# Passive Income - The secret to long term financial security



## tech/a (5 October 2013)

Those who work have funds placed in Managed Super Funds.
Some of us have SMSF.
The aim is to build a nest egg that will create some form of passive income.
BUT for many it will not be enough.

*PASSIVE INCOME*

Should in my view be our goal rather than accumulation of Wealth.
There is a difference to each and it can be argued that the more accumulated
wealth the more likely you will have a passive income stream or streams.

I thought Id start this thread with the view of adding to my suggestions below on 
how to build or implement a passive income.

Apart from Super
We have the classics

Property both Commercial and Domestic
Share trading from Futures to Options to Equities to Commodities.
Bulk Funds in Bank accounts earning interest.

Konan started with buying a TV at a lower price and selling it at a price lower than retail (In simplistic terms)

*But what about other ideas*.

Like mini businesses without a great deal of input.
One a few friends have taken up from my suggestion is owning equipment they 
then let out for long term hire. One friend bought a new 10 tonne excavator --- he cant operate it.
he has it within a fleet of machines with a machinery hire company. He hires it out on a long term hire basis with and without attachments. If It is required with an operator he simply supplies one from a Labor hire company.
He changes it over every 2 yrs.
I have heard of a guy who did exactly the same in China and has now a very large business more than a passive income.

Trailing Commissions for phone use mortgages and now energy and health insurances have become huge money as have normal insurances.

Another is development of an app. We have all heard the stories and would love to have started Angry Birds.

Well organised people can find people for other people and take a skim off the top.
Often done in the Cleaning field. This adds an interest as well as an income without affecting the day job.

Many do well from E-Bay!

I'm not talking $100s of 000s here but a constant flow of a few $100 to a $1000  a week or even a month.
That little extra which makes life that much easier.

People with skills can find other people with skills and take a commission.

I'm in the fortunate position where smaller works are not required by us so I sub contract the lead out to smaller operators.
They buy the materials from us and pay us 12% for the secured lead.
They charge what they want and we end up with around 25% for handing over a lead we would normally just reject. Both of us win and so does the client.

I'm sure there are many more ways of generating a passive income and look forward to the input of ASF members who have suggestions.

*This is in my view the most important yet least discussed topic for Long Term Financial Security.*


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## merlinnn (5 October 2013)

*Re: Passive Income-----The secret to long term financial security*

Great idea for a new thread!

I knew a bloke who was a real estate agent and had a DJ business on the side. He bought some equipment, paid some young blokes to run the shows at night time, weekends for weddings etc. After a few years he said it was pulling a 100k a year for him with minimal costs and very little input.

More ideas everyone please


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## Julia (5 October 2013)

*Re: Passive Income-----The secret to long term financial security*



tech/a said:


> Those who work have funds placed in Managed Super Funds.
> Some of us have SMSF.
> The aim is to build a nest egg that will create some form of passive income.
> BUT for many it will not be enough.
> ...



Perhaps depends on how you define' passive income'.  I wouldn't actually regard any of the above as being completely passive at all.  You still are managing whatever it is and need to be hands on, even if at a slight distance.

To me passive income is that generated by either ongoing rents plus capital gain in IP, or interest obtained by having enough to just leave it in the bank, doing little more than moving from institution to institution to acquire best rates.
Almost certainly other ways of generating passive income, but these come first to mind for me.

Fairly obviously, the greater your asset base, the less energy is required to generate enough to provide a comfortable living.


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## Bill M (5 October 2013)

*Re: Passive Income-----The secret to long term financial security*



Julia said:


> Perhaps depends on how you define' passive income'.  I wouldn't actually regard any of the above as being completely passive at all.  You still are managing whatever it is and need to be hands on, even if at a slight distance.
> 
> To me passive income is that generated by either ongoing rents plus capital gain in IP, or interest obtained by having enough to just leave it in the bank, doing little more than moving from institution to institution to acquire best rates.
> Almost certainly other ways of generating passive income, but these come first to mind for me.




+1

I agree, buying a 10 tonne excavator and hoping for customers or my business to take off is hardly what I would call passive. Same for ebay, buying, selling, posting and then dealing with returns or items that haven't come is not passive at all.

tech/a you mentioned trading, I don't do that either but I have some stocks that have been giving me dividends for the last 20 years, I don't even read their annual reports or go to their meetings. To me that is passive.


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## Bill M (5 October 2013)

*Re: Passive Income-----The secret to long term financial security*

OK, here is a great idea for passive income. Buy an unrestricted Sydney Taxi Plate. Cost $400,000 to $430,000 you do not buy or drive the taxi, you buy the plate only. You just lease the plate to a taxi operator, hands off, do nothing and get $550 per week rent for it. The lessee of the plate pays all taxi running costs including, putting a car on the road, radio room, insurance and any other outgoings. $550 p/w income for you, all you need to pay is your own personal tax.


