How to build your passive income lifestyle, beginning today
The passive income lifestyle is a lifestyle where your passive income, be it passive rental income, passive dividend income, passive business income; is more than your living expenses.
It is a very, very nice place to be in, and not only does every passive income feels so nice, it also works to lifts up so much of my pressure. Frankly, there are a lot of ways that can lead you to the passive income lifestyle (so many investment vehicles, types, opportunities), but I dont want to create more work or complexities for myself.
To me, it has to be “true” passive and simple to maintain, so I simplified the basic passive income lifestyle concept to be boring but systematic:
- have a steady day job
- save as much as possible
- invest aggressively into dividend stocks that pay you at least 7.5% per year (ideally 10% and above) consistently
- reinvest majority of dividends
- until your portfolio’s yearly dividend passive income is same or more than your yearly living expenses.
The 3 biggest factors that will impact your passive income portfolio
- how much you can invest regularly (this depends on how much you earn and spend)
- how much is the rate of return of your passive income (ideally 10% per year but 7.5% is decent)
- lastly, time
Time plays the most powerful compounding effect. Albert Einstein quipped, saying that compound interest is the 8th wonder of the world, and I agree.
Compound interest, simplified
Compound interest is basically how your money grow with interest return + time.
Let me show you a basic example: say you can invest $10,000 a year ($833.33 a month) into a dividend stock that returns you 10% per annum; and you reinvest every dividend return.
- Year 1: Invest $10,000 + 10% = $11,000 end of year
- Year 2: Invest $10,000 + $11,000 from previous year + 10% = $23,100
- Year 3: Invest $10,000 + $23,100 from previous year + 10% = $36,410
- Year 4: Invest $10,000 + $36,410 from previous year + 10% = $51,051
- Year 10: $159,310.50
- Year 15: $317,597.73
- Year 25: $983,077.21
- Year 50: $11,634,429.65
Instead of plain saving $10,000 x 50 years = $500,000; you can get a much bigger amount with compounding interest.
Start your basic passive income lifestyle today
- Save as much as you can
- Start investing into dividend stocks that gives at least 7.5% per year
- Continue investing and reinvesting the dividends
It takes time for compounding effect to work its magic, and the more time you have, the more it’d work wondrously in your favor…but conversely, the less time you have, the more obvious the shortfall. Eg a person who has 40 years to invest has a lot more time-based benefits compared to someone who only has 10, and that’s why because I dont have high earning capacity as high income professions such as doctors, I knew I needed to start a business to level up.
If you want to level up to earn more, retire faster
Then you gotta earn more.
For most people who have time on their side and have a good chunk to invest monthly, they can take their time to invest regularly, ie dollar-cost-average (DCA) into stable dividend stocks. It is a good way. I take this approach one level up with my businesses which serves to help me accelerate my earning rate (it’s fun and complex too ehehe)
Quick money side hustles
These include the low-hanging fruits of app-based works such as
- driving for Uber, Lyft, Grab
- sending items with DoorDash or similar
- pet walking / baby sitting
These are the kind of work that can help you earn an extra $50-100+ a day on your schedule, as part of your routine.
Learn high income skills
High income skills are skills and work that are higher value, such as
- property agents / realtors
- insurance agents
- copywriters / direct sales
- trade skills such as plumbing, electrical
and can typically earn you $100k/year.
Scale up businesses
Scaling up a business means to grow, hire and delegate, but before we go there, let me first say that it’s not always a necessity. It’s wayyyy more complex and difficult, but of course, has the most potential. Not everyone is keen or hungry to scale up businesses, and that is fine.
An example of scaling up a physical business is if you’re a realtor, you can consider recruiting a team of 5-10+ sales agents under your belt, where you then train them and lead them to grow their own businesses under your business. The upside is that you can multiply your income exponentially…when done right.
When done wrong, it can mean you working 24/7, tired and burnt out. Or lose money.
Normally, I recommend people to either do something low-hanging such as the quick small wins type or building a $100k+ per year freelancing business, because it’s less complex. If you want to do something that can scale, you can consider starting a blogging business where it can cost a few hundred bucks a year on the side.
Blogging is a publishing business where it can become a powerful passive income business with scale, but it does take a lot of time (at least a minimum of 2 years+) for it to take traction, build followers etc. The goal is to build a good enough following who likes what you write and do, and then monetize by display ads and creating products that help your followers.
Invest the profits from businesses and side gigs into dividend stocks
The profits I use to invest into dividend stocks (mainly as core) as well as some into high-risk-high-growth investments such as crypto. Profits from high-risk-high-growth investments are taken out to decrease risk and invest into more dividend stocks and pay for primary home.
Rinse and repeat.
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.