
To get started, let’s calculate what your current living expenses are so that we know they are accurate and honest.
First, look at your household living expenses. Start with the basics: food, gas, electricity, insurance, internet, clothing, and rent or mortgage payments. All the essential expenses that you must be able to cover as a minimum. Round all these expenses up to the nearest $10 or $100, or simply add 10 per cent. We do this as a buffer to cover rising expenses.
Then move on to the optionals: gym, additional lifestyle clothing, takeaway and dining out, gifts, hobbies, beauty and self- care services, and social activities. Again, round all these expenses up to the nearest $10 or $100, or simply add 10 per cent.
Simple budgeting with a banana. It’s money made easy.
Then include the average amount that you spend on holidays and weekends away per year. Say you normally go on one international holiday per year at a cost of $7000 including airfares, accommodation and spending money, and you tend to have one domestic holiday per year at a cost of $2000, and then you have two weekends away at an average cost of $500 each. This means that you would spend approximately $10,000 per year on travel and adventures.
The final and most sensible expense to add to your living expenses is a regular investment plan. This is so that you can keep building your passive income, even when you are financially independent and living off this income comfortably. This helps ensure that your financial security continues to grow. This is a set amount of money that you put aside on a regular basis to put towards your building your passive income, even when you are financially independent and living off this income comfortably. This helps ensure that your financial security continues to grow. This is a set amount of money that you put aside on a regular basis to put towards your investment portfolio’s continued growth opportunities.
Ideally I recommend that you factor a minimum 10 per cent of your total living expenses towards new investment into your portfolio, helping your financial security and choice strengthen further.
For example, if you discover that your total rounded-up living expenses come to $50,000 per year, you then need to allocate an extra $5000 per year (10 per cent of $50,000) towards buying and investing in more passive income streams – either building upon your existing investment or adding new ones.
Top Comments
The Financial Independence theory is an interesting one.
It's great in theory, I love my job but if I could get paid anyway (or replace it with passive income, obviously) I'm sure I could manage without it.
Personally, the risk is too high. Another GFC and you lose half your capital. For every bust period there's likely to be a boom period so it's more than likely okay in the end, it's just not for me.
Can certainly get behind investing more money, getting a passive income and then maybe going part time.