy to pay the 8% of rental income that was asked.

Yes, it means that 8% of the rental charge is not hitting my bank account, and yes, this means that the profit from the project is 8% less than it could be.

BUT, for this 8%, a lot of worry is taken off of my mind.   If the tenant doesn’t pay, the letting agent does the chasing.  If a pipe bursts, the letting agency will send in a person to repair it.  If the tenant has a query or a problem, I do not have to deal with calls in the middle of the night.   In short, the 8% is money well spent in terms of peace of mind.

Now it may be worth haggling with property managers.   There were cheaper ones than the one we selected (some down at 6%), but we felt happy with the service being provided and the money asked in return.

The other De-risking options I took
In addition to the managing agent, the other two items I purchased prior to a tenant moving in was:

1. Landlord Rental Insurance – Full landlord insurance was not needed as my company already had personal and public liability cover.  But I did pay £99 for a year of rental insurance – if my tenants fail to pay any of their rent, the insurance will make up the difference.
2. British Gas Management – I signed up for the British gas landlord managed service – which provides me with the yearly service, the certificate of safety for all the appliances, plus a call out service should anything go wrong (which the tenants call).  For £18 a month, its great value for money (no 2am calls about water leaks or heating not working).

Continuing on with my passive income Buy To Let project, I wanted to touch on some of the problems I encountered on the first part of the project – which were all around finding and buying a property to let.

On Wednesday 17^th July 2012, the exchange and completion on the property took place.   Because we were keen to get cracking on finding tenants (and start earning money), we made sure that we exchanged and completed on the same day.

We also did this as we had a schedule of work to do to make the property letable.  Keeping the fact that empty (or void) days means a loss whilst a filled (or let) day means a profit, we scheduled everything around this day.  We had arranged a week before the exchange/completion so that the moment we completed, our work force went in with a list of items to do.

The Work to Make Good
For our first buy to let property, we wanted a mix of the easy things that we could do ourselves (and so save time and money) and those that we would just pay for and get the professionals to do.    Our list consisted of:

• Paint all the walls and repair ceiling cracks (professionals)
• Service the central heating and report (professionals – British Gas – on a landlords service/maintenance/certificate deal)
• Put up window curtain poles and curtains (us)
• Replace worn out taps, a new radiator and other plumbing jobs (professionals)
• Purchase and install new dishwasher, washer/dryer and fridge freezer (us)
• Fit coat hooks and shower screen (us)
• Clean the carpets and oven (professionals)
• General clean (Windows, sinks, etc) (us)

We timed all of this so that the moment we got the keys – the various people would arrive and start work.   It was an interesting week of project management to make sure everybody could do their part over the next few days without stepping on each other or getting in each others way.

We created a mini project plan for all the teaks, including the purchasing of the required items (from white goods, to a kitchen sink, to radiators and even paint) so that everything should (and did) fall into place.

The Problems and Advice
Of course, up to the exchange and completion, things did not always run to plan.   We hit no end of problems in the purchase which included:

• Having to change lenders 3 times – each lender had strange made up rules on what they would lend to (for instance, the original Bank Of China would not lend on any property within 5 miles of a train station – which of course ruled out almost all towns and cities in the UK)
• Delays in funding meant delays in purchase, which meant somebody else came sniffing and we got ourselves into a mini bidding war (which increased our costs slightly)
• Delays in funding also meant that more work was needed by the legal bods, which added some more cost onto the purchase

And of course the delays also added to a little bit of stress to our own activities

Bending and Flipping Back
In the end, we completed on the purchase (and I had a cup cake to celebrate).  And the work kicked off on the rapid refurbishment project.

Whilst a lot of people go through a property purchase, its better with a Buy TO Let, as we wont be living there so there is no emotion involved.   If the numbers still made sense and worked – the answer was always going to be yes – if not, then we would have canned the project.

So it was a question of just rolling with any setbacks, and snapping back (like grass) once they had passed.  Oh, and remembering to get on with the day job whilst all of this was going on.

This is the next in my series about my freelancing based passive income project.

Today, I want to talk about a documented but not often talked about rule of the universe called “the compound effect”.

This fundamental rule has been talked about by some very wise men; people like Tony Robbins, Jack Canfield, John F Kenedy and even Albert Einstein talked about compounding at great length. This rule says (in a nutshell) that whatever you have, attracts more of what you have.

In terms of money, when you are in debt, debt will attract more debt (in terms of interest charges, late payment fees) which will add to your debt. When you have money, money attracts more money, and your money grows. I never really noticed this before until I started the passive income Buy-To-Let project – let me explain.

