I’m currently reading Hot, Flat, and Crowded 2.0 by Thomas Friedman. The book mainly discusses the ecological crisis we are facing, but the first three chapters also discusses the 2008 financial crisis. Ecological crisis and financial crisis may seem unrelated to each other, but Friedman argues that they actually have the same cause:

The way we were creating wealth had built up so many toxic assets in both the financial world and the natural world that by 2008/9 it shook the very foundation of our markets and ecosystems. That’s right, while they might not appear on the surface to have been related, the destabilization of both the Market and Mother Nature had the same root causes… The same recklessness undermined all of them.

Friedman explains the causes in more details, but they actually come down to just one thing: greed – the desire to get as much as possible for oneself without thinking about how things would be for other people or future generations.

Greed is the reason why people made irrationally risky investment in subprime mortgage assets. Greed is also the reason why people are depleting natural resources at an unprecedented rate. They want to increase their quality of life without thinking about whether or not they do it in a sustainable way.

The problem is people usually aren’t aware of the coming danger until everything is too late. Greed blinds them. Here’s what they might think:

1. Nothing could go wrong. We have done this for years and nothing negative happens. Besides, the probability that things could go wrong is small so there’s no reason to stop doing it.
2. Everyone is doing it. If I didn’t do it, I wouldn’t enjoy the rewards that everyone else is enjoying.

The scary thing here is this kind of thinking also caused the collapse of many civilizations throughout the history. The book Collapse by Jared Diamond has many such stories. Here’s one of them:

The overall picture for Easter is the most extreme example of forest destruction in the Pacific, and among the most extreme in the world: the whole forest gone, and all of its tree species extinct… The further consequences start with starvation, a population crash, and a descent into cannibalism.

But why did the deforestation happen? Here it is:

… competition between clans and chiefs driving the erection of bigger statues requiring more wood, rope, and food.

This, again, is greed at play. Greed made the people exhaust their resources despite the apparent danger. Didn’t they realize that exhausting their resources would cause their civilization to collapse? Greed had blinded them, obviously.

The same thing applies to individuals. A greedy person may become obsessed with money or prestige at the expense of his health or relationships. Greed blinds him to the coming danger until everything is too late.

This is an important reminder for all of us. Beware of greed. Here is a simple rule:

Where there is greed, there is a silent danger.

Photo by NeoGaboX

Do you want to make extra money? I believe knowing a few ways to supplement your income won’t hurt. You might not need them now, but when you needed them it’s nice to know the available options.

There are many ways to earn extra income, but here I make a few restrictions to prevent this post from being too broad:

1. I only cover how to make extra money online. This way you can work wherever you are in your spare time.
2. I only cover ways to make money in relatively short time. I don’t include anything that takes weeks or months to get results. That’s why I don’t cover things like blogging or revenue sharing with article sites (because building the necessary traffic could take a long time). On the flip side, most of the ways I discuss here won’t give you passive income. They require you to actively work to earn.

For each of the ways I’m about to share, I list some relevant web sites you can use. I don’t test all of them, so please read their terms before you decide to use them.

Without further ado, here are 9 ways to make extra money online:

1. Writing

Writing is a popular way to earn side income. The world is always hungry for good content and if you have writing skills you will find many opportunities online. Here are some sites that offer article writing jobs:

• Associated Content
• Demand Studios
• TextBroker
• Constant Content

You can also write tutorials. Tutorials are more difficult to write than ordinary articles since they contain step-by-step guide on a topic. But they also pay more. The sites below pay between $150 to $300 for each published tutorial:

• Tutorial9 (design and blogging)
• Tuts+ (design, photography, web development)
• Gomedia (design)

2. Designing

Graphic design skill has a lot of demand these days. You could design logos, posters, or even entire web sites. Browse the sites below to find design jobs:

• Envato Marketplaces
• Graphic Leftovers
• 99Designs

3. Programming

Do you know how to program? Then what about taking some programming jobs online? You can find them at:

• Rent A Coder
• ScriptLance

4. Tutoring

If you liked to teach then online tutoring is perhaps the way to go. The nice thing here is you don’t need to physically go to a certain place to tutor. You can do it in the comfort of your home. Here are some web sites that offer the opportunity:

