Day 7: Take it Easy
by Edward Smith
12 Jul 2020
Easy Passive Income
Some passive income sources are readily accessible and available right now. Bank accounts, Mutual Funds, Stocks, Bonds, and CDs produce a passive income called interest. You give over some of your present day money (the principal), you surrender time and the money's liquidity, and the person borrowing your money pays you a salary for the use of that money (interest).
You pretend the principal, is a machine that you built, and the machine's job is to produce an output. The output has value, so you get to live off of the output as income. You never touch the machine. If the machine breaks down, your income stops.
This is not a quick fix. Investments typically take a lot of money to become reliable sources of income. Many safe investments average around 7%. If you look around you can find things as high as 12%, but as the percents get higher, the investment typically becomes more risky.
For example, if you invested 1 millions dollars and made 7 percent, you'd make $70,000 a year on passive income (not counting taxes). Whereas if you found an investment that made 12% you'd be making closer to $120,000 a year (not counting taxes).
Most of us don't have $1,000,000 laying around, but that's okay. Over your working life, you will probably see $1,000,000 circulate past your finger tips. Make sure you keep some of that money and put it aside whenever you can.
Let time and compound interest do the leg work, and you may very well find yourself at retirement age living off a free income source that wouldn't have existed had you spent all of that money instead. Intentional and consistent behavior can really pay off if you're patient.
In my next article I'll cover "Complicated Passive Income Sources".
No comments:
Post a Comment