Monday, November 9, 2009

How long does it take me to reach a passive income of $3000?

Currently my passive income has reached about $880, and my target is $3000. So how long does it takes me to reach my target. Let me has some assumptions before doing the calculation.

Assumption 1: I reinvest my passive income and I have a saving of $20000 for my investment yearly.
Assumption 2: My reinvestment gives me 5% return in term of dividends
Assumption 3: Dividends from my investment is constant

By taking the assumption, I have the following result:

It is calculated that by year 14, my passive will be more than $3000. So how to reduce the number of years to achieve my aim? If you see my cash flow framework, there are two methods. First, I must work harder to increase my income from my job. Second is to find other income sources.

6 comments:

Gabriel said...

Hi,

Can i ask how do you hit so much passive income for the cash segment of $730.15? Is it purely dividends? I calculated my dividends per year amounting to approx $1650 only. Meaning per month its about $140. And i got more shares in cash than cpf compared to yours?

Unless there are other passive income generators for u?

Regards,
Gabriel

Freedom Achiever said...

You are right!!! I got other source of passive income.

la papillion said...

Hi FA,

I'm sure you know that 3000 now is different from 3000 in 14 yrs time. So your aim of 3000 per month passive income is based on present, I assume, because you didn't account for inflation. Would 3k per month be enough to cover your expenses in 14 yrs time, assuming that you hit 3k passive by then?

I think you need roughly 5k present term to offset inflation in order to get 3k in the future.

Freedom Achiever said...

Hi la papillion,

Yes, I am aware of inflation. I have a article on inflation in my blog link below.

http://lifelongfreedom.blogspot.com/2009/09/is-money-form-of-liabilities.html

$3K is just a target set for me. Though it may not enable me to be financial free, but at least I will not need to work so hard for money in 14 years time.

Regards,
Freedom Achiever

thesmallredone said...

Wow, I must say $3000 per mth is really alot. And yes you said you got other income. And since you have written this blog, we can see that you would like to share your expriences. Could you enlighten us on how your derive to that amount? Maybe not the 3k but your starting amount.

Freedom Achiever said...

Hi thesmallredone,

Passive incomes in terms of rental and dividends from stocks. Currently I am try to start up part time home based business. Doing a lot of reading up at the moment.

Regards
Freedom Achiever

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