• Tutor.com
• TutorVista
• TransWebTutors

5. Selling stock photos

Many people like photography. If you happen to be one of them, why don’t you sell your photos for profit? These sites help you sell your photos:

• iStockPhoto
• Fotolia
• Shutterstock
• Dreamstime

6. Microworking

With microworking, you make money by doing simple tasks that you can usually finish in a few minutes. They pay you a little for each completed task, but because the tasks are simple, you could complete a lot of tasks in a day. Here are two sites for microworking:

• Amazon Mechanical Turk
• Microworkers

7. Selling stuff

Obviously, you can make money by selling stuff. Do you have items in your home you no longer need? Other people may want to buy them from you. Just list them at:

• eBay
• Craigslist

On the other hand, you can also sell your own creations. They could be T-shirts, post cards, bags, and pretty much anything you can imagine. Here are some places to sell them:

• Etsy
• CafePress
• RedBubble

8. Website flipping

If you’re good at making web sites, you can sell them for profit. It could make you more than $100 for a few hours of work. Here are two popular places for website flipping:

• Flippa
• Digital Point

9. Translating

Do you master foreign languages? If you do then translating is something you might want to consider. There are a lot of translation jobs online. Here are some sites that offer them:

• ProZ
• TranslatorsCafe
• Translatorsbase

***

In addition to the specialized sites listed above, there are sites that offer opportunities in more than one category. Browse them to find various opportunities:

• Guru
• Elance
• Freelancer

Do you know other ways to make extra money online? Feel free to share them in the comments.

Photo by Don Hankins

What is your favorite way to make money? Obviously, there are many ways to make money. You can work for a company or have your own business. You can earn money from salary, dividend, commission, bonus, and many others.

My favorite way is to earn passive income. I’m sure this is not new to you. I’ve heard about it for years but only recently did I begin to understand its nature. I’m not saying that this is the best way or that everyone should do this. This is just the way I like most.

The main reason I love passive income is freedom. With passive income, I don’t need to be actively involved to make money. I do need to work hard to build the system in the beginning, but once it works I can leave it alone and the system will continue earning me money. All I need to do is checking it every now and then to make sure that nothing goes wrong. I can improve the system if I want to, but that’s optional. I can spend my time on a hobby or a new project.

Differences Between Active and Passive Income

To better understand the nature of passive income, here are some differences between active income (income that requires your active participation) and passive income:

• With active income, you can quickly get full-time income. For example, if you receive monthly paycheck then you will get full-time income within one month. With passive income, it may take a long time before you get it.
• With active income, when you stop working your income drops to zero or near zero. When you work you maintain your income level or slightly increase it. With passive income, when you stop working your income stays at the same level. When you work, you increase your income level.

From these two differences, you can see that building passive income is long and difficult. But once you make it, you will get the big reward of financial freedom.

Steps to Build Passive Income

From the characteristics above, here are the steps you should follow to build passive income:

1. Build a side business. Since it takes a long time to reach full-time level with passive income, don’t leave your day job. The active income from your day job will cover your expenses. At the same time, you should start building your passive income through a side business. Start early because it will take time. These passive income resources might give you some ideas.

2. Focus. It’s important that you focus on just one business and make it successful. Don’t be all over the place. There’s a price to pay for something to be successful and only with focus can you pay the price before you burn out.

3. Leave your day job. Once your passive income reaches full-time level, you can leave your day job. This is where you start enjoying your financial freedom.

4. Diversify. Now that you have more time, you need to diversify your sources of passive income. Work on new income sources. This way when something goes wrong with one source you still have other sources to cover you. This also is a good way to increase your income over time.

Photo by schoschie

One of the ideas I learn from I Will Teach You To Be Rich (my review) is the importance of focusing on the big wins. Focusing on the big wins means focusing on things that make the most difference. Instead of spreading your effort on many different things, you should focus only on things that give you the most return.

In personal finance, one way to apply it is by focusing on the big expenses (like the interest you pay for your mortgage) instead of the small ones (like the three-dollar latte). Many people do the opposite by focusing on the small expenses instead of the big ones. As a result, they lose money more than they save.

But why don’t people naturally focus on the big wins? Isn’t it clear that we should focus on things that make the most difference?

