Thursday, January 17, 2008

passive income

i'm interesting in how to generate passive income. that is, income that you can pretty much rely on without having to work. an example of this would be interest income -- if you have $100,000 in a bank yielding 5%, you'd net $5,000 per year without having to do any work at all. Of course, that's a lot of cash to be sitting around idly.

the point of having passive income streams is that at some point, if you've got enough money in the right places, is that you can live off your passive income entirely. this is the point that i call my retirement horizon -- if i can achieve that, it'll likely be goodbye to my 9-to-5. i'll probably still work to some degree on projects that i'm particularly interested in, to keep busy, that type of thing.

but to really know what your retirement horizon is, you have to have a clear picture of what your spending is and what you expect your spending to be. i don't keep too tight a budget, so i only have a general idea what this amount is, but since retirement realistically is a long way off for me, i don't spend too much time fretting about it. my bank does a nice job of displaying a spending report, but that includes transfers into other accounts as spending, so it distorts the amount of 'spending'. it does a decent enough job to show a general guideline, though.

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