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Most people earn the majority of their money through their primary job. To improve our cash flow each month, we can cut expenses or increase income. Just as we can only cut expenses to a limited degree, our jobs can only take us so far in trying to increase our income.

As you can imagine, working twice as hard at your job will not double your income. In fact, rising expectations likely mean that you’ll have to work harder just to keep your same level of pay. Salary increases tend to be largest, on a percentage basis, earliest in your career when you are paid a lower amount. Giving a 10% raise to a young worker making $30,000 a year is much easier for a company than giving a 10% raise to a seasoned employee making $100,000 a year. This means that as you become more valuable to your company, you’ll probably see your salary increase at a decreasing rate. Large raises are more likely to come as the result of promotion, a change in job title, or even moving to another company. While these are all possibilities, they too are limited in number and effect.

If you can’t count on your job to bring a surge to your income, where else can you look? Obviously taking on additional work or a second job is an option for some people, but you only have so many hours in the day. This leads to a search for passive income, i.e., money you bring in that isn’t directly tied to your labor. Even if you don’t realize it, you probably have some passive income already.

If your bank account pays interest, you have gotten a small taste of passive income. The bank pays you interest for keeping your money on deposit with them. There are much more elegant and profitable ways to earn passive income than earning interest, but it is probably the easiest.
Unfortunately, it doesn’t pay much at a bank. Even direct banking websites, which boast interest rates “8x the national average,” are only returning about 3%. Earning money without having to work for it has long been a method used by those who get ahead. While earning interest isn’t the only way to achieve passive income, it offers a great balance of simplicity and return.

There are some entrepreneurial ways you can boost your income stream without working too hard, although there is some effort required vs. sitting back and earning interest on your deposits. Examples include selling your books, CDs and DVDs on Amazon or Half.com (eBay’s fixed-price marketplace). You can also sell used clothing, jewelry and various household items at consignment shops in your local community. If nothing else, these are great ways to make money while you do your spring cleaning!

As a freelancer working from home, it's shocking the level of ignorance most common-folk (W-2'ers) have into the lives of us freelancers. Here are the 7 most common aggravating assumptions I hear from people, and how to kindly dispel them:

1. Our Job Must Be Easy

To a worker who commutes 45 minutes in traffic each way, the fantasy of hopping out of bed and into the work area sounds fantastic. This fantasy also leads the W-2'er to most often incorrectly assume that because our fridge is nearby, that our job must be easy.

How to Dispel:

Share a story about the worst client you've ever had. The W-2'er will be able to relate to this. This will stem some of the jealously harbored at you.

"Yeah, I was building this website for this dead Saudi prince's lawyer. He promised me like 15 million dollars, but I totally got stiffed on that job"

2. We Work In Pajamas

After sleeping in, this is probably the second most common assumption made about the freelance work day. This stems from every cubical dwellers fantasy about coming to work in Pajamas. Some offices even have pajama days (heavens knows why) to quench this strange W-2 fantasy.

In reality, working in Pajamas isn't very functional or comfortable at all.

Have you tried working in Pajamas all day? One, you get really sticky sweaty. It's quite uncomfortable after about an hour. Two, if you're a small start-up working from home, three guys sitting around in pajamas programming all day is really awkward.

How to Dispel:

"Well, why don't you come over some time and we'll have a pajama party!" (Say this with a completely straight face)

3. Our Job Must Be Fun

Yeah, I just love bookkeeping, and payroll taxes and business licenses. My favorite is collecting overdue invoices! Yes, the freelancer life is all coffee shops and spending the day with my dog! (Two other myths that almost made this list)

How to Dispel:

While it's true many freelancer enjoy their work. It's still work. Again, a situation that the W-2 can relate to works well here.

"I had a client rip me a new one this morning. I really just wanted to cuss her out, but then I'd get fired"

4. We Don't Start Work Until Noon

This is the most common one by far. Never mind the fact that many home start-ups have employees that come in each morning. Because we work from home, we must sleep til noon every day, right? I mean, there no way we have clients or anything on the east coast and actually have to get up for conference calls at 5am sometimes, right? Grr...

How to Dispel:

Give an example of when you did start work at noon, but also the explanation as to why. This avoids direct contradiction to the W-2'ers statement, but provides an insight into the freelance/entrepreneur life.

"Yeah, I didn't start work 'til noon last Wednesday. But I also didn't get to sleep until 8am the night before because our server crashed."

5. We Must Be Filthy Rich

While this isn't the worst of assumptions, it can still be irritating.

To many W-2 workers, running your own business surely means that you hang out with Bill Gates and Mark Zuckerburg. I mean, we run our own companies right...we must be wealthy!

Now, you might not always want to dispel this one, but it can come back to bit you if you don't.

How To Dispel:

This one's fun. If you are comfortable talking about the 2 months you lived on rice and beans to fund your business, by all means share that. Otherwise, give a few examples of the expenses most W-2's don't realize we have.

"I know you can't ever remember my website, but I'd really appreciate if you'd try. I can even come over to your place and bookmark it for you. Just please stop clicking my Google Ads..."

6. We Can Always Be Available

We freelancers are always the first one asked to pick up friends from the airport during the day. Of course, I mean, we're just sitting on the computer all day playing solitaire....we can totally come pick you up this afternoon! (Never mind the 10 sales calls we needed to make).