Unfortunately, that’s not case. One reason is that the big wins are often not obvious. You can’t see them right away. You can immediately see that you save three dollars by not buying latte, but the amount you save on mortgage interest can’t be seen immediately. You can only see it by looking at the big picture and thinking long term.

That’s why it’s important to see the big picture when it comes to finding big wins. See how things will be in ten or twenty years. Think long term. What seems like a good deal in the short term might actually be bad in the long term. On the other hand, things that don’t give you immediate return in the short term might give you great return in the long term.

One more important thing to keep in mind is that not only should you identify big wins to get them, but also you should identify big losses to avoid them. If you focus only on the wins then there is a danger that one big loss could wipe them out. You need to be aware of potential losses as well so that you can avoid them before they hit you.

I learned this from personal experience. A few years ago, I went overseas with my family. Since I’m a book lover, I was happy to find used book stores that sell good books at discounted prices. So I bought many books. Only at the airport was I aware that all those books made my bag overweight. I needed to pay a hefty overweight fee that wiped all the savings I made from the discounted books. I loss money, in fact.

So don’t forget to look at both sides of the coin.

Photo by BombDog

Optimizing your personal finance is one of the most important things to do. The reason is that your financial situation affects other parts of your life. If you had financial problems then it would be difficult for you to live life to the fullest.

That’s why I was glad to receive a review copy of I Will Teach You To Be Rich by Ramit Sethi. The book aims to help you optimize your personal finance. Though the word “rich” in the title might mean different things for different people, here is what it means for the author:

What does rich mean to you? For me, it’s about freedom — it’s about not having to think about money all the time and being able to travel and work on the things that interest me.

I agree completely. Being rich is not about having a lot of money. It’s about having the freedom to enjoy life without financial worries.

Inside I Will Teach You To Be Rich

The book starts with an introduction followed by nine chapters.

Introduction

When it comes to personal finance, the worst thing you can do is not taking action. Don’t wait until you get the perfect solution before you act. Instead, use what the author calls The 85 Percent Solution: a solution that isn’t perfect but is good enough to get you started.

To help you keep the balance between enjoying your life and controlling your expenses, here is a principle you might find useful:

Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.

1. Optimize Your Credit Card

In the long term, having good credit can help you save thousands of dollars on large purchases because it can get you lower interest rate. So it’s essential that you improve your credit. The most important  thing you should do to improve your credit is paying off your credit card bills each month.

2. Beat the Banks

The next thing you should do is setting up the right bank accounts. You need to have two different accounts: a checking account and a saving account. Having these two accounts makes managing your money easier.

When setting up your accounts, one important thing you should pay attention to is the fees. Fees are often more important than interest rates because they could easily wipe out the interest you earn. Get yourself accounts that have the lowest fees possible.

For saving accounts, find one with high interest rate. An online saving account usually meets this requirement.

3. Get Ready to Invest

Investing is essential to get rich. In fact, the author said that investing is the single most effective way to get rich. Through proper investing you can achieve your financial goals and have enough money for retirement.

This chapter outlines five steps you should take to invest. The first step is contributing to your 401(k) to get your employer’s match. Then you can do the next steps to bring your investing to the next level.

4. Conscious Spending

Conscious spending means you make the decision of where you are going to spend your money. A Conscious Spending Plan has four major categories where your money can go to:

• Fixed costs
• Investments
• Savings
• Guilt-free spending money

One way to implement your plan is by using an envelope system in which you allocate money for each category. Once you spend the money in a category you can’t spend more, but you can transfer money from one category to another.

5. Save While Sleeping

You should automate your finances as much as possible so that you can spend your time on other things. For that, the first thing you should do is linking your accounts together. Then you should set up automatic payments and automatic transfers between those accounts.

6. The Myth of Financial Expertise

Financial expertise is a myth because the so-called financial “experts” don’t know what will happen in the future. You can often earn more by investing yourself because that way you minimize the fees.

7. Investing Isn’t Only for Rich People

Above anything else, the volatility of your portfolio depends on your asset allocation. So make sure that you have the proper allocation between different asset classes. You can do this by picking a portfolio of low-cost funds but you should remember that you should rebalance it regularly. If you don’t want to rebalance then pick a lifecycle fund where it is done automatically for you.

8. Easy Maintenance

This chapter gives you tips to on how to properly maintain your investments. It discusses how to rebalance your portfolio and when to sell your investments, among others.

