How to Earn $180 Passive Income Per Month

It is 1.23 AM in the morning.

And here I am punching in some numbers furiously into my calculator.

So I did some rough calculations and it seems like I will be falling short of my passive income goal for the Year 2009.

I am still short of $180 dollars per month to hit my goal of $400 per month in passive income.

Any suggestions to achieving this figure?

I figured that if I invest my money in a REIT that gives me 10% yield, I will require a capital of $21,600.

I do have free cash sitting around that amounts to $21,600 but I am wondering whether investing in REITs is really the best option to hitting my objectives for this year. My current REIT portfolio already has healthcare, residential and office REITs. Perhaps its time to add some retail or industrial REITs in?

It is a pity that I sold away my canroys too as I felt that the capital gains that I got were quite substantial. After selling my PenWest Energy Trust, the price continued to ZOOM upwards way past the price that I sold it for. Nevertheless, I did make quite a good return on inital investment.

Decisions, decisions, decisions.......

2 Months to End 2009

Oh No!!

It is just a short two more months to the end of 2009. And it seems like I have yet to hit my objective of $400 per month in passive income for this year!

How could I have fallen asleep and not keep track of my passive income earnings?

Last year, I managed to achieve my goal in a pretty short time simply by buying lots of REITs. This year however, the global financial crisis sort of through my whole REITs buying strategy off track. I got a little bit afraid of buying more REITs as most of my REITs had fallen in value.

I really need to get to work so that I do not fall behind my earnings goal. Otherwise there will be lots of catching up to do for the year of 2010.

Any suggestions please?

Read Related Articles:
1. Welcome to My Financial Freedom Journey
2. Financial Freedom Number
3. Financial Freedom Goal

Financial Freedom Update

I love those Q&A articles that are always featured on the Straits Times. So...I have decided to do my very own Q&A down here:

Q: What are your money habits?

I try my best to save first before I spend. Once my monthly salary comes in, I will usually set aside 10 to 15% into another bank account as part of my savings. Other than that, I buy stocks every once in 2 to 3 months. I am much more a saver than a spender. I only spend on things that are necessary.

Q: What financial planning have you done for yourself?

I have a long term view for my investments. My wife and I have set aside cash amounting to close to $100,000. The rest of my money is mainly invested into equities with a small portion in commodities unit trust. Equities are mainly into Singapore stocks while we have some exposure to Canadian Royalty Trusts and US stocks though that makes up only 10% of our equity portfolio.

My Singapore stock portfolio was structured firstly for capital gains and later on in the years, I have started to focus more on dividend yields. Around 40% of my portfolio is currently into REITs or dividend yielding stocks. Some of my stock holdings including Pac Andes, Kingboard, China Aviation Oil, First REIT, Ascott REIT and Suntec REIT.

Q: What about insurance planning?

I am covered for about $600,000 for death/disability and $400,000 in critical illness. My wife is covered for $300,000 in both life insurance and critical illness. We are both covered under hospitalisation plans. We are looking to increase the coverage for my wife to $500,000 and for myself to $1 million.

I use a mixture of term insurance, whole life, and ILPs for insurance coverage. The surrender value of my whole life plan is currently at $15,000 while my ILP's surrender value is around $34,000

Q: How did you get interested in investing?

My dad .

Q: Your best investment to date?

My flat. Bought it for $300,000. It should be valued at around $450,000 today.

Q: Your worst investment to date?

Bought into Unifood during its high of close to $0.50. Lost around $8,000

Q: Any other investments?

Education and reading of books. Investing time into my family too.

Q: Moneywise, what are your growing up years like?

I was taught to save money for a rainy day. Both parents were really frugal though they were quite willing to spend on things like holidays.

Q: Your home is ...?

A HDB flat

Q: Your car is ....?

A 1.6 litre car

Financial Freedom Goal Setting

I have learnt from previous workshops that goals must be SMART:

S - Specific
M - Measurable
A - Attainable
R - Realistic
T - Timely

In my earlier postings, I defined financial freedom for myself as when my passive income exceeds my expenditure. I gave myself the timeline of 2022 to bring down my monthly expenses to $2800 and to bring up my monthly passive income to $2800.

Based on increasing my passive income by $2400 every year, I will be able to increase my monthly passive income by $200 each year. The plan is as such

2008 - $200 (achieved)
2009 - $400
2010 - $600
2011 - $800
2012 - $1000
2013 - $1200 (Car loan fully paid for)
2014 - $1400
2015 - $1600
2016 - $1800
2017 - $2000
2018 - $2200
2019 - $2400
2020 - $2600
2021 - $2800 (Housing loan fully paid for)

Therefore, by 2022 I will be effectively financially free! Of course, this is based on the assumption that I have paid off all my car and housing loans by then.

Financial Freedom Goal (Half Month Review)

In my first post in this blog, I articulated my Financial Freedom Goal by the year 2022 of earning $2800 per month in passive income. As it stands now, I am currently at $207 per month passive income. Half a month after articulating my plan of increasing my monthly passive income by $200 each year to $2800 per month by the year 2022, I can safely say that I am on my way to achieving my financial freedom goal.

So often, one reads about the need to achieve financial freedom through multiple sources of passive income. Very often, what people often forget or neglect is to have a plan to make this work.

This was the very purpose of this blog. It was to remind me of this goal and to lay out a plan that would help me achieve this goal.

Too often, I had found my investing habits to be sort of haphazard.

When I first started out working 3 years back, I wanted to invest in blue chip stocks that would provide me with a steady stream of income. Looking back after 3 years, I had not acquired a single blue chip or dividend yielding stock. Instead, my greed for quick gains has resulted in me holding a portfolio of stocks that have neither given me a steady stream of income or any quick capital gains to speak of.

That was when I decided that enough was enough. It was time to write a financial plan that will make sure all my investment and financial decisions are aligned to this plan.

The difference between 3 years back and now is that I have articulated a clear plan and will review this plan before making any financial decision.

Since the penning down of this financial plan, I have managed to increase my passive income by close to $16 per month. Of course this is nothing great to boast about but it definitely beats all the procrastination that I have been doing for the past few years that I have been working.

On top of that, I have also become much clearer about my monthly expenditure and am trying to find ways to reduce it.

I hope to be able to share my journey with others once I attain my Financial Freedom Goal 2022.

In my next post, I will explore the various streams of income that I hope to attain by the year 2022. Do bookmark this blog and return soon

Financial Freedom (Goal 2022)

My definition of financial freedom would be to simply have sufficient passive income (income that I do not need to work for) that would cover my monthly expenditure by the age of 40.

Simply put :

Financial freedom = Passive Income > Monthly Expenditure

That is a total of 14 years to achieve it. Hopefully I will achieve it by the 31 Dec 2022.

The purpose of achieving financial freedom is to give me the flexibility to pursue things that I enjoy doing and value in life. The goal of achieving financial freedom is just one of my many goals in life.

I intend to achieve this through the following steps:

1. Increase my monthly passive income to S$200 by end 2008. (S$2800 per month by 2022)
2. Reduce my monthly expenditure to below S$2800
3. Pay off all debts (HDB 4 room flat, car) or attain a debt level that combined with my monthly expenditure would not exceed S$2800

This blog serves as a journal to chronicle my journey and I hope that you would learn as much from it (be it from my failures or successes) as I would from the entire process.