The Importance of Passive Income

I wrote an article a short time back about Passive Income, and my desire to be a millionaire before I’m 40, or to at least retire by the time I’m 40. As long as you have enough money to survive with and pay your bills you are effectively “retired”, and the more time you have the more free time you have to use. For those wondering, the reason I want to retire is because I’d rather volunteer (preferably working with animals) because I love them, and having the time/money to focus on my personal projects which better humanity, I would feel ashamed personally if I worked all my life and achieved nothing. This may seem like an impossible task to some, but I believe it’s possible and quite easily done You just need focus and commitment.

Why is it important to me, well basically, you earn money whilst you sleep. Even if you just earn 1p per hour whilst you sleep, it all adds up over time and multiplies quickly

There are various sources you can use for “Passive” income. Also I refer to the income being Passive in the sense that once I set it up, or have put some work into it. I don’t touch it thereafter. I may primarily change setups from time to time as experiments, but other than that once they’re setup they become a source of income

Now. The maths so that people can understand it. At this moment in time, I use (or have) at least 5 sources of Passive income that I can use to make money from. Here are some examples that I use or have looked into just to give you some examples and why I use them. Much like compounding, the power comes from the sources you have and the fact they run continously without touching

  • eBay Partner Network
  • Google Adsense
  • Youtube
  • Amazon KDP (Bookshelf for authors)
  • Website Store (currently not activated yet)
  • Amazon Affiliates (not using, but an option for some)

I’ve tried to give realistic figures here rather than make believe ones.
Each source “earns” you £0.01 per hour in passive income (£87.60 per year) or £7.30 per month
£0.01 (P/H) x 24 (Hours per Day) x 365 (Days per Year) = 24p per day income

Now, you have a total of 6 sources below – they’re all earning a total of £0.01 per hour
6 x £87.60 (per year) = £525.60 (£43.80 per month)

Now, let’s say you have a let’s say you have 30 sources of income each earning you £0.01 per hour
30 x £87.60 (per year) = £2628 (£219 per month)

Or, how about you have 5 sources of income each making you £0.12 per hour
You’re now earning £2.88 per day per “source” of income – or £14.40 per day overall (£5256) per year (£438 per month)

As you can see, it doesn’t take much to boost your income for a relatively low amount if you have a large number of sources of passive income. Or you have a small number of sources that gain large income.

Just some optimistic calculations, to put things into perspective (how a little can turn into a lot)

You’re a heavy content creator on Youtube. You have a large base of followers who like your videos, maybe you make VLogs. You run adverts on your videos. Each of those videos only make you £0.001 per hour, but you’ve amassed over 300 videos, and about 10% of them are watched often (earning you £0.72 per day – 24H x 0.001P/H x 30 Videos)
This source earns you £0.03 per hour or £262.80 per year

You’re a creative bookwriter, you’ve got lots of books for sale on Amazon KDP. You have written 100 books, but only 30% of them actually earn you £0.005 per hour (or £3.60 per day – 24H x 0.005P/H x 30 Books)
This source earns you £0.15 per hour or £1314.00 per year

As you can see, I’ve only listed two sources of income above, and these could earn you £131.40 per month more in income given my two situations above. Combine that with a website, you can run Google Adsense / eBay Partner Network ads on it for some more income (I personally don’t make much via Google, but EPN I earn between £20 – 50 per month) which I reinvest mainly (my webhosting costs me about £100 Per Year)

Even if I could use the 6 sources above that I mentioned all it would take for me to make almost £1400 per month would be for those sources each to make me £0.40 per hour or £9.60 per day. When you look at the price of a minimum wage job in the UK £8.72 per hour for my age currently. You realise that when you have passive income sourcs, the money you earn doesn’t matter, because it all adds up over time. I actually have about 30/40 sources of “income” that I’ve been thinking of (both active / passive) which I’m currently researching as methods to boost earnings.

Additionally, you should also focus on debts. No point earning £1400 per month passive income and not putting it on debt, because once the debts are paid, you’re then freeing up more income and lowering you’re outbound expenses.