9. A Rich Life

Here you can find many specific topics in personal finance such as student loans, wedding, salary negotiation, buying car, and buying house. It also gives you a summary of what it takes to get rich:

Getting rich isn’t about one silver bullet or secret strategy. It happens through regular, boring, disciplined action.

Conclusion

I Will Teach You To Be Rich is full of practical advice to improve your personal finance. Rather than giving you abstract ideas of what you need to do, it tells you exactly what you need to do and why. The book especially targets people in their 20s and 30s but its advice is applicable to other age brackets as well.

One differentiating characteristic of the book is its focus on the “big wins”. Instead of focusing on cutting small expenses, it focuses on cutting big expenses  like the interest you pay for major loans. The author argues that many people save three dollars on latte but forget to improve their credit and that costs them thousands of dollars.

In my case, since I don’t live in the U.S. I need to adapt some of the advice given. But I get a lot of ideas to implement.

In the post Making Money with a Purpose, I wrote that having the ability to make money is more important than having money. Now I’d like to discuss how to increase your ability to make money and therefore make more money.

Let’s start from the beginning by answering a basic question: what is money? Steve Pavlina in his book Personal Development for Smart People has a good answer:

The money you earn is society’s way of saying: “In exchange for your valued contribution, you are hereby granted the right to extract equivalent value from society at a time of your choosing.”

So the amount of money you earn is proportional to the amount of value you contribute to the society. What you need to do to make more money is simple: contribute more value to the society.

There’s a catch though: the one who determines the value of your contribution is the society, not you. In Pavlina’s words:

Your income depends on the social value of your work, not the personal value. Personal value is whatever you say it is. Social value, however, is determined by social consensus.

So here is a key principle:

To make more money, contribute more social value.

Here are several things you can do to contribute more social value and thereby make more money:

1. Identify your personal strengths

First of all, you should identify your personal strengths. What are you naturally good at? Working on your strengths will give you much more in return than working on your weaknesses. So it’s essential that you identify your strengths.

Action list

• Take the test in Now, Discover Your Strengths or StrengthsFinder 2.0.
• Create a life map and see the patterns of your strengths.

Further reading

• 12 Essential Lessons to Maximize Your Personal Strengths

2. Do your deliberate practice

By identifying your personal strengths, you should find where you can be very good at. For example, you may find that you can be very good at playing piano or programming. What you need to do is improving your skills there until you reach world-class level. That way you can provide tremendous value to others.

To improve your skills, you need to do deliberate practice. Here is a good explanation of deliberate practice:

Deliberate practice refers to a form of training that consists of focused, grueling, repetitive practice in which the subject continuously monitors his or her performance, and subsequently corrects, experiments, and reacts to immediate and constant feedback, with the aim of steady and consistent improvement.

It is generally accepted that this form of training calls for approximately 10,000 hours of concentrated effort if one is to achieve the optimum level of expertise.

Action list

• Decide the field where you want to do your deliberate practice.
• Allocate at least two hours a day for your deliberate practice. The more the better.
• Aim for consistent improvement.

Further reading

• The Role of Deliberate Practice in the Acquisition of Expert Performance
• Finding Niche: Where to Invest Your 10,000 Hours of Practice

3. Diversify your skill set

Aside from the skills you choose for your deliberate practice, you need to have other skills in your skill set. These skills complement your main skills and help you provide something unique (see point 5 below). You don’t have to be very good at them, but you should be good enough.

Action list

• Choose a skill to add to your skill set. This list of competencies may give you some ideas.
• Spend time to learn the skill. A good way to do that is by creating a project where you can apply the skill.

4. Expand your network

Your network is essential in helping you make more money. There are two reasons for that:

1. Your network helps you find demand
   It can connect you with those who need your solutions. It helps you find opportunities.
2. Your network helps you find supply
   When someone needs something that you can’t provide, turn to your network to find those who can. Or find someone whose skills complement yours.

Of course, to expand your network you must be willing to help the people there.

Action list

• Help someone in your network today.
• Meet new people and follow up.
• Join Twitter. It helps you connect with others (by the way, here is my account).

