Let's take the average salary of $3k per month. If you want to have a dividend giving that amount per month, or an equivalent of $36k per year, you'll need a capital of $720k invested @ 5% pa! Do you have 720k? I certainly don't have that yet, but I can still have that dividend credited to my bank account every month, as long as I show up for work.
So for all the people out there keen on investment, you should try investing in yourself and in your work and see if you can squeeze more out of it. Income from work, though active, is going to have a lot more effect in your financial health than investing ever could be. The reason is because we have a smaller base capital when we're younger and so work provides that stable, consistent income that if we're diligent and disciplined enough to save up, will form a solid foundation in which we can deploy later.
The problem comes when we try to put the cart before the horse - focusing to earn a passive income stream when we should be focusing on earning a good active income stream. To be an investor is to be efficient in capital deployment. Investing our time and energy on building a passive income stream when our human asset is the strongest seems to be out of sync. It's like choosing to eat canned tomatoes when there are fresh seasonal tomatoes plucked directly from the vine. Hey, got fresh tomatoes, eat it first lah! When it's ripe and you can't store it anymore, then you go and can it and make it last a little longer so that you can eat it in the future.
Do the right thing at the right time!
11 comments :
We need more financial bloggers who write very well like you to stress the importance of earned income from our human assets. Even "Gurus" themselves made most of their money from their business from selling courses on investment training instead of their STOCK portfolio.
Save up $1m from our salary and bonus, close one eye and invest in the next few months we will get $50K investment income next year. How difficult can it be?
Many of us are seduced by Large Number posted in the cyber world without knowing the real magic behind this Large number.
Great post! I admit I am one of those who are unduly fixated on passive income. Need to stay focused on the real prize, at this stage of our lives (I'm assuming you are mid-30s!)
:)
The 4 steps to become richer ... that most people never follow:
1. Earn Income
2. Invest a considerable amount of that income (20+%)
3. Spend the rest by maximizing the joy-to-stuff-ratio
4. Make sure your expectations of what a good life entails grow less than your earnings.
Agree with you on investing in your own human capital first. After all, our active salary and bonus income usually forms the biggest component of our total income.
Hi bro8888,
Thanks for your encouragement! We all need that first pot of gold before we can do anything. And for most people, it will have to come from our earned active income. No choice!
Hi RT,
Hey hey hey, haven't heard from you for a while! What happened to you? Haha
I'm still in 30s, yes ;) Still have some more human asset to milk, before it all goes downhill haha
Hi Tacomob,
Your 4 steps covers everything already haha, perhaps except for the insurance part :) I see quite a lot of young pple, who are just starting work and wanting to focus on the part 2. That's like skipping steps, haha
Hi finance smith,
Welcome here :) Yes, you're right, it's indeed our most important and biggest source of income, at least for a while. Until our financial assets grow more powerful than our human assets, we still have to work for a living!
Why are you sharing the secret to the public. You shattered many dreams.
Unless there is a sure win investment. If there is, we will all leverage to bet big on that.
Hi FD,
THIS IS the sure win investment. You invest in yourself and you are guaranteed to reap rewards. Most pple do well in this investment; it's hard to find anyone losing money in it. Investment aren't even as certain as this!
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