Maybe the next time you think of Passive Income, it will get your mind thinking about how you can have another source of income. Put your mind to use when you have 10 mins free time, and make it work for you in the long run. I think most people would love the luxury of not having to worry about money when they wake up each morning, knowing how their next bill will be paid, or like me, being able to retire when I’m young and enjoy life.

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Pay calculator for financial management

One of the things I did when taking control of my financial expenditure and budgeting my money was created an Excel spreadsheet. I used this as a Pay Calculator for my financial management. It helps when you’re tracking every single penny you spend, because you can see all the figures at a glance. Where you’re spending too much, where you aren’t spending enough. Where you can save.

When filling this file in, you have to be 100% honest, and input every single number. If you’re lucky, you’ll have most things on a direct debit, it makes things easier. If not you have to manually input them into the pay calculator.

Please find attached this Microsoft Excel file. Which you can use for budgeting and sorting out your finances.

http://andrewhope.co.uk/~downloads/wordpress-files/financial-calculator.xls

It’s fairly self explanatory

  • Standard household bills input into the left column
  • Any extra money in right-hand side column
  • Your standard wage / benefits goes in the middle section

The pay calculator will then work out the rest for you, and also show you what money you will have left over for the month.

For me personally credit card / loans where my main issue. I’ve been working on restoring my credit rating so I could get a consolidation loan to free up £100 per month off my wage. It doesn’t seem like much, but when you’re counting pennies and budgeting, an extra £100 that you no longer spending is a hell of a lot of free money to play with. Also I paid off one of my credit cards.

This has helped me with financial freedom, I’m slowly getting there.

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Retirement at 40

Retirement at 40, is it possible? – For me, yes. I think it’s possible. Although to retire early, ideally you want to get started early. The same as compounding interest, the younger you start saving. The more money you have in the future.

How much do I need in order to retire at 40? I estimate savings of at least £500,000 (realistically though I’d like this to be closer to £1,000,000)

Now this number is a lot, don’t get me wrong. I’m currently 35 years old as I type this Blog entry, however I like a challenge and I’m still optimistic, if it doesn’t work out, then I’ll have built up savings. So it’s a win-win regardless

The reason I want to retire at 40? – “Life’s too short”, you’ve heard those words many times before, and it’s true. Once you’re gone, you’re gone. So I’d rather focus my time on enjoying it and focussing towards my interests. These include Medicine, Robotics and Energy.

As a person, I’d like to do something to leave a mark on this world, which has a greater impact. Working a 9-5 job isn’t doing it though, this is the reason why I’m aiming for a retirement goal. I care about the bigger picture and being happy. Reaching this point would allow me to achieve this goal

Based on a retirement figure of around £1,000,000, I’d need to earn somewhere in the region of £600 per day!

Now, I’m not thinking about this number, quite frankly it’s absurd to think about.

I’m thinking of another way, via “Passive Income” – basically making money without me working for it (so I make money whether I eat, sleep or shit.

For reference it’s about £26 per hour passive income I need in order to get the magic number based on my current age. Which is why I said start early, if I started working on retirement when I was 20, I’d only need a passive income of around £7 per hour!

Anyhoo. My thoughts towards retirement at 40, and what I need to do. Or currently are doing to achieve them

  • Reduce outgoing expenditure (paying off debts / mortgage) and saving money in general
  • Investments (I’m looking into things like Dividends, and REIT) to help pay out dividends as passive income
  • Stocks and Shares (this is more long term investments)
  • Increasing my passive earnings (writing books, training guides, writing more content for my website)
  • Earning more money (whether this be matched betting, ebay, etc)

I don’t earn much passively, but I have my mind focussed on a goal now which is something I’m good at. Quite frankly the thought of leaving any job at 40 appeals to me. I’ve always said if I could afford to not work for a living I’d work with animals

Anyway, that’s my short rant for now. I’d love to hear ideas of how you think about passive income, or what works for you.

Views – 231