If you have ever been to a finance seminar, "how to get rich" conference, or read a Rich Dad,Poor Dad book, you will have heard this term. "Passive Income" gets thrown around a lot and has become overrused in my opinion. Nonetheless, it is an idealistic concept that is important to know. It can change your outlook on how you make your money.

In A Nutshell

Passive income is money you make from rental property, corporation, or enterprise that you are not actively involved in. Sounds nice, doesn't it.

Active income is the opposite. This is for most of us, our job. We have to be at work by 9, leave at 5, collect our paycheck, and do it again. If we don't show up for work anymore, we don't get paid anymore.

Portfolio income is the other option. These are investments or anything else you could put in an investment portfolio.

Finance Conferences and Workshops Keyword

All the books and seminars love this word. It is the ideal situation everyone would like to be in. Have all their money come from passive income. It is an achievable goal, believe me, but it takes a lot of work and for most people, having a mix of passive/active income is the most likely scenario.

Why You Should Want It?

A few reasons.

1. Earn more money without having to do that much more work.If you work for an hourly wage, you have to work twice as hard to double your income. Passive income sources require work up front and maintenance work down the road, but they are rarely require twice the effort. If they do, get out of them.
2. You become less dependent on your job.If you quit your job or get let go, you will still have some income to cover expenses. Softens the blow. If you want to take a leave of absence from your work, passive income can pay those monthly bills as well.
3. Eventually, you can be free of needing a job.This is when you can have enough passive income to cover your expenses. This takes time, but people have done it.
4. Investing time/money in passive income sources will generally give you more assets and a greater net worth. You can sell the source if you needed money in the future. It is kind of like putting money into a savings account.

Examples of Passive Income

Passive income can be a variety of sources. They aren't all 100% passive. You will need to watch them and invest some time into them on occasion, but they aren't a active job you are doing.

• Royalties from copyrighted material (books,music,video,educational materials).
• Rental income from real estate (this can be a job if you make it that way).
• Royalties from patents and inventions.
• Advertising from web site content.

I know. You can argue that some of these are jobs, but I can argue that some of them aren't as well. The point I'm interested in, is that there are things out there that if you invest some time in them at the beginning, they will not require as much work later to continue paying you back.

Rental Example

My wife and I purchased an up/down duplex in Calgary. We don't need a big house at this time, so we were interested in having a rental opportunity. We bought the house, fixed up whatever needed fixing, and then put an ad in the paper. Our renters pay us every month and we can put that money in the bank. We get a few tax-writeoffs for our house expenses and still have to pay tax on the rent money.

Now we still have to do work. Make sure the tenants are happy. When they leave, go repair anything thats needs fixing, pay for any advertising, be around to show the place to people looking, and the list goes on. There are a lot of responsibilities. But you know what, that is what they are. Reponsibilities. If you are responsible to make sure things are in order, then everything runs smoothly.

If I added up my time and how much we have made from it, it pays a way better hourly rate than my current job. I can go months without doing anything and then work a Saturday to do some minor repair and inspect things. I can also have someone else to look after the place when I'm gone for a month. I can't do that with my normal job.

Other Examples

Royalties from books, patents, and music is a tough one. These require a lot of upfront work and some talent. They also will need some marketing after the fact, but once they get rolling, can provide royalty payments for years to come. It is these types of passive income that can really shoot your income up.

Advertising on web sites is another one that is very popular right now. This takes work though. It is what this website is about. Google Adsense and a lot of other ad programs will help you get ads on your page and pay you for it.

If you write an article two years ago and people still view it today, you still have a potential revenue source without having to do any upkeep on it. This still takes a lot of time to build the site and market it. There is the added flexibility of being able to maintain it anywhere there is an internet connection.

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I never go in the dollar stores and was one just the other day. These places are awesome. Do you every need something, but you don't feel like buying it because it's $10 to $20? Of course you have.

There was stationary, batteries, toiletries, tools, household items, you name it.

I don't have much else to say today so I'm writing about this. If you want to save a few bucks on this kind of stuff. Go to your local dollar stuff and get it there. Especially if you don't care about having name brand.

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My wife and I saw Famous Puppet Death Scenes last night at The Grand in downtown Calgary. I didn't have a clue what to expect from this performance.

It is basically a collection of scenes using puppets and even children's toys. The program said the scenes were collected from a variety of sources around the world. Some are done in french, italian, german, swedish, english, and I'm not even sure what else. They all feature some sort of death or multiple deaths.

It was a good mixture. A bit artsy. There were funny scenes, more serious ones, and some I didn't even understand. Some of the puppets had a lot of detail put into them and looked awesome. There was even one seen where the puppeteer was holding an old woman puppet. He closed her eyes and then slowly moulded her face until she was a beautiful young woman with smooth skin. "Always beautiful" in eyes of the husband? That was my best guess at the message.

