How Much You Need to Have Invested to Cover Your Expenses Passively

3 34
Avatar for MoneyCanWorkForYou
2 years ago

Cover Your Expenses With Passive Income

Photo from Pexels by Breakingpic

Intro

Passive income is a term that’s thrown around a lot. People seem to love it. But what does it actually take to live off of passive income? How much do you need to have invested to be able to cover your everyday expenses? These are the questions I am going to answer in this article.

How To Calculate

For the purpose of these calculations, we are going to look at passive income like dividend and interest payments. Not scaleable income from different side-hustles with unpredictable income. 

Ben Le Fort

 explains the difference between the two in-depth in his article — Here!

There are no set-in-stone rates for dividends and other interest-bearing investments so let’s imagine that we get a 4% yearly dividend payout to do our calculations. You can easily adjust these calculations to fit your investments later.

It’s Really Simple

If you wanted to know how much you would need to have invested to make $1000 passively from your 4% yearly yield investments, You should simply divide the $1,000 by 0.04. And that gets you $25,000. You would need to have invested $25,000 to make an extra thousand a year. But if you wanted to get $1000 passively a month, you would need to multiply those 25 grand by 12 and that comes out to $300,000.

Real-life Example

Let’s calculate how much you would need to have invested to cover a standard Netflix subscription that costs $15.99. First, let’s multiply it by 12 to get the costs for a whole year. We get $191.88. And now, let’s divide it by 0.04 — it comes out to $4,979. You would need to have invested about five thousand dollars just to cover a simple Netflix subscription.

To Cover Cost Of Living

This will vary depending on where you live and what lifestyle you lead, but as an example, we will be looking at the average expenses of a household in the US. Statisa.com data shows that the average annual cost of living in the United States in 2020 was $61,334. To cover this amount from passive income we divide 61,334 by 0.04 and we get $1,533,350. Meaning you would need to have invested one and a half million dollars to live an average lifestyle in the United States.

Takeaways

Living from passive income sounds exciting. But for most of us, it’s still a distant dream. And if you want to live from passive income, what you really need to do is focus on ways to earn more actively. And you can look at your expenses from a different perspective. If a Netflix subscription costs $5000 to cover it with passive income, is it still a necessity for you?

6
$ 4.34
$ 4.32 from @TheRandomRewarder
$ 0.01 from @francis105d1
$ 0.01 from @Germancrypto
Sponsors of MoneyCanWorkForYou
empty
empty
empty
Avatar for MoneyCanWorkForYou
2 years ago

Comments

Yeap, I future out some time ago that you need at least $300k to have a monthly income of just $1k month, but getting to that money is the hard part, especially if you were born without rich parents to leave an inheritance. If you have $300k, you can have that same amount of FlexUSD tokens, and you will get 8% a year in the interest; of course, if CoinFlex goes out of business, your money is gone.

Many DeFi protocols offer more than just 8%, but if the tokens go down in value, your interest is as good as nothing; the problem is not passive income, in my opinion, the problem is getting the initial capital and growing that capital into your first $100k and beyond. I am in the phase of getting to raise my money to at least $100k; after that, I will worry about passive income because I know I need at least that much to begin with.

$ 0.00
2 years ago

If using platforms like CoinFLEX, maybe look into diversifying into similar platforms with similar rates. Don't keep all of your eggs in one basket. If one of them goes bust, you might still be able to recover funds from others. You should check out BlockFi, Celsius, Nexo and there are also fiat peer-to-peer lending sites like Mintos. Not only does using several platforms help with diversification, but some also offer nice sign-up bonuses if using referral links. Here are some of mine https://linktr.ee/MoneyCanWorkForYou. You can get $50 if you deposit $400 on celsius and the rates are also not bad.

$ 0.01
2 years ago

FlexUSD pays interest on your own wallet you don't need to send your coins to a centralized party like Celsius or Nexo, but the company behind FlexUSD is CoinFlex so that is the risk.

$ 0.00
2 years ago