Further reading

• 106 Tips to Become a Master Connector

5. Find your unique value proposition

What value can you contribute to the world that others can’t? Answering this question isn’t easy but it will help you differentiate yourself. So take the time to find your unique value proposition.

Action list

• Read and apply the tips in Career Tips: How to Find Your (Potential) Unique Value Proposition.

6. Build your personal brand

After finding your unique value proposition, you need to get the message out to your target audience. If people don’t know you then they won’t come.

For that reason, you need to build your personal brand. By building your personal brand, people know what they can expect from you so they will come to you when they need it.

Action list

• Create your one-liner.
• Create a profile on LinkedIn.
• Buy a domain and create a web site.

Further reading

• The 10 Immutable Laws of Personal Branding
• 12 Things You Can Do Today to Strengthen Your Personal Brand

7. Open your eyes for opportunities

Opportunities often come in unexpected ways. You need to open your eyes and see what is around you. That’s how you improve your luck:

Unlucky people miss chance opportunities because they’re too busy looking for something else. Lucky people see what is there rather than just what they’re looking for.

Since they are observant, lucky people often see things that other people don’t.

Action list

• Watch trends. Here are three sites that help you do that:
  • Delicious Popular
  • Google Trends
  • TweetMeme
• Observe how people do things and what problems they have.
• Keep an idea journal.

Further reading

• How to Get Lucky
• A Simple Guide to Finding Opportunities

8. Provide customer-oriented solutions

When you see a need, look at what you have (your skills and network) and find a way to provide a solution. The broader your skill set and network are, the more likely you will find something.

Your solution should be customer-oriented and satisfy the customer. If the customer is satisfied, she may spread the word about you.

Action list

• Combine your skills and tap into your network to provide a solution.
• Aim for customer satisfaction.

9. Build upon what you build

I read about it in the blogging context, but it applies to making money as well. One of the best ways to provide more value is by building on the value you already provide. This is smarter than starting from scratch because you can leverage what you have.

Action list

• Look at what you have and ask yourself:
  • How can I use it to build something new?
  • What extensions can I add?
  • What related markets can I reach?
  • What untapped opportunities are there?

***

Applying these tips will take time, but it will help you make more money in the long term. Like Moliere said:

The trees that are slow to grow bear the best fruit.

Photo by Jeff Belmonte

In the post How to Save Time in the Long Term, I wrote that we need to minimize our potential regret to save a lot of time in the future. The reason is that we lose more time not by how we do things but by what we don’t do. So I made a list of things that might give me the biggest regrets in the future if I don’t do them. This is my personal list but many of the items are applicable to everyone.

One of the items in my list is income diversification. Not diversifying my income is something that could make me regret in the future. The risk is clear: I would get financial problems if my primary source of income disappear. There is definitely no fun in seeing your income drops to zero or near zero especially when you have a family to feed. I’m afraid that this is a potential problem for many people, in particular those who work as employees. If for some reasons they lose their jobs, there is a possibility that they will fall into financial problems.

That’s why you need to diversify your income. Diversifying your income gives you a safety net to prevent financial problems. Here are some tips on income diversification:

1. Start early

Building new income streams to the level where they are substantial enough for a living may take long time. So it’s important that you start early. Don’t wait until the financial problems come. While you can get back many things you lose, you won’t get back lost time. Use your time wisely.

2. Explore opportunities through side projects

Exploring new opportunities is a must if you want to diversify your income. Creating side projects is perhaps the best way to do that. It allows you to explore opportunities without sacrificing your primary source of income. A promising side project can then become one of your main projects.

This is what happens to me with this blog. This blog started as a side project for me but now it grows to the point where it becomes one of my main projects.

3. Be persistent

As I stated above, it takes time to build new income streams until they become substantial enough. So not only should you start early, but you should also be persistent. In any endeavor you take you will always go through failure period before you succeed. Don’t lose heart and don’t give up when you are going through such period. Understand that it’s part of your journey to success. Keep doing what it takes even if it doesn’t give you the results you want at the moment.

4. Know when to stop

While you need to be persistent, you should also know when to stop and explore other opportunities. There is a difference between being persistent and being stubborn. When something is clearly hopeless, don’t keep pursuing it. Save your resources and switch to other opportunities.