How to Dispel:

This one is a little difficult, because freelance work is often project based. When in conversation with a W-2 friend be sure to remind them of weekly conference calls or meeting that you have. You need to reinforce the fact that your schedule has structure to it.

"Every Friday at 2pm I have a call with Client X. Also, we made 5 new sales today, which means 5 training appointments next week!"

7. We're Really Just Unemployed

This is probably the most rare assumption people make when you tell them you work from home (as a freelancer at least), but it stings the worst. People of course don't come right out and say it, but you can see it in their faces.

You tell them you're a freelance web designer and somehow they hear "unemployed and living with his mother"

How to Dispel:

Invite the doubter out to lunch. Have him or her meet you at your home office. Make sure you have at least two "employees" present working away at computers (buy some college kids lunch to be your "employees" for a few hours if needed). Wish the employees well and tell them to "make sure and have those TPS reports ready when I get back". Have a nice long lunch...make sure to pick up the tab.

Spread the Word

Print this out and keep a copy in your wallet. Trust me, if you haven't encountered one of these assumptions yet, you will, and you need to be prepared.

Better yet, forward this to all your W-2 friends. You might just be able to avoid these situations all together.

Now I'm off to take a shower, it's 1pm and I'm still in my pajamas...

If you dream of being wealthy, getting completely out of debt, or funding an easy retirement, there's something you should know. It's not impossible. However, if you find yourself consistently deeper and deeper in debt, perhaps it's time to change some of the bad habits that have kept you from achieving your goals.

Supposedly, one definition of insanity is doing the same thing over and over and expecting the results to be different. If you continuously spend more than you earn, how can you ever expect to get out of debt?

The Motley Fool published an article that talks about the basic habits of a millionaire. Some of the advice is great advice, although a bit unspecific. The author outlines three major rules.

1. Believe it's possible
2. Burn your boats
3. Associate with those who are already successful

The first piece of advice is good. You have to believe that you can succeed -- once you believe in yourself, you can plot a feasible plan to make your goal a reality. The second piece of advice relates to raising the cost of failure -- by doing so (through destroying credit cards or telling your friends to yell at you if you overspend), you make it more difficult to not succeed. The last step is imperative -- befriend and get advice from those who had been in your situation in the past. Only by doing this will you be able to learn from others' mistakes.

The process of getting out of debt and achieving your goals can be a difficult one to bear. However, the act of planning your approach can make it much easier. You just have to first believe it is possible to succeed and then do everything in your power to make it happen.

We all know how consolidating debt with a person-to-person loan can help to save you money and get you out of debt more quickly. New FICO scoring rules may provide an added benefit to P2P borrowers: a boost in their credit score.

In their March 2008 issue, Money magazine reported that Fair Isaac, the company whose formula determines your credit score, is updating that formula. There were a few areas where this update could affect your credit score. One area in particular, having a few kinds of credit, could favorably impact everyone with a P2P loan.

As a result of this update, having an installment loan, like a P2P loan from Lending Club, in addition to other forms of credit, like credit cards, could give your score a boost. Having these multiple types of credit, along with making regular payments and maintaining low balances was reported to raise credit scores by as much as 25 points.

By consolidating debt with a P2P loan, you are not only taking on a different kind of debt, but you will also be able to maintain a low balance on your credit cards. You’ll be making monthly payments to your loan, so that criterion will be met as well. As you pay off your loan, you will be lowering your credit utilization, which could help your score even more.

It is expected that these changes may take some time to be adapted by the three major credit bureaus. In the meantime, you can rest assured that your P2P loan may be helping you in more ways than you expected.

It may seem surprising, but taking on more debt is often the best way to reduce overall debt. This only works if those who borrow money use their new debt appropriately and take steps to deal with the root causes of their money problems.

Debt consolidation starts out by adding to an ailing consumer’s debt. While people may consolidate in order to reduce their debt, their first step is to take on more debt. People looking to consolidate all of their credit card debt will actually double their debt by taking out a consolidation loan. That’s why it’s so important to use the proceeds of the new loan completely as intended and as quickly as possible.

Let’s say that you had $15,000 in debt spread across 3 credit cards. To consolidate all of that debt, you could take out a loan for $15,000 with a lower interest rate than what the credit cards are charging. Until you actually use the loan proceeds to pay down your credit card debt, your total debt would increase to $30,000. Of course, as soon as you use the $15,000 loan to pay off your credit cards, your debt would be back to $15,000. The reason you would do all of this to end up in the same place that you started ($15,000 in debt) is that, with an interest rate much lower than what you had been paying on your credit cards, your new lower monthly payment will allow you to get out of debt much more quickly.

The danger of using debt consolidation to remedy personal finance troubles is that after you pay off your credit cards, you’ll have $15,000 in low interest debt, plus at least $15,000 in credit available on your credit cards. So not only do you need to use your personal loan to pay off your credit card debt, but you also need to avoid using the credit available on your cards.

Borrowing money at a low interest rate to pay off debt at higher rates can save you money, but this must be done with care. Continuing the habits that caused the original debt will cause your overall debt to grow.