Generating enough passive income to cover your desired living expenses is the holy grail of personal finance. The problem is, the goal post keeps moving thanks to inflation and life. This post explores what is considered passive income so we can remain disciplined on our journey to financial independence.
I’ve been trying to build passive income since 1999 when I first graduated college. I knew when my boss told me to get in by 5:30 am that I wouldn’t be able to last for decades in finance.
It wasn’t until around 2017 that I felt I truly had accumulated enough passive income to take care of my wife and son. However, after my daughter was born in late 2019 I once again felt more pressure to provide. My family planning forecast only assigned a small chance we’d have another child due to our advanced ages. It’s funny how life turns out sometimes.
Then, when the government started unleashing trillions of stimulus in 2020, the feeling of having accumulated enough began to fade. With volatility back and interest rates getting compressed, the desire for more capital as a safety buffer increased. In addition, the income-generating potential of various assets are under pressure.
We’ve already seen a slow decline in P2P lending returns, bond interest rates, CD rates, and savings rates. Stock dividend yields and real estate rental yields might not be too far behind.
When it comes to personal finance, you never want to get too complacent. It’s important to always try and anticipate the future.