5. Failure is your friend

While you are exploring opportunities, you will find a lot of opportunities that are unsuccessful. That’s normal and you shouldn’t be discouraged when you fail. Just don’t make the mistake of giving up too early. Perhaps you are just walking through the failure period of a good opportunity.

6. Strengthen the winners

While exploring opportunities, you will find some that are winners. These are where you should put most of your resources. Invest more money. Spend more time. Don’t make the mistake of giving all the opportunities the same amount of resources. Give more resources to the winners so that they can fully develop. This is the reason why you should experiment and explore new opportunities in the first place: to find winners that you can strengthen further.

***

Diversifying your income is important to prevent financial problems, but you should not just pursue money for money’s sake. A better way is to make money with a purpose.

Photo by bradipo

Making money is a significant part of our life. People spend 40 hours or more of their time a week to make money. For that reason, it’s essential to have the right perspective when it comes to making money. Otherwise we may focus on the wrong things and end up at the wrong place.

I’ve been thinking about this subject for a while and I’ve come to a perspective that I’m about to share with you. This perspective helps me connect making money to a greater purpose and makes it more fulfilling.

The Goals of Making Money

Why do people make money? What do they try to achieve? I believe there are two levels of goals in making money: a lower one and a higher one.

The lower goal of making money is to meet your needs.

This is the goal that most people has and there is nothing wrong with it. I also have it as a goal since I do have needs that can only be met with money.

But there is a higher goal.

The higher goal of making money is to make yourself useful to a cause you believe in.

While the lower goal of making money sits on level 1 (Physical) or 4 (Esteem) of Maslow’s hierarchy of needs, the higher goal sits on level 8 (Transcendence). Consequently, the higher goal is more fulfilling. It’s fine to have the lower goal of making money, but I believe that sooner or later we must adopt the higher goal.

Of course, you can be useful to your cause in many ways. Being useful financially is just one of them. You may want to be useful to your cause in non-financial ways and that’s absolutely fine.

In my case though, I want to contribute financially as well as in other ways.

Now I will share with you what I think is the best way to be useful financially to your cause.

Being Useful Financially To Your Cause

There is one thing that makes you useful financially to your cause : the ability to make money.

Notice that I say the ability to make money and not the amount of money you have.

This, I believe, is an essential principle when it comes to making money:

Having the ability to make money is more important than having money.

It’s not how much you have. It’s how much you can make. There are three reasons why the ability to make money is more important than having money:

1. By having the ability to make money, you won’t be obsessed with having a lot of money because you know that you can always earn the money when you need it.
2. By having the ability to make money, you can easily give money away. Again, that’s because you know that you can earn the money when you need it.
3. By having the ability to make money, you can share your knowledge on how to make money rather than just giving the money itself.

This way you can be useful to your cause in three ways:

1. You have the time to do important things for your cause that aren’t related to making money. That’s because you aren’t so obsessed with having money that your time is occupied with work.
2. Your money can directly help the cause because you’re willing to give it away.
3. You can help other people earn more money. They can then be useful financially to the cause and thereby create a multiplier effect.

As you can see, you are useful in many ways if you have the ability to make money. That’s why you should focus on increasing your ability to make money.

In a future post, I will discuss how to do that.

Photo by jenn_jenn

Today is Blog Action Day and the theme for this year is poverty. Poverty isn’t always financial. In fact, I believe that poverty is multidimensional. It’s related to the four facets of prosperity: material, spiritual, physical, and social. Consequently, there are four kinds of poverty: material poverty, spiritual poverty, physical poverty, and social poverty. You must fight against all those kinds of poverty if you want to be truly prospered.

Self development plays an important role here. Only through self development can you put yourself in a position where you defeat poverty in all areas of your life. Self development grows your capacity so that you are bigger than the situation you face. It helps you overcome all kinds of poverty in your life.

In this post I’d like to share some self development tips to help you overcome the four kinds of poverty. Here they are:

Material

1. Increase your knowledge

It’s important that you consume the right information when it comes to career and personal finance. Otherwise you may get wrong advice that leads you into trouble. Here are three good books on career and personal finance I recommend you to read:

• What Color is Your Parachute?
• Your Money or Your Life
• The Bogleheads’ Guide to Investing

2. Develop your skills

Developing your skills is important to increase your earning potential. Read 7 Essential Tips for Developing Skills for more information on how to do it.

