No Joke: Jay Leno Teaches Us a Valuable Lesson About Personal Finance

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The Tonight Show with Jay Leno - Season 21
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Earlier this month, Jay Leno officially retired from "The Tonight Show," capping a more than two decade run as host of that American institution -- a stretch only eclipsed in length by the "The King of Late Night" himself, Johnny Carson. And though the media frenzy surrounding the event was nonstop, one of the stories that was missed in all the excitement was the unique retirement plan Leno implemented using his salary from NBC -- a plan everyone can use to ensure a larger nest egg when they're ready to retire.

All you have to do is get a major network to pay you millions of dollars a year and you'll be all set. (See, it's easy!)

OK, now back to reality.

As Leno recently explained to Jerry Seinfeld, since becoming the host of "The Tonight Show," he's never touched a penny of his NBC salary. Instead he's lived on the money he makes from his stand-up gigs, personal appearances, and endorsement deals.

Of course, Leno's income -- no matter what the source -- is at a level that most of us will never achieve. But as he told Seinfeld, even when his pay was normal, that was how he's always done it:

"You know, when I was a kid, I always had two jobs, and I would bank one, and I'd spend the other. Then when I got 'The Tonight Show' I just continued to do that."

Applying this same concept to your retirement plan can yield you much better results that you'll get from saving alone.

Saving for your retirement means carving out a piece of your income separate from what you use for bills and recurring expenses. However, if there's an interruption in that income, your retirement fund will suffer.

The "income redundancy" in Leno's plan creates a completely separate income stream -- distinct from the one you use to live on -- that feeds your retirement fund, and which won't be affected by a temporary disruption of your main income source.

What's Your Second Income Stream?

There are a number of ways to create that income redundancy, depending on your age, the economic climate, and the amount of effort you're wiling to put into it.

The most straightforward option is to actually have two jobs -- one full-time and one part-time -- or if your personal circumstances allow, two full-time jobs. This arrangement is ideal for young, single people with plenty of energy and little outside responsibilities. A 20-year-old who nets $500 a week from a side gig and earmarks it solely for his retirement fund would amass almost half a million dollars -- not including interest -- by the time he turns 40.

But what if you already have a full-time job and are in your mid-40s, with children, %VIRTUAL-article-sponsoredlinks%a mortgage and other responsibilities? How can you take a second job without it affecting not only your relationship with your family, but your physical and mental health, as well?

This is where you need to redefine what the term "job" means.

We're fortunate enough to live in a time where technology gives us the opportunity to create income without the massive investment of time and money that would've been needed in years past, and we can use that advantage to create our second job.

For example, a friend of mine took some classes a few years ago on repairing computers. He now runs ads offering to buy "broken" laptops online; once he gets them, he fixes them up and resells them for a nice profit on Craigslist. But the best part is that he does it in his own garage, spending only a few hours a night -- after his kids go to bed -- on his "job."

Do you know how to code, or design, or write, or market? If you do, you can offer your services as a freelancer on sites like Elance where you can choose the work you want, work as much as you want, all with flexible hours and from the comfort of your own home. Don't know how to do any of those things? Can you shop?

One of the most popular reality series today is "Thrift Hunters," which follows a pair of middle-aged men who make a good living by finding items at thrift stores, buying them cheap, and then selling them on for profit eBay (EBAY). Could you spend a few hours a week doing the same?

The possibilities are nearly endless as to how you can come up with your secondary income source, and are only limited by the amount of time and effort you're willing to invest in the process.

No man is an island, or even a peninsula, so I encourage your feedback in the comments below. And don't forget to pick up my book, "Trading: The Best of the Best -- Top Trading Tips for Our Time."

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