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## Smurf1976 (5 October 2013)

*Re: Passive Income-----The secret to long term financial security*

Things I have actually done:

1. Owning my own home. Not paying rent saves a fortune.

2. Solar power - only $2K a year but still that's $2K with no tax to pay either.

3. Superannuation fund is managed by others but I've made sure it's in appropriate investments. No ongoing effort required by me - it just sits there making money. I'm too young to access it however, but it's building up in the background.

4. I own shares in dividend paying stocks. Not totally passive, I do spend some time managing the portfolio, but it's minimal work.

5. Not passive as such, but having skills that enable me to do things that would otherwise be an expense saves significant money. Household maintenance etc.

Individually they are modest, but collectively it adds up to a significant amount.

A related issue is cash flow. Something may not generate an income, but it achieves the same benefit if it avoids an ongoing expense, especially if that expense fits into the "essential" category. My items 1 & 2 above are examples of that approach - they don't pay me, but they do avoid me having to pay someone else.


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## TheUnknown (6 October 2013)

Taxi plates are the dumbest investment ever, just look at what recently happened in victoria they are a dud investment hard to finance hard to offload.

I have been hiring out excavators since 2010 it has its pros and cons my fleet consists of 2x12t , 2x20t , 1x30t and 2x5t its a business that works on a 30-60 day account when that is involved it hardly becomes passive.


Best way to generate passive income is buying A class commercial property with national tenants in the best location. Location is the key.


Ebay, every tom dick and harry does it with ebay always changing selling fees you really need to be on top of your game and 2008753 competition.


Business/Property development is your quickest way to a TRUE passive income, you could hit the jackpot with shares but 1% do the rest are fails but brag, you dont hear such and such became a multi millionaire with shares but you do with business people and developers much more often, shares the king is buffet but thats one in a billion or more.


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## sydboy007 (6 October 2013)

*Re: Passive Income-----The secret to long term financial security*



Smurf1976 said:


> Things I have actually done:
> 
> 1. Owning my own home. Not paying rent saves a fortune.




Agree with a mortgage free home as one of the best passive incomes.  Once you achieve that the cost of living is quite low, though with house prices the way they are in most cities it may not be the best option for a FHB.

Hybrids provide a higher yield / higher risk passive income, with much lower volatility than the shares in the company (limited upside as well)

Being willing to do things yourself, while not so passive, does save quite a bit of money too.

When I was growing up swapping food was a big thing for my family.  We had a pretty decent veggie patch and some fruit trees, even chooks for awhile.  My brother and I would go and swap with quite a few other people on the street stuff they grew.  It worked pretty well for all of us as the food was fresh and less likely to go to waste.

A small herb garden can save you quite a bit of money, throw in a small chilli plant too.

If your house isn't insulated, then you'll get a great passive income from the energy savings if you do put in some insulation.

Paying a bit extra for highly efficient appliances also tends to pay off well with the rising utilities costs.

If you use lights a lot then changing to LED can also save you money over the long term.  I noticed a reduction in energy usage at home after moving to LED lighting and getting the free insulation from the Govt from an avg 10-11 kWh per day to 7-9 kWh.  Not a huge saving, but it slowly adds up.


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## Garpal Gumnut (6 October 2013)

I reckon looking at expenditure is as important, if not more so, than income.

I see many muppets with considerable passive income frittering it away needlessly. And I'm not talking about the luxuries or essentials of life.

Most folk with good income need to look at expenditure.

gg


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## merlinnn (6 October 2013)

What about the Internet, Google Adwords etc. in my industry people are being charged up to $40 per click once their ad is on someone else's website. Vending machines, Auto Car Washes, I still think owning a car park in or near the CBD of any major city would generate a long term passive income.

In relation to being frugal and not spending that is great, but you can only cut costs to a point unless you live in a cave and fossick for nuts and berries, whereas income has infinite potential.


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## TheUnknown (6 October 2013)

Vending machines = the industry is hard to operate in as its full.

Car wash/auto car wash was good when the water restrictions was on.


Carpark is a great business but having something like that requires massive funds for close to cbd or in cbd locations.


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## Smurf1976 (6 October 2013)

Garpal Gumnut said:


> I reckon looking at expenditure is as important, if not more so, than income.
> 
> I see many muppets with considerable passive income frittering it away needlessly. And I'm not talking about the luxuries or essentials of life.
> 
> Most folk with good income need to look at expenditure.



Something I've noticed is that increasing income is rarely a lasting solution to financial problems.

If someone earns $50K and has maxed out the credit cards, has no assets etc then in most cases that will still be the case even if their income doubles. There are exceptions of course, but in general that is the case.