A leaflet and How it all started to Fall Into Place
When I created the passive income Buy To Let projection spreadsheet, it was based on the worst case scenario (or as worse case as I would allow without getting into the realms of fantasy). The interest rate charged on the finance was initially projected as high, the rental received as low, the costs charged to us as high, the property growth as low – with this pessimistic view point plugged into my spreadsheet, the numbers still worked. But then, the numbers got better as the project progressed.

An example is the rental management fees. During the initial investigation, we spoke at length to another person who was renting a Buy-To-Let property, and they advised to budget for a 9% management fee by the estate agents (the % of every monthly payment by the tenants that the estate agent would take for managing the property).

Using this advise, we put into the project projection spreadsheet a management fee of 10% – as I say, the numbers worked and looked good.

On the day that the project was given the green light by the Chinese financiers, we came home to find a leaflet posted through our house letterbox. This leaflet was on its own, and had clearly been pushed through by somebody distributing flyers around our neighborhood.

What did the flyer say? It was from one of our local bigger state agents, offering a fully managed service for 7.5%. Oh – what timing!! Yes please.

The effect is that we are saving 2.5% on our fees, and therefore are making an additional 2.5% above and beyond our existing profit projections.

As I say, its funny how money attracts money.

Today I want to continue talking about my Passive income project for my company, which as I had described earlier, was taking shape in the form of the purchase of property and then generating income through the Buy to Let market. Today, I want to talk about the project finance.

In 2011, my company had done rather well, and was sitting on a pile of cash. However, it was not sufficient to purchase a house (or other residential property) outright. Therefore, my company needed further finance – in the form of a bank loan.

When it comes to finance, there are a lot of options available:

Loan, Interest Mortgage  or Repayment Mortgage
Clearly, the three main options that were open to me was a banking business loan, an interest only mortgage or a repayment mortgage. In terms of the maths, there is really no difference between a business loan or a repayment mortgage – on the amount of money I was looking to borrow, it would still need to be secured against the rental property we would be buying.

In my Buy-To-Let growth spreadsheet that I had put together earlier, the maths suggested that a repayment mortage was the way to go rather than an interest only. After all, with interest only, I would still be left with the value of the original mortgage to pay back at the end of the loan period – so growth would be less. So in my mind, a repayment mortgage would be the way to go.

Also, I liked the idea that the rental for the property would basically be paying off the loan (with the risks of months without rent and bad tenants accepted).

UK Bank Backing – They don’t really want to know
So with the decision made, we went off to see our friendly business bank – the Natwest (who we had banked with for 10 years). We met with the business manager, who was more than happy with our maths, more than happy that it worked, and was more than happy to lend us the money we needed (to top up our own cash into the project). After all, the UK government had introduced Project Merlin a year or so ago, which was a banking incentive to lend to small business with projects such as this, so the project helped Natwest meet their own lending goals.

However, the interest rates quoted by Natwest were shocking. When the UK base rate was at 0.5%, Natwest wanted to charge us just under 6% VARIABLE. We questioned this high interest rate (after all, Natwest were borrowing the money from the IMF at less than 0.3%), and the manager was very frank with us – because there really was not any real need for a UK bank to generate money from UK customers.  They were already making so much money elsewhere.

Good old UK banks – you have got to love them.

Re-scoping Risk
I was also not very happy about paying a variable interest rate. Yes, interest rates had been at a record 0.5% for the past 3 years, but sooner or later they would be heading up, and I wanted to keep the risk of the rental not meeting the monthly repayments to a minimum. This project after all was all about minimum risk for maximum returns.

Luckily, there is a good table of BuyToLet mortgages and loans listed on the internet, and there was some cracking deals to be had – if we looked further afield.

The Final Solution – from an interesting source
In the end, the finance came from…. The Bank of China. And what a cracking deal it was – 3.88% for the TERM OF THE AGREEMENT. Interest rates could rocket – and it would not cost us a penny more. Our tenants would never have to worry about us charging them more rent to meet the monthly payments because our own payments would be fixed – it was a win for all concerned.

We had to do all the financial applications (and provide 6 months of personal and business bank statements, 3 years of company year end reports, credit checks on all directors (free from Experian)) and a couple of other bits of information. Then, on Monday 16th April, the Chinese Bank said yes to the finance. The project was green-lite (lighted?!?) and we could really get cracking on our passive income project.

Exciting times.

