Comments on: Re-Earned Income

By: Everyman’s Guide to $30 / Month in Passive Income

Everyman’s Guide to $30 / Month in Passive Income — Thu, 26 Jun 2008 09:22:59 +0000

[...] while back I made reference to $30 / month of passive income and one of my off-line friends was quite interested in more details. Along the same lines as my [...]

By: Dan

Dan — Fri, 02 May 2008 21:13:18 +0000

Ah, I guess I should differentiate between different forms of blogging. If your blog is primarily informational in nature and depends upon search traffic rather than having a following, then it isn’t as much work (new content isn’t required all the time to keep people’s interests).

But having a following is generally less volatile than depending on what Google’s and Yahoo’s algorithms are that week.

By: Mr. Cheap

Mr. Cheap — Fri, 02 May 2008 17:52:55 +0000

DGI: Yes, that’s my feeling too. The $30 I referred to in my post wasn’t from blogging (I forget where it was from, but it was passive). Blogging income is more like a second job rather than a passive income stream in my opinion.

By: Dividend Growth Investor

Dividend Growth Investor — Fri, 02 May 2008 15:25:37 +0000

Dan, the only problem with blogging income is that it requires your full attention to writing great content, while at the same time marketing to everyone on the web.
With investment income though, you only need to select companies that won’t cut their dividend. If you are fortunate enough that your company keeps giving you raises ( like JNJ) for 4 decades, then you are a lucky person..

By: Jerry

Jerry — Fri, 02 May 2008 14:54:51 +0000

This is a common fault for many people. You don’t see success in most areas of life by going with the “home run approach” that ThickenMyWallet mentioned… rather, true success leads from multiple smaller efforts combined over time. For many people, $250/month would cover their groceries, or their health insurance, or some other necessity. I think this is why so many people will line up to spend money on lottery tickets, but won’t actually invest small, consistent amounts in their future.
Jerry

By: Dan

Dan — Thu, 01 May 2008 19:22:17 +0000

Everyone needs to be taught Net-Present-Value calculations.

Basically, the worth of a recurring $30/month payment (assuming it is risk-free, even though it is not) is between $3600 and $7200.

$3600 = $30/mo * 12 mos * (1/10%)
$7200 = $30/mo * 12 mos * (1/5%)

In other words, someone would have to invest $3600 at a 10% return, or $7200 at a 5% return in order to get the same kind of return. (And I’m completely ignoring tax advantages & disadvantages here)

Advantages with blog income: If ad rates increase along with inflation, your returns will be inflation adjusted. Some organic growth from search engines may occur as content ages. The cost of hosting content should continue to go down.

Disadvantages: Content can go “stale”, or out-of-date, and therefore people won’t view/seek it as much. Ad rates can tumble. Some maintenance is required which probably isn’t being accounted for. New forms of media may take over.

By: moneygardener

moneygardener — Thu, 01 May 2008 18:42:14 +0000

Thicken My Wallet’s comment hits it bang on for me. Of course $30/month or even $250/month doesn’t seem like much money because many people always think in terms of employment income. The kicker with passive income is that you don’t have to actually do much to get it, that’s why it’s passive, also in the case of dividend stocks, it’s relatively permanent and grows.

By: guinness416

guinness416 — Thu, 01 May 2008 18:01:21 +0000

I’m not exactly a starving artist and 250 bucks a month seems like a decent chunk of change to me. Instead of looking at it as your grocery budget you could also look at it as an additional, what, $7,000-ish of christmas bonus, which none of us would turn our noses up at.

By: 0xCC

0xCC — Thu, 01 May 2008 16:41:44 +0000

I read Derek Foster’s “Stop Working” book in 2005 and changed my investing focus to income rather than capital appreciation. In 2005 my portfolio generated an average of about $150/month. By the end of this year I expect my portfolio to generate close to $750/month. Obviously I’ve been adding to my portfolio over the last 3 years but I would say that at least 30-40% of that $600/month increase has come from re-investing income and companies increasing their dividends. So far in 2008 my investment income has increased $20/month just from companies increasing their payouts to shareholders.

By: ThickenMyWallet

ThickenMyWallet — Thu, 01 May 2008 15:50:50 +0000

I always find it curious that people take a “home run” approach to investing. If people can’t clear a massive return or rental income then its just not worth doing. It seems strange to me because if you study how rich people got rich (for those who did not come from well to do families like the Trump’s) they started small and let the momentum build. At some point in the process, you hit the tipping point and the massive returns come in but it is a process.

While $250/month in rental income isn’t that much in the abstract, it is $250 more in your jean pocket then the person who thumbed their nose at that figure.