Opening night is $50 and it's $40 for other nights which is a little too steep in my opinion. Student tickets are only $20, which is more what this play should be priced at. So for that price, I would definitely recommend it. For anything more, you can go see a more mainstream production at Theatre Calgary.

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This was a very useful metric I found a couple years ago. It tells you how "wealthy" you are. This is a bit of a biased look. Wealth by the wealth ratio, means how easily you can provide for yourself using passive and portfolio income and not have to work. If you don't know what passive income is, read my article Passive Income - What Is It. Portfolio income is money you make from your stocks and mutual fund investments.

In a nutshell, passive income is money you earn without having to actively work for it (like a job).

Formula

You take your total annual passive and portfolio income and divide it by your income needs (how much money you spend in a year). Then multiply it by 100. This will give you the percentage that comes from passive/portofolio income.

Where Are You?

For those of you who don't have any passive/portfolio sources right now, this will 0%. So 0% of your income needs are covered by non-active income. All the money that goes to pay for those expenses comes from your job.

When you achieve 100%, you technically don't need to work at a job anymore. Your other income will meet what you spend. The goal should be to exceed 100% by as much as possible. At this point, you are truly wealthy.

Below is an example of the calculation. Pretend this is a real example. This is a two income family with no kids. There income more than covers their expenses. However, if you were to take away one income (they have a baby and one parent will stay home or there are other circumstances) the one income would still cover it, but not by much. There is also zero passive/portfolio income in this situation. So the wealth ratio is 0%.

No Passive Income

Active Income			Expenses
Wage 1	$3000		Mortgage	$1100
Wage 2	$2800		Utilities	$400
			House Insurance	$50
Passive Income			Property Taxes	$120
None	$0		Car Insurance	$120
			Petrol	$150
Portfolio Income			Maintenance	$100
None	$0		Groceries	$250
			Other	$200
			Entertainment	$200
Total	$5800		Total	$2690
Wealth Ratio: 0%

Here is the next example. The couple decides to rent out the basement of their house (assuming it had the right layout to do so). They charge $750/month, but do incur $100/month in new costs on average for maintaining their rental. As you can see they now have some passive income and it covers just under 27% of their monthly expenses. Thus their wealth ratio is 27%.

Some Passive Income

Active Income			Expenses
Wage 1	$3000		Mortgage	$1100
Wage 2	$2800		Utilities	$400
			House Insurance	$50
Passive Income			Property Taxes	$120
Rental	$750		Car Insurance	$120
			Petrol	$150
Portfolio Income			Maintenance	$100
None	$0		Groceries	$250
			Other	$200
			Entertainment	$200
			Extra Rental Costs	$100
Total	$6550		Total	$2790
Wealth Ratio: 27%

Quality of Living

Notice that how much you spend enters into this equation? People who have high standards of living are going to need more money. Ever wonder why you can go to those rich acreage neighbourhoods and there isn't anybody home during the day. No one is out walking their dog or anything. They have to work to pay the mortgage, taxes, and upkeep of their houses.

I'm not saying to live like a peasant, but a lot of people spend according to their income. It is our natural tendency to spend the extra money we make and live "on the edge". If we kept the same spending habits we had today and then create enough passive income to match our current day salary, then we would be laughing. Most of us, however, would take the extra cash and have fun.

Is It Easy to Obtain 100%???

NO. I'm not going to beat around the bush. It takes work and time and more work. You need to take it one step at a time. These seminar guys are kind of annoying actually. The promise the moon, but don't discuss reality very much.

My first recommendation would be to look for opportunities for passive income. I've sorted these on simplicity and initial investment from smallest to largest. The larger ones typically have better returns and more passive income is possible.

• Put $500 into dividend paying stocks (or even bonds). This is probably the poorest performing passive income source, but at least it pays you something and the money is saved. It is the cheapest way to get out of the 0% passive situation.
• Do you own anything that can be rented out? Garage, land, tools, furniture, computer equipment, photography equipment, etc.
• Start a website where you can put some Google Ads. Just write reviews on products you have purchased. Try and find a free site that will let you put ads on it. You might need a geek buddy to help set it up.
• Are you looking to buy your first house? Look for one with a basement suite or a garage that you are willing to rent out.
• Sell a product. Develop a website, get a mailing list, advertise it, etc. What is a product? Anything someone wants to buy. Education material, software, or even a toy.

Note: A lot of these can be a job if you set them up that way. It is important that they are set up to require the least amount of work possible.

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I have owned a Nikon D70s for a year now and it has been a great camera. Unforunately, I do find that when using the built in flash, it tends to make the pictures look overexposed and too white. It looks like you were using your flash, which you don't necessarily want.