I am going to continue today talking about my passive income project which I started talking about last week.

Once I had (provisionally) decided that entering the Buy to Let residential market was my best option for generating passive income, my next priority was to de-risk the project.

I Don’t Like Risk
For me, risk was a major consideration. Clearly I wanted a good return on my financial investment, but more of a consideration is that I did not want to harm my existing company in any way. This meant that I needed to know that I had sufficient money in the business to get everything set up and a tenant in place before cash ran out.

Or put it another way, I wanted to be able to de-couple the cash needed for the Buy To Let project from the day to day cash needed for my main business.

For this, I needed a good cash flow projection. So I hit the spreadsheets.

My Project Projection
I created a cash flow forecast for the next 12 months of my business. I was already tracking future cash flow of my business through an application called Float (which was linked to the FreeAgent online account system), but based on my principle of treble checking everything from different angles, I created a spreadsheet with my own analysis.

Outgoings came from the last 12 months from my companies P&L report (lifted directly from FreeAgent). I then averaged the expenses per month and then projected these forward for the next 12 months.

For income (main business), I put in my previously calculated day rate, and multiplied the rate by the number of workable days per month. For workable days, I worked out the number of week days per month, and then removed the bank holidays (there seemed to be lots in 2012), and my scheduled vacation days when I knew I would not be working. This then gave me really hard solid numbers for income and outgoings per month, and therefore a cash flow.

Next, I put in the taxes for the next 12 months. FreeAgent had done a lot of the hard maths for me in terms of VAT payable and Corporation tax over the next 12 months – so I put these into the spreadsheet. That meant I did not have to worry about paying taxes at any point – the money was already allocated. Another less thing to think about.

Finally, I put into the equation my current company bank balance and the money I would be investing in the business – and the result was – it worked. I could happily transfer a lot of the company cash into the Buy To Let property, and my company would stay afloat with a tidy cash balance left in the company account to tide me over any hiccups (sickness, loss of customers, etc). The numbers also tied up with the cash flow forecast that Float was projecting – as I say, nice to have the same answer from two different directions.

Want to Use My Spreadsheet?
If you would like to see/use this cash flow spreadsheet, you can download a version here. Note, that to keep my life simple, my calculations were all WITHOUT vat – i.e, as if I was not charging VAT on my invoices nor being charged VAT on my bills – as at the end of the day these generally sort themselves out. It also meant I did not have to project VAT payments.

Also, the numbers in the cash flow spreadsheet have been tweaked for public viewing – not really going to tell everybody how much I earn or amount of tax that I pay  ;-)

Over the next few weeks I am going to be talking about my Passive Income project.

As I have talked about many times in the past, I wanted a way of generating money for my company regardless of what I was doing – eating, sleeping, working – I wanted to generate more revenue and more profit.

The next few posts describe the reason for this decision, the when, the how and the results. I will include my spreadsheets, my maths and the outcome – warts and all.

It is worth noting that these entries were written between the Spring and Winter of 2012, and stacked up to be available once the project was completed and had settled down.

I hope they prove useful.

It started with a problem
At the start of 2012, my company closed its 2011 financial year end. Thanks to some hard work and a lot of luck, I found that my company was sitting on a fairly large chunk of money. After I had taken account of the money to be paid on the profits (Value Added Tax (VAT) payback to the government and corporation tax on the profits), my company had recorded its best year ever.

But this left me with a problem – what to do with the money. Yes, it’s a nice problem to have – but its still a problem.

As I type this, its April 2012. Inflation in the UK is sitting at around 3.8%, and the best bank account with interest is paying 3.45% (very long term, and locked away cash) – which means that each year that the cash is sitting in a bank account, the money is reducing in value by 0.35%. Or put it another way, for every £10,000 in the highest interest paying account available, it would actually reduce in value by £35 a year.

Ok, so maybe that’s not a lot, but a loss is a loss – there must be something better to be doing with the money rather than letting it rot in a bank account.

Plus, I really wanted to start generating money from passive income.

Ways of generating Passive Income I wanted to Avoid
There are many ways suggested on the web for generating passive income. They range from the boring and predictable (sell e-books, trade on e-bay) through to the more obscure (generate virtual currency like bitcoins, create server farms to enter competitions) and even to the more risky (investing in stocks, spread betting). None of these appealed to me – either they were too risky or too much hard work (I didn’t want to spend all my weekends wrapping items to be posted from e-bay sales).

