Happy New Year everyone! I hope your festive period was full of pleasantries, good food, great family and consisted entirely of recharging, relaxing times? (Who am I kidding… let’s be honest, we’re all glad it’s over for another 12 months!).

Every month there are themes to personal finance. March/April time is the period of tax panic, ISA renewals/hunts and other ‘end of the financial year’ matters. But what of January? There is little changing in the UK world beyond the calendar, but it’s the perfect mental incentive time to do some financial ‘spring cleaning’.

1. Review/Amend/Create Household Budget

In the spirit of New Year’s Resolutions, now is the perfect time to be giving the once-over to your finances. What are you paying for that you can cut, reduce, or review? Even if you’re not in debt any money you don’t spend is money that you can save instead. Does your household budget reflect reality, or is it a pipe dream that is summarily ignored 3 days after payday?

2. Haggle With Providers

Paying £50 for Sky when you only watch 5 channels? Do you need the Sports package they enticed you with 3 months ago with the half price offer? Give them a call, route yourself to “If you’re thinking of leaving Sky…” and plead poverty. Get them to remove unnecessary package(s) you may have, and then beg for a reduction in price. You’ll probably get it and save a fortune over the year. If you really watch that little TV, would you do with FreeView? Click here for 5 specific tips to reduce your TV costs.

Do the same with any recurring contract you have. Landline phone, mobile phones, internet access, gym memberships, and so on. Click here for loads of tips on how to haggle!

3. Shop Around

One of the biggest household expenses after rent/mortgage is food. Supermarkets are at war for our custom as they realise the recession is not abating any time soon, and every foot through the door is an important one. Loss leaders are a dime a dozen, and special offers are all over the store.

If you always shop in Waitrose, try Sainsbury’s. Drop down from the ‘Premium’ brand to store’s-own, and stick to your food budget. Shamefully I have gone from spending £600/month on food down to £150-200 just by a little forward planning and spending 5-10 minutes hunting out bargains. Click here for loads more tips on cutting your grocery spending!

4. Check Your Rate – Savings

Are you getting the best your bank or the finance world in general has to offer on your savings account? Barclays lowest rate of interest on their savings accounts is 0.1% when online you can grab a (still pitiful) 1.5% by shopping around. Check your ISA allowance is full for this year (You have until the end of March), and make sure it is paying a decent rate as well.

5. Check Your Rate – Credit

After Christmas is the ‘guilty moment’. If you have overdone the Christmas spending on presents, travel and gastronomy, see if you can’t get a better interest rate or balance transfer deal than you have right now. Many providers at the moment are offering 0% deals that can be yours for the taking, potentially saving you hundreds.

6. Council Tax Money

For the majority of the country, for the next 2 months there won’t be any council tax to pay. Use this money wisely and put it towards your emergency fund rather than spending it on incidentals. It is money that should be in the monthly budget anyway, so won’t be missed.

7. Sell Your Clutter

Has a new 55″ OLED TV replaced your 40″ Plasma? Sell sell sell, on eBay, Friday Ad or any other method. De-clutter your home, your life, and release extra money for debt reduction, savings or other plans!

Good luck, and here’s to your dreams for 2013

I was talking with some colleagues at work last week, and discussion swung around to topics along the lines of “are you going to do this forever?”. Most were answered in the same vain:

Colleague 1: “I’ll have to. I can’t afford to take a pay cut.”

Colleague 2: “I’ll have to. I’m £2k overdrawn as it is.”

Colleague 3: “I’ll have to. I have kids at college.”

When it came my turn to answer the question, they all scoffed, laughed and told me I was a dreamer. I said “I intend to work for another 10 years, and retire from the mainstream rat-race when I am 38.”

There were a variety of replies. Some profane. Some full of mock-encouragement. All disbelieving in some way. I was so shot down that I didn’t even really get a chance to explain how I hope to do it, and their cutting remarks actually made me wonder if it is just a pipe dream to be able to give up mainstream work and live a dream instead.

What is Passive Income?

Before I delve further into my dream perhaps it is worth spending a moment explaining just what a passive income is, as not everyone will quite understand.

In short, a passive income is something of which you have applied resources to, and which continue to provide resources in return now and later. (Thanks to Trent @TheSimpleDollar for the premise).

If that sounds a bit vague, it is. An actual example would be buying dividend-producing investments (using a current resource – cash) which will provide a resource now and later (dividends). Another example would be to write a book (resource – time) providing a royalty revenue stream long after the time ceases being spent on it.

My Passive Income Plan

It was probably a good thing they didn’t ask what my plan was, because I’m not sure I could have explained it there and then and kept their attention at the same time. But I got thinking – what IS my plan? It needs to be a half decent one for this to work.