I notice this is especially bad when there are people in the photo.

I have found a few things to tone this down considerably and make your photos look normal again. All these settings cannot be changed in the "automatic modes". You need to be in the manul or priority modes.

Set Your White Balance

I don't know why, but the D70s doesn't want to set the white balance to "Flash" when it actually uses the flash. Try it. Take a photo with white balance set to automatic and the flash up and then manually set your white balance to flash (the little lightning bolt) and take another photo. The colors will be drastically different.

Note: If you shoot in RAW mode, white balance doesn't really matter. You can adjust this on your computer at home with no loss in quality. It is annoying and time consuming though.

Turn Down Your Exposure Level

Turn down your exposure level by a third. This is the little +/- button near your shutter button. Hold it down and use your sub-command wheel to adjust it down by a third. This will underexpose your photo slightly and tone down those bright spots caused by your flash.

Turn Down Your Flash Level

On the left side of your camera just down from your flash is the little lightning bolt sign on a button (the one that pops up your flash in the manual modes). When you are in the custom modes you can hold down this button and use your primary command wheel to adjust the flash level. I will turn it down by two thirds usually to tone down the brightness of the flash.

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I went to see this play last night. Definitely a different step from what I have seen so far with my Theatre Calgary's subscription this year.

Basically, this 3 person play is about an older, British couple who have been married for over 30 years and their son. They have been going through marital problems for sometime and it comes to a head when the son comes home to visit one weekend when the husband decides to leave.

All in all, this play was quite good. The play itself is very serious, but there is a bit of humour through the reactions of emotionally overcharged wife and the emotionally withdrawn husband. It offers a deeper look into their experience and how the deal with the situation (or don't).

The play is done with the same set for the entire thing. The lighting changes periodically to just focus one or two characters to "change the setting" on occasion, but for the most part, it all takes place in the family home.

If you want to see a more serious, real life type of play. I would definitely say to go see it. The acting is quite good.

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We are well into a new year and you need to be send away for a tax deduction if you deserve it. Why would you do this? If you are getting a tax refund every year, then you are overpaying your taxes. You might as well put that money back on your paycheque every month.

Why would you not want to do this? Some people really like getting that money back in April/May. It is a way of saving some money. If you calculate your deduction form wrong, you might end up owing money which would not be fun.

This most commonly happens if you are contributing to your RRSP on your own or with a broker that is not affiliated with the "corporate plan" at work (if you have one). Your RRSP contributions are not taxed so the government needs to know about them.

Other reasons you might be charged too much tax:

• Child care expenses
• Alimony or other support payments - If the government doesn't know you situation until the end of the year, you be squeezed more than you should be.
• Employment expenses - If you have expenses that can be deducted because of your work (most salary jobs don't work like this), you can write them off.
• Interest on investment loans - These are RRSP investment loans or loans for any other "dividend" paying investments.
• There are other deductions as well. Talk to your accountant or whoever does your taxes.

How Much Will You Get Back

I have managed to squeeze out a little over $200/month. I max out my RRSP every year though, which a lot of people don't do. If you have other types of deductions, you could probably easily hit this number as well.

How To Do It

Tax deductions are fairly easy and I have done them each of the past 3 years. You have to do a little math, but that is about it. The form is available here on the Government of Canada's website.

T1213 - Request to Reduce Tax Deducations at Source

It is fairly simple to fill out. The form asks for numbers in a half dozen spots. Simply fill them out. How much your salary is, how much you will contribute to you RRSP, your support payments, etc.

The RRSP section asks for details on it. I just attach a sticky note to the form with the following:

1. My annual gross salary.
2. My RRSP contribution room. This will be 18% of your salary in the previous year (up to a max of $18,000 I believe) added to whatever room you still have left. So I would just take what I made last year and times it be 0.18. This will be my new room this year.
3. Your current monthly contributions.
4. What you will have contributed during the year. This is the monthly contributions multiplied by 12 plus whatever lump sums of money you have put in there as well so far (you will have only had a month or so to do this so it is probably 0).
5. The RRSP account number
6. The brokerage, broker's name, and contact information.

This gives them an idea of why you want the deduction. If you contributing on a monthly basis, then they can assume you are legitimately needing a tax deduction because of your RRSP.

Child care expenses and support payments should also have some extra attached documentation outlining how much money is going there.

When you are done filling it out. Just send it in the mail to your nearest federal tax center. They will get back to you in "government time" with a formal letter stating whether you are approved or not. Your human resuorces department will need this letter to give you your tax deduction. They don't have the authority to do it otherwise (they can get in trouble).

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I recently attended a StockScores seminar here in Calgary. Was a very interesting presentation put on by Tyler Bollhorn. Basically, it is a sales pitch for an educational program he offers on teaching yourself to buy and sell stocks effectively.