I was also looking for a large return and minimum risk option (yeah, I know, the holy grail of investments). By minimum risks, I meant something that would still be worth the original investment should anything go wrong.

What I decided On – My Passive Income Plan
There were lots of options still on the table, including expanding my business, buying another business, investing in other companies (via angel investments) and a whole host more.  After listing all the options, weighing up the pros and cons, and looking at the risk verses reward – I decided that my company would invest in……. property.

Lots of companies have invested in property in the past – but on the whole this has been through investment in commercial property- buying offices or shops and then renting them out . But looking around the UK today, all I see are empty shops (or shops with £1 stores in them) or offices that are being given away for next to nothing. Invest in the difficult world of commercial property? No thank you.

But residential – that was the ticket for me. Residential properties have been dropping in purchase value over the last 5 or 6 years so at the moment is very cheap. And with the banking chaos, banks are not giving out mortgages so people are having to rent.

I checked with 5 estate agents in my home town, and indeed that was the case. People were desperate to sell their properties (so would provide a good bargain) and also in desperate need for rental property. The initial numbers looked good.

So that was my plan – I was going to buy 1 or 2 residential properties through my company (why I am doing it this way in later entries), and will rent them out.

Next, I will cover the maths of the project.

I have just decided to treat my wife to a quick weekend break in the spring of next year. I am taking her for a ‘city break’ to Venice, Italy. Its just a short stay – 4 days visiting this wonderful (I hope) floating city of canals, bridges and great Italian food.  The picture below is Venice from the air (I didn’t know its an island, did you?).

But, I am not here to gloat about going away next year.   No, if I am going to gloat about anything, it’s the cost of the trip. From England to Venice, 5 star hotel in the center of the city, flights and transfers is costing me just £22.

Ok – honesty time.  So it didn’t really cost me £22 – it actually cost me £590 – but… in terms of budgeting it only cost me £22, because I saved £570 though other savings.

I have talked before about cutting personal and business costs.  Well in October, I really pulled out all the stops.

For a lot of suppliers, I used the ‘I’m cancelling my account with you (now show me your best deal)’ trick with almost all my personal and business suppliers.

For instance, I struck a deal with Sky (my satellite TV provider) for a 50% discount for 12 months, which saves me £150 a year. And British Telecom (phone for home and business) gave me a 60% discount for 12 months – so that’s another £90. And so it goes on – totaling £570 of savings. Some were instant money back or savings, and some were discounts over time. So the savings were invested in a short break.

And the point is, anybody can do the same – all that is needed is advice about money.

I am not talking about specialist ‘Financial Adviser’ type of advice, its just a question of staying up to date with current advice, warnings of changes which may effect you (such as utility price rises), and taking advantage of the advice which is out there.

So if you are interested in saving/making money (both for yourself and your business), can I introduce to you, my definitive list of great money information (all the changes I made this month which saved me that money came from these sources).

There are a lot of resources out and I could list them all for you, but these are the cream of the crop:

Money Podcasts
BBC Money Box – For UK freelancers, this weekly show brings you all the latest personal finance news
BBC Money Box Live – Again for the UK, a weekly phone in show covering a different topic each week
Which Money Podcast – Another UK weekly podcast, with advice from the Which team
Radio 5 Wake up to money – Final UK podcast – a daily update on all things changing in personal and business money.
Planet Money – Three times a weekly, American based finance news
CNBC Fast Money – Daily updates on US Finance from the CNBC team

Money Blogs
MoneySavingExpert – For the UK, signing up to this weekly email feed is a must, with alerts on finance changes, utility rises, discounts and ways of saving money.  Sadly, there does not seem to be a US version of this site.
GetRichSlowly – A collection of articles about both reducing debt and growing wealth.
I will teach you to be rich – This site is run by Ramit Sethi.   It is less about saving money, and more about growing wealth.

Money Tweeters
@prairieecothrif -If you want to be inspired to live the life you have always wanted in a sustainable way, check out the connected blog.
@retirebyforty – He quit his corporate job! Now you can follow and see if he can stay out of the corporations for the next 40 years, whilst he shares money advice!
@TalkMoneyBlog – They talk about personal money issues and give free information, help and advice about the mortgage market, debt problems, credit cards and money saving tips.
@thisismoney – This is Money: news, conversation, top articles, tips, advice and opinion from the team at the UK’s best financial website.
@lovemoney_com – Lots of useful information to help you have a better relationship with your money.

If you have any other suggestions of blogs, podcasts or tweeters to follow, I would really love to hear about them.   Please, leave a comment below.