One very important concept I want to share with you today is that you can figure out your passive income and financial independence game, as well as achieve it. It takes patience and some thinking and planning, which will take at most 1-2 hours if done quickly.
Of course, if you’re doing it for the first time, it can be overwhelming because you may just not know when and where to start…but that’s what happens with all new projects isnt it?
Like if you decide to go on a holiday, you’ve gotta plan, research what to do, weather, and buy the tickets and accomodations and go.
Eat that elephant one bite a time
I like to use this example because personal finance, financial independence and passive income matters can seem so big and daunting, like an elephant. So take it bite-by-bite, aka one step a time.
- First, how much do you need to retire? What are you spending money on? Is it $1000/month? $2000/month? Take a look at your last 3-6 months of expenses and calculate from there.
- Is there anything you can cut out from your spending? Perhaps you’d been spending on stuff that you dont really care about? Cut out the largest 1-3 expenses that you dont care about. More or less? This is very dependent on where you live (cost of living place) and your spending habits.
- Then average out your monthly expenses last 3-6 months. From here, you can extrapolate how much you’d need average on a year. Say you need around $2000/month, which is $24000/year.
- Then, figure out how much you need invested to get $24000/year. Of course that’d mean you can get a simple $2000/month job too, but that’s active working.
- If you want to retire, then like me, you will need to build or purchase assets that will pay you regularly, such as dividend stocks or rental properties or even online business. Choose ONE that works best for you. The easiest for me is dividend stocks. So assuming I need $2000/month to retire, that’d mean I’d need $24000/year to retire. Assuming I like dividend stocks and that my dividend stock portfolio pay me 5% per year in dividends, that’d mean I’d need $24000/5% = $480000 in dividend stocks that pays me 5% in dividends
- Working on your passive income portfolio. Choose one that you’re comfortable with. Is it dividend stocks? Is it crypto? Is it financial instruments like insurance? Or rental properties? Whatever it is, choose just one to learn, practice and master.
- Then I’ll have to figure out how am I to amass $480K? The most logical would then be to slowly work, save and invest as much as possible. If I can save $18K/year and I can reinvest every single dividend, that’d take me 17.5 years. If I throw in bonuses and side hustle to a total of say $30K/year, and reinvest every single dividend, it’d take me just slightly more than 12 years to achieve my $480K target.
- I’d layer some buffer, just in case. To me, this can mean increasing my portfolio by at least 25-100++%, depending on how much risk tolerance I have or how bored I am
- Rinse and repeat.
I dont know bout you man, but there’s so much you can do or not do.
Maybe retire your spouse if you’re married.
Maybe move to another country.
Or do philantropy works and volunteer. Teach and mentor.
Maybe pursue something you’re interested in, be it obscure or “useless” skills or fun stuff.
Learn a different language, even cryptocurrency.
Start a new project.
Become a preacher to serve God’s calling in your life.
Do deep work that you care deeply about, be it changing the world or climate change etc.
What financial freedom is
Financial freedom is hard to understand by itself, because not many people think about it, much less take consistent action or had achieved financial freedom.
Let’s talk about what financial freedom is not – most people are actually in financial bondage or financially stuck. They HAVE to work to pay bills, or keep the hedonistic treadmill going. They have debts which are either not going away or keeps growing in size. They don’t have the freedom to stop work at all.
Conversely, financial freedom…is about having the option to choose to work or not. Pursue something interesting or not. Create or not. Sleep in or not.
The hard thing about financial freedom
There’s a few hard things about this concept of financial freedom, which is
- It’s too far away. Many people take the “I’ll cross that bridge when I get there” because they can’t grasp the concept of “saving and investing for 10-20 years to retire by 40”. It’s hard to envision, so many people just work and keep money in the bank. They fear they save for 10 years and then they die so it’s all for nothing.
- It’s scary. It can be hard when the price of dividend stocks go down during corrections and crashes (funny, I take it as good stuff on sale) so they prefer to avoid this pain of losing value though it’s short term. This point is linked to point #1, where people tend to be short term.
- Not many people do it. So it makes it unusual, which makes it hard for people who prefer to follow the herd. This means that most people cant achieve financial freedom.
- It’s not taught in schools or most families. That’s why most people are broke and struggling. People (are) try to be nice, but the world and market doesn’t work on that – there are very specific principles to become and grow richer, which is to accumulate more assets. In fact, people are taught to be poor eg concepts such as “living below your means”, “save”, “dont take risks” and the most common “the rich are wicked” causes many to have conflicted thoughts about money.
Honestly there’s a lot more of this which I will cover in another post, that’s all for today. Food for thought.
I’m the founder and writer here at NigelChua.com; as well as serial entrepreneur, therapy business entrepreneur, digital entrepreneur, investor and also happy husband, father and Christian.
Started and sold off a business for 7-figures; built another 7-figure one and growing it further, plus building/investing into other businesses and investments as well as advisory works.
Nowadays I share and teach entrepreneurship, financial independence, retiring early as well as building and living a life you love.
Thank you so much for your time and I hope it’s helpful for you.