Monday, July 9, 2012

Passive Income

I have seen a lot of other personal finance bloggers talk about increasing their passive income. Right now I have a little bit of passive income from my savings accounts, but I’d like to increase it. I have also been making some money doing blogging, but I still have to put time into it, so I don't know if that would be considered passive or not. If I stop blogging I might get a little bit of passive income, but it would probably eventually dwindle away to nothing. Right now I have nearly $20,000 in the bank, however the interest rate is so low, I only made $11.24 last month. It’s better than nothing and I didn’t really have to do any actual work for it.

I recently heard about Lending Club which allows people to lend others money. There is a little more risk involved, but the returns are much better. It looks like if you diversify your loans and play it safe, you can still make about 6% even if you consider about 1 to 2% of the loans will default. One negative thing is you have to tie up the money for either 3 to 5 years. I will need to use the majority of the money I am saving within the next 3 years, so I wouldn’t put it all in there. Currently I have $4,000 set aside as an emergency fund. I know it’s not much, but I believe my husband’s job is pretty secure, and if anything were to happen we’d probably get enough warning to stock up. There is an opportunity to sell the loans to others, so the money can be liquidated if needed, but it probably wouldn’t be as liquid if it were in a regular savings account or CD. What are your thoughts on using a site like Lending Club? Would it be a good place for me to put $4,000 in?

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