3. Manage your finance

You need to manage your income and expenses. The first step to do that is to take note of every transaction you do. I already have this habit since I first worked and it helps me a lot in my personal finance. It allows me to know exactly what my current personal finance situation is. This way I know if I overspend on something and quickly get it under control.

Spiritual

4. Find your purpose

You need to find your purpose in life because it gives you meaning and direction in everything you do. Read A Guide to Finding Your Life Purpose for more tips on it.

5. Build a spiritual habit

Just like you should regularly exercise to maintain your physical health, you should also have a spiritual habit to grow your spiritual health. Depending on your spiritual belief, the habit could be praying, meditating, and reading sacred texts, among others. The important thing here is to make it a habit.

Physical

6. Build the exercise habit

You need regular exercise to manage your energy. Regular exercise helps you maintain high-energy state during your days so that you can perform best.

7. Get enough rest

I was surprised when I first read about the power of nap in How to Stop Worrying and Start Living. Even seemingly short nap can restore your energy and make you more productive. I know it’s not always possible to take a nap, but the point is you should have enough rest to get your energy back.

Social

8. Prioritize relationships

Put relationships as your top priority. It requires you to sacrifice here and there which is not easy but that’s how you build a fulfilling life. One of the best signs that you prioritize relationships is you provide time for others. The time you provide might not be long, but spending quality time with others will boost your relationships with them.

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While short, these tips can help your self development. You can then fight effectively against the four kinds of poverty in your life.

What do you think? Do you have other tips to fight life poverty?

This article is part of October 2008 theme: Winning Attitude

Photo by notsogoodphotography

A few days ago the Internet connection in my region was down for more than 24 hours. While it’s perhaps just because the connection is not so reliable, it reminds me of an important principle: do not depend too much on something. Or, in other words, don’t put all your eggs in one basket. In my case, if I depended too much on the Internet, then the situation might have affected me badly. Thankfully, that’s not the case.

This principle applies to everything we do. Bad things could happen, so we’d better be prepared for them. We should spread our risks in such a way that a negative event will have minimal impact on us. Of course, we should not spread the risks too thinly that we lose focus, but neither should we put all of them in one place.

While this principle is applicable to many aspects of our life, here I will share 6 ways to apply it that I think are relevant to most of us. Here they are:

1. Always backup your data

Nowadays most of us work with computers. The first and foremost rule to minimize your risk here is to always backup your data. Don’t ever have your data in only one place. I use an external drive to backup my data regularly so that I’m prepared when something happens to my computer. I learned this lesson the hard way: I once lost three-semester worth of data. I hope you don’t have to learn it that way.

2. Have offline copy of important online data

This is a variant of the previous tip. While the previous tip focuses on having a backup of the data in your computer, here the focus is to have a backup of the data on the Internet. The Internet is a very dynamic place, which means things can disappear as easily as they come. For instance, good online articles might not always be there; the sites might be down. This is not to mention potential problem with Internet connection like what I experienced.

That’s why I’ve used Scrapbook for years to save and read the best articles I found around the Internet. This way, I always have the articles I love no matter what happens.

3. Create several income streams

If you had only one income stream and it failed, then you would face the danger of not having any income at all. Having only one income stream is like a company that has only one customer; no healthy company has only one customer. So make it your goal to create several income streams. The passive income resources might give you some ideas.

4. Diversify your investment

Diversification is a well-known principle in investing, and for a good reason: poorly diversified investment might give you a big loss that erase years of good performance. So be sure that you invest in different investment classes such as cash, money market, bonds, and stocks. Find your risk profile and diversify your investment accordingly.

5. Diversify your relationships

In many cases, your network is your insurance policy. When something bad happens or you need something, your network is the place to go to find help and support. The more diversified your network, the more cases it can handle.

6. Diversify your knowledge

Being an expert in your field is always a good thing, but not learning about other fields is dangerous. What if the market changes and your expertise is no longer in demand? In the current fast-pace environment, anything could happen. So be sure that you diversify your knowledge. This way, when a new wave of change comes, you will be prepared to face it. Even better, be a versatilist.

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Those are my 6 ideas. I’m sure there are still many other ways to spread risks. If you have ideas about it, feel free to share them in the comments.

Photo by ground.zero