Amongst my own plans in general, I’ve taken a hint of inspiration from @FinancialSamurai’s Plan, which he discusses in quite some depth.

Time Rich, Not Cash Rich

It’s important to note that I don’t intend to become ‘cash rich’ from my dreams. What I want to be is ‘time rich’. I’d like to step off the hamster wheel of normal work, and instead focus on things I find rewarding such as charity and volunteering. If my standard living costs can be all but covered by passive streams of income then the time I’d ordinarily spend labouring away for an employer can instead be redirected towards giving.

Continue Blogging

I’d like to drive my passion in blogging further and become a ‘professional’ at it. Quite where the line between an ‘amateur’ and ‘professional’ blogger is drawn I’m not sure, but to be able to count your blog as a significant passive income source would be a good start on crossing that line.

Stocks & Dividends

I subscribe to the ‘Oblivious Investor‘ mode of thinking when it comes to investing in stocks and shares. My current holdings pay pittance in dividends, and my banking sector is particularly dismal at this moment in time. But, because I’m playing the stock market for a longer-term goal, I’m not actually bothered that I’m losing (on paper) 5% a month. At some point things will rebound as they always do, and we will go from bust to boom once more and I can cash in on that.

The principle of Pound Cost Averaging is also in my favour, as I mostly started buying when the market was on its way down.

One thing I do need to do is begin a dividend pool. At the moment while some of my holdings will provide an income of sorts either through sale or unintended dividends I need to start actively thinking about options that will provide a sustained, regular high dividend stream.

Shout out and thanks to @Monevator for the Lazy Portfolio write-up as well. There are some great ideas within.

Write Books

One of my many passions is writing. I like to think that I can get across complex concepts and ideas without actually giving people brain ache. It also pains me to still see that despite attempts last year, there is still no compulsory school-level education on managing personal finance and money.

I’d like to combine the two and write a book aimed at the 16-21 year old market about doing just that.

Is It Just A Dream?

Not necessarily.

Assuming I need £800 to ‘live’ per month, then a passive income stream could bring me most of the way there, with careful planning. A part-time job of say, 16 hours a week could provide money to ‘live’ with. As with all dreams, anything is possible; you get out of it what you put in.

If it stays a dream then yes, it is just a dream. But if you work to make that dream a reality, then who is to say you cannot succeed?

What’s your plan?

If you have a plan for jumping off the hamster wheel too, come share it in the comments.

Go on. Admit it. You’ve dreamed at least once of what you’d do if you won the National Lottery.

I got thinking last night (again – Drew @ObjectiveWealth’s fault) of what I’d do, and thought for a change I’d write my musing down as I went.

I’ve won £10,498,320.29! Woo! Let’s see what I’d spend it on!

1. Pay Off Close Family Mortgages

My first selfless act. I know that nearly all of my family would benefit me if they won the lottery, so it is only fair and just that I do the same for them. I estimate that’d be the £498,320.29 taken out in doing this.

£10m remaining.

2. Pay Myself (nearly) First

£6 million would go into some sort of not-immediately-accessible savings account. I don’t really have a huge understanding of how much interest such large sums would pay. Assuming I could get 4% somewhere that wasn’t on an investing basis it’d still provide an interest income of circa. £250,000 per annum off which my family and I would actively live.

This £6m capital would not be touched, as it would allow us to do all the things we want to do in life by living off a safe passive income without having to ‘work’ ever again except for work I find fun and rewarding (I’m getting to that…).

£4m remaining.

3. Open a Charitable Trust

I’d like to open a charitable trust affiliated to this blog and funded with £2 million that looks to help people in dire financial straights through no  or little fault of their own. The committee would convene once a month to examine requests for financial assistance and choose the most worthy submission, providing grants and loans where most needed.

It would also lobby the government for compulsory primary and secondary educational modules and qualifications in personal finance management and you can bet your last 5 pence, I’ll keep blogging because I love it.

£2m remaining.

4. Buy A Nice Family Home

I live in the South East of England, which sees some of the most expensive land and property prices anywhere in the country. I’d like to purchase a home that would be fitting for my family; that is secure; that has open space; and that is beautiful and accessible to local amenities. I estimate this can be had in the current climate for £1.5 million or so.

£500,000 remaining.

5. Buy My Dream Car(s)

These are all looking pretty standard, aren’t they. I’d like an Aston Martin for running around in, and a Rolls or a Bentley for longer journeys. I’m driving.

£100,000 remaining.

6. Go On Holiday

While it is true our £6m will be providing a healthy passive income, I want a dream holiday to celebrate immediately. That should take care of the last £100k.

Of course none of this is going to happen, because I don’t actually play the lottery. But a guy can dream, right? What would you do if you won the jackpot this week?