They chose financial independence over home ownership.

This is somewhat extreme but watch how this Canadian couple chose financial independence over home ownership.  They are in their 30s and,...

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"E-book" by AK

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Want to create another stream of income with $500K?

Saturday, May 16, 2015

I am sharing a recent conversation with a reader here:

Hi AK,

I have been reading financial blogs from US too long and have been searching for a worthy local base blog for a long time. I am thankful to have found your site. Through your site, I have attended some local investment workshops and get to know Fifth Person and Big Fat Purse.

I wanted to have a second stream of income via investing in dividend paying stocks or reits. I am intrigue by your story that you are retired already given that you have generated a steady stream of income with salary between mid to high 4 digits.

Sharing a little about myself. After finding out what you were earning and that with that you are able to generate a steady stream of income of 120K pa, I really wanted to know how u do it. My income level is around mid 20K and I do have some spare cash of 500K to invest with the rest I am looking to buy another property.

I have idle cash that has not been work for a few years after a life changing event in my life. I am looking to start again and the objective is also to generate a steady stream of income. I believe to be able to earn 10K a mth in passive income is a good start for me but just doing simple math, it would mean that i have to have a large base of cash close to 2.5 mio given a conservative yield of 5%?

Could u share with me how u actually do it? I guess a large base is critical isn't?


There are so many ways.

My reply:

Hi A,

Welcome to my blog. :)

It is difficult to share all the bits and pieces of my journey that brought me to where I am today in one email. I can only give you a summary.

Coincidentally, I gave a talk this past Saturday at an event and I have provided such a summary in my latest blog post. You might want to check it out. ;)

I will add that having a salary as high as yours will make it much easier to invest for a passive income stream from stocks. 

In fact, if you have a pretty frugal lifestyle, you might not even need to invest if you save most of your income. 

If you were to save $15K a month, not considering bonuses, you would have $180K a year. In 10 years, you would have more than enough to retire on, assuming you are in your late 30s or 40s now. Remember, you would also have your CPF savings to draw upon at age 55 and from age 65.

Also, my way is not the only way. I have a friend who has made quite a bit of money investing in properties for rental income. His earned income is much higher than mine, and yours is higher than his. So, this could be an avenue to generate passive income for you as you mentioned buying another property in your email. :)

My blog is mostly inspirational. It is not meant to be instructional although I do blog about my philosophy and investments from time to time. :)

Best wishes,

Reader's reply to this:

Hi ak,

Thank you for your prompt reply!

Yes you bet, I have read the details in the conference you were invited to give a chat.

I am a good saver. Although i did not save the 15k you mentioned, i did save alot. I did not enjoy such high salary in my entire working career. However, i learn not to live beyond my ability. So I have maintained my lifestyle pretty much the same as when I have first started out in my career. I still take the mrt and i still buy cheap toiletries. I do have my indulgences but I am always prudent. Actually, hedging out the basic risk is the most impt in my opinion. So I am definitely cover the unforeseen risk of family and myself via insurance.

I agree there are other avenue and properties is one of them but becuase i do not just own one property, it will be an extremely cash heavy option. To come up 40% cash or more for property can be draining and with rental getting pathetic, i am sure there are others most worthy investment option.

Am sure it is not easy for you to share in one go withe me and i am sure i need to go through the journey myself as well. I will keep you posted on my journey amd hope you can share your experiences as the time passed.

Thank u!

How to be a millionaire next door?

A is a financially prudent person and I believe that retiring comfortably will not be an issue.

Not upgrading one's lifestyle as one's earned income improves is a simple way of helping to ensure a financially secure (and even financially free) future. Simple but is it easy? It is probably harder for some than others.

Remember that Warren Buffett said “never depend on single income. Make investment to create a second source.”  

However, he did not say it had to be investment in stocks. Real estate can be a great investment class too when the price is right.

Related post:
AK was at Breakthrough Conference 2015.


ted said...

Remember to keep your PHYSICAL health in well-maintenance* too.

Not just your FINANCIAL health. :)

MENTAL health too.

* : A low barrier activity like Brisk walking 30 minutes everyday, will reduce the high statistical killers, do your own homework ;p
Of course add in resistance exercises etc, overtime too.

Siew Mun said...

I am planning to write and publish 2 books on my recipes in cooking and another regarding my professional know-how. Leaving a legacy and also hopefully have another income stream

AK71 said...

Hi Siew Mun,

I think they would also be very meaningful hobbies. Gambatte! :)

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