I came across an intriguing headline while doing some of my personal finance reading today. It was over at MSN MoneyCentral and it really caught my attention. It was "The Biggest Mistakes Poor People Make".

According to Liz Pullium Weston, there are seven money mistakes that poor people make that ensure they will stay poor, such as paying too much for rent or a mortgage, confusing needs with wants, only making minimum monthly payments, failing to budget, having no emergency savings and spending retirement savings.

Well...yeah, those things will guarantee that poor people will stay poor, but they didn't all really address my own personal situation a few years ago, when I was REALLY poor. I wasn't just poor, I was "po"...I couldn't even afford the extra "or". The worst part: it was really all my (and my wife's) fault. Worse yet: they are mistakes that so many other people make.

Spending every last dime you earn in one week...and you're paid every two weeks. Well, what do you do when you spend your check in one week, and there is another week until you get paid again? You either play the "float" by writing checks for money you don't have and hope they won't clear by the time you get paid again (but bank processing times have gotten faster, so that won't even buy you time anymore) or you use a payday loan lender, which charges hundreds of percent of annual interest. Good way to stay poor.

Buying things because they are a "good deal". "Wow, look how much money I saved" you might say. But, you couldn't even afford the amount of money you did spend, because you're broke. Good move, Wisenheimer. Now you're even more broke.

Ignoring bills. Every day, bills would come in the mail and I would toss them on a heap and ignore them. I couldn't afford to pay them, so what was the point? The point was if I had contacted the bill collectors and worked out a payment plan, the mail would have stopped coming, or at least they wouldn't have been as threatening. Plus, I was damaging my credit and racking up extra fees. Stupid.

It's "their" fault I'm poor. I was poor because my boss didn't pay me enough, because the bank charged me fees for bad checks, because the bill collectors were overcharging me, because I didn't have enough education, because my parents never taught me how to handle money. At least, that's what I used to think. The real reason was it was really all my fault. Don't have an education? Get one. Don't make enough money at your job? Get another one, or start your own business. Born into a poor family? So what. Millionaires, U.S. presidents and famous actors were also born into poor families. You can get ahead, too...but no one is going to hand it to you. You have to work for it.

Spending more than you earn. If I was to write a book about how to get ahead, it would be the shortest book in existance. It would be one page long, and contain just one sentence. That sentence would be: Live below your means. If you spend less than you earn, suddenly you have more money to use to get ahead. It really is than simple. "But, I don't earn much money to begin with" you might say. That may be true, but whatever you earn, you can still live on less. People all over the world do it everyday. In some African nations, the average annual salary is $300 a year. Not a week, not a month, but in one full year. You're much better off than that. You can live on less than you earn. If you can't, either increase your income, or find areas were you can cut back. Five years ago, I took a job which paid 20 percent less than what I had been earning. I still managed to cut my spending even further, and my family begain to live on about 75-80 percent of what I was earning. It wasn't fun, it wasn't easy, but we did it...and we're better today for it.




Savvy Frugality Recommended Reading: More Employees Getting Scrooged This Christmas.

If you're like me, you check your retirement savings, your stocks, grit your teeth and say "I'm in it for the long haul", and try to forget about it until the next time you check your stocks. After all, I have about 25 years until retirement (although I hope it's actually less), so there is time for the stock to bounce back, which it will...eventually.

But what about those college savings for Junior? Perhaps he's like my kid...13 years old and ready to attend college in five years or less. All of a sudden those stocks don't look so inviting, and every "economic meltdown" story in the news is driving the stock price lower, and eating up your gains. If you're looking at sending a child to college in five years or less, and you want to lock in your savings before losing the rest of the tuition and book money, there are a few sensible, although very conservative, moves you can make with the kid's college cash.

1. Get rid of the stocks. If you're really concerned about having some college cash left in five years or left, preserve the money you have now. Things are just to volatile on Wall Street right now to risk cash you'll need in the short term.

2. Stash your cash. Those high-yield savings accounts at online banks are suddenly looking like a better deal. Sure, they only pay 3-4 percent interest per year, but that's better than LOSING money.

3. Adjust your 529. If you have a 529 state-sponsored college savings account, shuffle your investments around to more conservative options, like bonds...or the fixed asset option which pays a set (but lower) amount of interest each year.

4. There are always U.S. Savings Bonds. These are an old-school savings option. The interest rate on Series EE and I bonds are low, and you need to hang on to them for at least five years to make it worth it, but again...you're not going to lose your cash.

