My April investment income went down to $96.83 from $98.43 the month before. This is because I didn’t add to my investments and the stock market went down. I won’t be adding to my investments this month either and it looks like the stock market is going down more so my investment income will probably go down again. This is a little frustrating since I was looking forward to getting over the $100 mark but as soon as I’m able to start adding to my investments I should reach the $100 goal.
Disclaimer: This is not my actual investment income. To get this figure I first add up my retirement savings, emergency fund, and any other money I consider permanent savings. What the total of my savings would earn at 6% interest for a month is my monthly investment income. My goal is to get this amount to $1000 a month. If I have $1000 in monthly passive investment income I will be able to retire early.
My investment income rose from $89.50 in January to $98.43 in March. That is a great increase and it is almost entirely due to gains in my stock portfolio and Roth IRA. I did add $100 to my Roth but otherwise haven’t made any contributions to my investment portfolio this year. If the stock market doesn’t decline I should be able to pass the $100 mark in the next couple of months. There is also a possibility that I will be making a large contribution to my portfolio which would speed things up a bit.
Disclaimer: This is not my actual investment income. To get this figure I first add up my retirement savings, emergency fund, and any other money I consider permanent savings. What the total of my savings would earn at 6% interest for a month is my monthly investment income. My goal is to get this amount to $1000 a month. If I have $1000 in monthly passive investment income I will be able to retire early
According to economist Zvi Bodie. In a Money magazine article he says that if you need the high return of stocks to reach your goals then you can’t afford to invest in stocks. You should read the article to get all the details but this is a general summary of what he says. He states that stocks are too risky an investment for retirement investing and suggests a portfolio of TIPS instead; you should only invest in stocks what you can afford to lose. He also says that you should save 20%-30% of your income or more so you will accumulate enough money for retirement despite not having the higher returns from stocks.
This is an interesting point of view and I can agree with it somewhat. As he states when you are saving for retirement you can either sacrifice by having a lower standard of living now, working longer, or taking more risk in your portfolio. If you are able to maintain a low standard of living and save a large percentage of your income than the returns you receive are not as relevant as when you are saving only 10% of your income.
Personally, I am still going to be investing in stocks. They are risky but since I have started saving late in the game and don’t have much income I need the high returns of stocks to accumulate enough money to retire. Even if I were young and just starting out I don’t think I would put 100% of my money into TIPS though. That just seems too conservative to me. Once I have accumulated all the money I need then I might consider putting a large percentage of my investments in TIPS or some other form of guaranteed income but until then I will stay invested in stocks.
My March investment income had a nice rise to $58.12 from $51.69 the month before. This was due to my stock portfolio rebounding nicely and allocating a little more of my savings to my emergency fund. The total would have been even better if the mutual fund in my Roth IRA would have participated in the March market rebound. Somehow this mutual fund managed to barely go up in value despite the rise in the stock market. I guess I should be happy it didn’t lose money like it has mostly been doing the past few months.
Disclaimer:This is not my actual investment income. To get this figure I first add up my retirement accounts, emergency fund, and any other money I consider permanent savings. What the total of my savings would earn at 6% interest for a month is my monthly investment income
Judging from the response I got to my post “How Much Should You Save for Retirement?“, people are really interested in the subject of my retirement. In that post I mentioned my desire to retire at 50 and that I had some ideas on how to do that. I do need to make a plan in order to reach this goal.
When I was in my early 20’s I read a book titled How to Retire at 35. I decided that would be a good goal. I didn’t make much money then so my plan was to start saving big money as soon as I had a good-paying job. Of course, once I had a good-paying job I forgot all about my idea of retiring at 35 and spent money like crazy. When I turned 30 I made a goal of retiring at 40. That goal obviously didn’t happen either. The problem was I didn’t really have a plan and I kept getting sidetracked and putting other things ahead of saving for retirement. Whenever I saved a little money I’d go off on some adventure and then be broke again. I did have fun on my adventures but if I had just been disciplined I could be having adventures all the time now.
This time I’m going to do things differently. I’m already better off than before because I’ve already gotten in the habit of saving for retirement. This time I’m going to keep retirement as a priority. My goal is to have $1000 a month to live on at age 50. If I retired today I’d only have $34.87 a month to live on. That is a very large gap but it isn’t as bad as it looks. That is based on just living off the interest from my savings. Based on just living on the interest, at 6% I would need to have $200,000 saved. Since I have about $6000 saved now I’d need to save about $1200 a month to meet that goal if my savings had an 8% return. That seems like a large amount considering I don’t make that much total right now. After I finish school though that should be a reasonable amount and in the meantime I’m saving all I can afford.
My goal of living on $1000 a month might seem far-fetched to some but I’m confident that it is reasonable. I’ve lived long enough to see the effects of inflation but unless we have really high inflation the next nine years I don’t think it will be much of a factor. I live on about a $1000 a month now and I could live on considerably less. One way I could cut my cost of living would be to live in a van. I’ve already posted about that and I believe it is a feasible option and one that I would enjoy. Another way to cut my living expenses would be to live in a foreign country. I lived in Guatemala for 3 months on $450 and had a great time. The cost would be a little more now but it would still be dirt cheap. A third option would be to spend half the year hiking a long trail such as the Appalachian Trail. I’ve hiked about half the AT and I think with some planning I could hike the trail on a budget of $200-$300 a month. Those are just the ways I came up with off the top of my head on how to drastically cut my living expenses, I’m sure there are many more.
That is my plan for now. It might undergo some changes before I turn 50 but I’m going to keep my focus on the goal.