Here is how much you need invested to make $200 per day in passive income from real estate, index funds, and dividends – Enjoy! Add me on Instagram: GPStephan
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The FIRST APPROACH – which is the most SIMPLE – is to follow what’s called The 4% Rule:
This is the formula that says you can spend 4% of your portfolio, each and every year, without running out of money, while maintaining your EXACT same lifestyle. Basically, the logic is that – if the market returns an AVERAGE of 7% per year adjusted for inflation, you’re safe spending about 4% of that – while still having enough left over to grow and hold you through the times where the stock market goes down for a prolonged period of time.
So, using this logic…if you wanted to replace the AVERAGE American income of $63,784…you multiply THAT by 25….and that means you would need $1,619,600 invested in the stock market to FULLY replace the average income.
The SECOND APPROACH: DIVIDEND STOCKS
Here’s how that works: when you buy a stock, what you’re REALLY buying into a small ownership share of that company. Now that you own a small piece of the company by investing in their stock – some of those companies will pay you out a “dividend,” which is a fancy word for saying: they’re going to pay you a portion of their profits, because you own a small piece of their company by buying their stock.
In my opinion, DIVIDEND STOCKS CAN be a good replacement of your income…but, I wouldn’t create your entire portfolio from it, because it’s MORE Important to look at the growth of the overall stock and the company, rather than JUST how much they pay. .
And FINALLY…the third approach, where you can speed up this process a LOT – is by investing in Real Estate.
For example, instead of investing $20,000 into buying stocks – you might be able to use $20,000 as a down payment to buy a $125,000 home that rents for $1000 per month. In this case, about $450 per month will pay your mortgage to the bank…$50 per month would go to insurance…$100 per month would to maintenance and repairs…$100 per month would to go vacancy and miscellaneous…and that would leave you with $300 PER MONTH left over as profit…from a $20,000 investment. In that scenario, you’re earning an 18% cash return on your $20,000.
To start doing this:
FIRST: TRACK YOUR SPENDING.
Just go to Mint.com or PersonalCapital.com, they’re both free, sign up – and then watch your spending for the next 30-60 days to see EXACTLY how much you spend every month. That’s all you need to do for this step.
SECOND: CUT BACK WHAT YOU DON’T NEED
Once you see how you spend your money over 30-60 days, you’re going to be able to point out some inefficiencies with where you spend and what you don’t need.
THIRD: SAVE AND INVEST THAT EXTRA MONEY
Literally WHATEVER YOU CUT BACK ON HERE – INVEST IT IMMEDIATELY. Open up a Roth IRA if you don’t already have one, throw that money into a low cost index fund, save up for a down payment on real estate, or do SOMETHING with the intention of investing it.
FOURTH: LOOK INTO GETTING ANOTHER JOB OR SWITCHING CAREERS
There are multiple studies that have shown that people who switch jobs every 2-3 years make nearly 50% more than someone who stays with the same company.
AND FIFTH: SLOWLY BUILD THIS UP OVER TIME WHILE YOU RE-INVEST YOUR PROFITS
And the OTHER good news is that, the less money you SPEND – the less money you need to REPLACE – and not everyone needs $63,000 per year in passive income.
As far as my own thoughts on this, and what I would do…honestly, I’d say it’s best to use a combination of ALL 3 OPTIONS if you want to invest enough to replace your income.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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