5. Buy a CD. Certificates of Deposit at the local bank or credit union are another safe option. There are varying lengths of time you have to hold the CD, usually ranging from 6 months to 3 years. The higher the dollar amount of the CD and the longer you hold it, the higher the interest. Again, your cash won't go anywhere, and it's insured in case your bank tanks (provided your bank is FDIC-insured).

I had been buying shares of Wal-Mart and Devon Energy for my son's college fund. I'm not selling them (I don't have many shares), but I'm not buying more, either. For now, the kid's cash is going into an Emigrant Direct savings account at 3 percent interest per year.

I'm a big fan of the personal finance site The Dollar Stretcher. I always have been. I have read the site for years....long before I ever thought of writing my own blog. It is chock full of great information about saving money, investing and earning money, especially if you are going through some rough economic times yourself. The ideas on The Dollar Stretcher helped see me through some personal financial problems of my own, and I have tried to return the favor by helping others through my own blog here at Savvy Frugality.

With that being said, I am pretty excited to announce that Savvy Frugality will be partnering with The Dollar Stretcher! I will be writing a blog for The Dollar Stretcher site called Main Street Meltdown. I intend to focus on general money-saving tips and especially on money-saving moves anyone can make during our current shaky economy.

This doesn't mean that Savvy Frugality is going away. I will continue to post content at Savvy Frugality, and there will be additional material at Main Street Meltdown that you won't find at Savvy Frugality. Essentially, Savvy Frugality is extending its reach to new readers at The Dollar Stretcher, and we hope you will check out The Dollar Stretcher if you are not already familiar with the site. Also, be sure to check out the other great personal finance blogs available at The Dollar Stretcher site as well.

Like most people, I'm always looking for ways to bring additional income into my household. Taking steps to save money is great, but that will only get you part of the way toward living a fiscally fit life. There has to be money coming into the house, too. I take advantage of ways to earn extra money on the job, and I usually receive an annual cost-of-living pay increase, too. However, there are other ways of making extra money without moonlighting. How? Through passive income.

By its definition, passive income is income you receive automatically, regardless of what you do. It's money that constantly flows to you. This doesn't mean that you don't have to work for it. There is usually a lot of work at the outset, but after you have everything in place, the money rolls in. How much is dependent upon what your source of passive income is and how badly people want to pay you for it.

Passive income is not a "get rich" scheme. Sure, some people make a lot of money through passive income; others don't. So, how do you earn passive income. There are a few different sources which can help generate passive income for you:

1. Blogging. A lot of people have been jumping on the blogging bandwagon to try to earn passive income. The income usually comes from advertising placed on the blog site. Others get paid to blog, but that isn't really passive income. Savvy Frugality generates a bit of passive income. If I stopped writing it tomorrow, the blog would continue to generate advertising revenue without my having to do anything else to it. That's passive income.

In the past, I have written articles for sites such as Associated Content. Although I'm not a regular contributor, my articles continue to generate income, and I receive (small) payments directly to my PayPal account once per quarter.

2. Rental payments. If you rent something to somebody else, whether it's real estate or some other kind of property, you are generating passive income. Sure, there is upkeep of the property, insurance, etc., but the property works for you.

3. Royalties. If you have written a book, recorded a CD or created software that people will download from a site, that is a form of passive income. A lot of work goes into creating the product, but after it is created it will generate passive income, provided people are willing to pay for it. Some popular musicians from the 50s and 60s earn more money in royalties now than they ever did when they topped the music charts. How? They continue to receive royalties from work they did decades ago, and their product sells more copies now than when they were "in".

4. Dividends and interest. If you have a nice sum of money socked away in a CD or high-yield bank account, you are earning passive income in the form of interest. Stock investments which pay dividends also generate passive income.

5. Other creative works. I have uploaded a few designs for T-shirts and mugs on CafePress.com, and this generates some income every time someone purchases my designs. The Revver Video Sharing Network pays uploaders for their videos when they are used. Are you a shutterbug? Create some stock photos and get paid every time someone downloads them from one of several stock photo sites on the Web.

6. Business partnership. A silent partner in a business in one which helps fund the startup of the business for a percentage of the business' profits. They don't actively work or manage the business, but they are a partner, so they earn money from the business.

You are only limited by your imagination when it comes to generating passive income. The point is to create something that will continue to generate revenue for you with limited to no other involvement from you after it is created. Even if it's only a few dollars a month, if it's truly passive it won't matter, because you aren't really working for the money anymore. It is generating money on its own.

I am earning passive income each month. It is not enough to warrant my leaving my "day job", but it supplements my regular income. Some people are able to retire early as a result of the amount of money they make from their passive income. I'm not there yet, but I'm always thinking of additional ways of making my money or my talent earn additional income on "auto-pilot".