Not too long ago, I was happily planning on retiring from the Marine Corps and starting a new job. But, lo and behold, I started reading. Oh no. So having only military retirement income is no longer the plan. I found out through reading that I can actually have my money do all the work for me. Having your money do the work for you is called passive income. Passive income comes from investments that you have made throughout your lifetime. Some passive income ideas are dividends from stocks, interest from bonds, income from real estate rentals, and residual income from businesses. And yes, military retirement is also considered passive income as well. So my goal as of today, Oct 9th, 2020, is to create as much passive income as I can before I retire. The good part is that Kris and I can live very comfortably off of just my military retirement. So if we don’t make our goals by the time I retire, we can still work on it after I retire.
Is it hard to build a passive income stream? No, it just takes discipline (and spreadsheets). In order to build passive income, you need to build excess cash flow. Cash flow is the difference between your income and expenses. For example, if you have an income of $10,000 and your expenses are $3,000, then you have $7,000 of excess cash flow. In order to build excess cash flow you can 1) increase your income (job or business) 2) lower expenses 3) pay off debt 4) buy assets that pay you (increase income). Once you start generating excess cash flow, you will invest in items that generate you even more income such as stocks, bonds, real estate, and businesses. With that, let’s look into how my 4 retirement blocks connect to each other.
Military retirement- This is what I have been working on for 21 years. I am still going strong in the Marine Corps, grinding it out for more retirement income. The goal is to set ourselves up to not even use any of this income for expenses. I truly want to invest each dollar of military retirement income back into more investments such as stocks and real estate.
Investment Circle- My investment circle consists of checking, high yield savings, bonds, stocks, and real estate. From this portfolio, I will be receiving savings interest, bond interest, stock dividends, and real estate dividends. Of all of the blocks, this is the easiest to get started. It will take a substantial amount of money to get this to where I want it ($3 million?), but I have years to achieve this. After a little while, the dividends and interest will start doing a lot of the work for us, as we re-invest them.
Real Estate- Real Estate is a great way to earn passive income for retirement. Not only does your house price appreciate (go up) but also your rental income goes up as well. The main thing to remember is to have an emergency fund, just for real estate. As long as you have that, it is not to difficult to own multiple properties. It is also nice knowing that you own property that can help out family members or children. Just an added bonus.
Business Income- This may take time to set up. In order to start a business, you need to build an audience or population of people who use our products. That is the hardest part. You will need to learn business and communication skills as well, but that can be done in time. The plan is to build an audience between Kris and me and grow our business. Right now I don’t know exactly where that will lead us, but learning how to interact with a group is extremely valuable. It may take us three years to build an audience, but once we do, we can figure out what their needs are. This business can be run from anywhere. The best way to start a business is while you are working. Once your business income is more than your primary job income, you may consider quitting your day job.
Having all these blocks working together should allow us to have a very comfortable lifestyle. The worst case is that I work another job for a few years, just to invest more into my investment circle or real estate. As we prepare for retirement, it is important that we invest in having multiple streams of income, this ensures that we don’t become “income challenged” for the rest of our lives.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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