In this article, I am trying to explain when is living on passive income possible.
At the end of 2022 was the time when my family was transitioning from one lifestyle to another. Specifically, from living fast and earning more money in exchange for our time into living slow and having lower earnings but getting our free time back.
After leaving our jobs, we decided to come back to Zhanjiang in 2023 where we have our home in southern China. Both my wife and I managed to test early retirement in our mid-thirties as both her and myself left our jobs at the same time. We were living entirely on passive income between 01.01.2023 and 01.07.2023.
How to make living on passive income possible?
Our passive income come from four different passive income sources that I have been building in the last couple of years. Two of them have already been finished while two of them are still in progress. I will be growing my online business and continue investing in dividend stocks. If you want to sit in the shadow in the future, you need to plant the tree today!
1. Spend less than your annual passive income
We simply need to spend less money each year than our annual passive income. This was our main goal.
Because our monthly income is rather irregular, I plan our family budget on annual basis. These days I plan for the whole year instead of planning monthly because our monthly income is rather irregular every month. In the first three months of 2023, we spent around RMB7,000 per month on average, which is roughly USD$1,000. After estimating the monthly cost of living of our family of four (2 adults and 2 children), we should be able to live on approximately USD$1,000 per month. This will amount to between USD$10,000 and USD$15,000 per year.
For six months, we did not have any active income without full-time jobs as neither me nor my wife work. We relied entirely on passive income where our unchangeable strategy is to buy and hold assets that earn us money:
- Real estate. Keep occupancy rate at 100%. Keep on milking the cow!
- Deposits. Reinvest all expiring deposits and add more cash to start new deposits.
- Online business. Write and publish more articles.
- Stocks. Keep on reinvesting dividends. Add more cash to buy new shares.
My primary job was to manage our finances while my wife looks after the kids and well-being of our family. Therefore, I was working from home to continue developing our four passive income sources. I do not wish to invest in any other financial instruments such as Bitcoin or bonds. I believe that real estate, bank deposits, online business and stocks are sufficient, sustainable and safe enough to build and maintain wealth.
2. Earn extra money whenever possible from side gigs
Secondly, we need to use additional job opportunities that come our way to earn extra money. Then, we will invest those new earnings in money-generating assets to increase the amount of our passive income in the future.
This website is serving as the third passive income source for my family. I have launched SuperBusinessManager.com two years ago in January 2021 with survival being the business objective in the first year. Now, it is all about growth between 2022 and 2026. I am giving myself more or less four years to fill in every section of the website with content. The plan is also to reach 5,000,000 amazing readers. The good news is that we are on the right track!
I am also making more YouTube videos to catch up with the website content. I usually make a video to match with the article published. My wife is changing her shopping routine from using credit cards to shop for groceries and then paying back the credit card bill into using cash. We are planning to entirely stop using the credit card. It is easier to control monthly spending in this way. Otherwise, it is quite troublesome to align cash inflows from passive income with credit card bills.
In summary, by living on passive income, we could spend as much time as possible with our two small children. Especially with our son who is suffering from ultra rare genetic disease called Menkes Disease as needs constant palliative care. While my wife’s focus was on taking care of the kids, I was working from home to continue building four passive income streams.
After that 6-month period, I returned to full-time employment.