I was very impressed with the seminar and I would recommend anyone to go check him out when he is in town. He does free seminars in Toronto, Edmonton, Calgary, and Vancouver.

His company has a website called StockScores.com. On this site you can utilize their instructional material and technical analysis tools.

Underlying Principles

There are some underlying principles that he outlines. You need to attend a seminar to here them in a clear manner. He gives good examples as well. Basically he outlines a couple of things that I agree with.

1. The Market Is Efficient - There are events that will happen to the business and the market will reflect these quickly and efficiently. If it is good, it will go up. If it is bad, it will go down.
2. Be Prepared to Lose - Set stop losses. Don't be afraid to get out of a bad stock. You should plan on losing on trades, but by a small margin.
3. The Market Is Not Fair - Yes. There are people out there with more privileges to information and can react before you can.

I especially like the last one because it reflects that you can't predict where a stock will go before everyone else.

Sentiment and Signal

There secret tool are two indicator values that are calculated for a stock every hour. The Sentiment and the Signal. Basically it is a formula that calculates the given Sentiment (market's mood toward a stock) and Signal (abnormal behaviour toward a stock). When these values pass 60 and 80 respectively, it indicates a stock to watch.

The Sentiment, in my opinion, was basically if the stock was rising in price and the Signal was if the stock has greater volume than normal. The Signal might indicate that people with more knowledge about the company are buying (or selling) the company.

Chart Patterns

If a stock hast he 60/80 values for Sentiment/Signal then it is time to look at the chart patterns. This is basic technical analysis. You can read about this in any technical analysis stock trading book or research it on the web.

Picking a Good Stock With Their Method

Referring back to the principles, the method basically tries to identify stocks that have just begun to react to events in the market and will be increasing over the near/long term. Then you must look at the stock and try to figure out the risk and reward. Is its upward possibilities going to be better than its downward possiblities.

I am not quoting him word for word, but as close to what I understood as possible. The criteria is as follows:

1. Sentiment Score is Greater Than 60
2. Signal Score is Greater Than 80
3. Good Chart Pattern
   • The price breaks through an "resistance" that it hasn't been able to overcome in the recent past.
   • The stock had low volatility in the recent past.
   • The was abnormal activity when it broke through resistance (high volume compared to normal).
   • There is optimism. The stock price is going up and the chart follows a recognizable pattern that indicates possible appreciation in value.
4. Reward Outweighs the Risk

   By looking at the chart, what is a reasonable expectation for the price to rise to and go down to. If the downside is greater than the upside, then you should walk away.

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I'm trying to learn the StockScores techniques I learned at a seminar last week so this will be my new thing.

Every week I am going to pick a few stocks that I think will go up in the near future and keep track of them. I always same I'm going to do this, but end up quitting after a week. This will force me to keep track better. I am going to assume I put $1000 into each pick and the commissions will be $30 on a buy and $30 on a sell. I will post a summary periodically on what has happened.

I explain why I am picking each stock, I will "pretend" buy it for the last trade price and I will also set a "stop loss" price for each stock. If it ever gets to that price, I will have assumed that I sold it then. I will follow my stocks every week and pick and exit point whenever.

Note: These charts update every 15 minutes, so keep in mind the day of this post. Any chart activity after that day I would not have seen yet.

Picks For Today

Note: There is a recap of these picks and what happened in Recap of Stock Picks From February 12th 2007.

T.THR

Resource sector. Was gone down the past while, but is trending up. Rising bottoms look like they forming a penant. I would expect it to break through this week sometime. Buy at 11 cents and stop loss at 9 cents.

T.HNT.UN

A real estate trust. A few days ago it formed a penant chart pattern and broke through resistance on lots of volume. I am going to buy it at $2.74 and my stop loss will be at $2.40.

T.RBO.UN

Another trust. Broke through resistance a few days ago with lots of volume. I am going to buy at $9.35 and my stop loss is $9.00. Upside doesn't look like it could be as big as the downside, so I'm wary, but I will try it.

T.EMC

Broke through resistance with volume. I am going to buy at $11.38 and put a stop loss at $10.50.

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I added a favicon to my site the other day. What is it? It is the little picture beside the web address for my page. It will even store that picture in your favourites/bookmarks.

This is all assuming you have a new enough browser.

How do you make one. It was simpler than I thought. All you need to do is place a file called favicon.ico in the base folder of your website. It should be the same place where your index.html or index.php page for your home page.

How do I make a favicon.ico file? I did it as a gif file format. Basically, I took a picture that I wanted to use. For mine, I had a picture of a sunset. I cropped the picture in Microsoft Paint (on every Windows computer) so that I had the picture I wanted and it was 16 X 16 in size. I saved the file. Then I renamed it as favicon.ico and uploaded it to my server.

That's it!

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