Those who spend the lot will spend the lot whether they earn $20K or $200K. Just like putting more petrol in a car with a hole in the bottom of the tank doesn't do any good beyond the very short term (until the petrol leaks out), the same goes with income. A big pay increase might lead to repaying the debts initially, but pretty soon the spending ramps up to match the higher income level and in due course the debts are back. I've seen it many times.

Temporary increases in income are the biggest trap of all. You might be able to work every bit of overtime that's available at some point in your life, but pretty soon either other things in life preclude it and/or the employer no longer is offering additional hours. If your spending ramps up to match the temporary increase in income, it's a disaster just waiting to happen unless you're able to quickly reduce spending when the need arises (which most people find very difficult to do).

If you want to build wealth then you need to live below, not above, your means no matter what your actual level of income.


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## fiftyeight (6 October 2013)

Smurf1976 said:


> Something I've noticed is that increasing income is rarely a lasting solution to financial problems.
> 
> If someone earns $50K and has maxed out the credit cards, has no assets etc then in most cases that will still be the case even if their income doubles. There are exceptions of course, but in general that is the case.




I am struggling with this at the moment. Me and my girlfriend struggled with money while I was at uni and we had a mortgage. We assumed once I graduated we would be on easy street. Wrong. Now we earn more we spend more.

Things have improved since, but its still a bit of a battle as we love travelling and going out.

Not passive income and not the best way to save money, but when we couldnt save we both didnt claim the tax free threshold so we received bigger tax returns. I know there are better options, but if it was not for this I dont think we ever would of gone travelling.


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## TikoMike (6 October 2013)

fiftyeight said:


> I am struggling with this at the moment. Me and my girlfriend struggled with money while I was at uni and we had a mortgage. We assumed once I graduated we would be on easy street. Wrong. Now we earn more we spend more.
> 
> Things have improved since, but its still a bit of a battle as we love travelling and going out.
> 
> Not passive income and not the best way to save money, but when we couldnt save we both didnt claim the tax free threshold so we received bigger tax returns. I know there are better options, but if it was not for this I dont think we ever would of gone travelling.




You have a two year amendment period to amend your tax returns. Although I am quite surprised the program (etax for example) you would have used did not automatically calculate the tax-free threshold + low income offset? You must have chosen non-resident instead of resident when lodging. 

Anyway as I have seen, the more people earn the more people feel they are privileged to things. I may be looking at retirement in the next few years given my passive income is getting to the point where I could support my cost of living and then some. Luckily it's the small things that keep me happy and I am quite happy with my current financial state given my past saving habits (these habits did not change as I received income increments during my work life).


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## fiftyeight (6 October 2013)

TikoMike said:


> You have a two year amendment period to amend your tax returns. Although I am quite surprised the program (etax for example) you would have used did not automatically calculate the tax-free threshold + low income offset? You must have chosen non-resident instead of resident when lodging.




No idea, I just did not claim it when I filled out the paperwork when I got the job, paid more tax all year than my fellow employees and then got back the extra when I did my tax return.

Thread drift sorry.

Looking forward to passive income ideas


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## ROE (6 October 2013)

fiftyeight said:


> I am struggling with this at the moment. Me and my girlfriend struggled with money while I was at uni and we had a mortgage. We assumed once I graduated we would be on easy street. Wrong. Now we earn more we spend more.
> 
> Things have improved since, but its still a bit of a battle as we love travelling and going out.
> 
> Not passive income and not the best way to save money, but when we couldnt save we both didnt claim the tax free threshold so we received bigger tax returns. I know there are better options, but if it was not for this I dont think we ever would of gone travelling.




There is a thing call delay gratification - why do you want to travel when you struggle to save?
It is better the other way around... Build asset first, then use dividend generates from that investment and as long as you discipline you rarely run out of cash by the time you 45-50

Spend money in your younger years, you will be twice as disadvantage as someone who save early in their twenty and build asset ... Compounding and investment return require time and this is something you can't buy or get more...every day gone you can't buy it back...you can however buy more car and holiday any time..


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## ROE (6 October 2013)

fiftyeight said:


> No idea, I just did not claim it when I filled out the paperwork when I got the job, paid more tax all year than my fellow employees and then got back the extra when I did my tax return.
> 
> Thread drift sorry.
> 
> Looking forward to passive income ideas




If you don't like business or doing anything extra from your day job, the best way to generate passive income is live well below your means and invest in properties and shares at the right price ....after a decade or two it should generate sufficient passive income for you...

The magic starts when your asset is twice your income .... Whatever it is..some people think you need to earn a lot of money ..no you don't as long as you can save from your earning that is your magic....

Say you on 100k a year and save 10k a year and assume 8% return
So each year you save 10k but when your asset from saving reach 200k (twice your earning)
The earning from that is 16k return a year, 60% more than you can save... So you end up with 26k a year
And again each year from there on it just multiple like crazy - obviously if you can get to 300-400k
Your return will be 3 times more compared to your saving ability .....

The magic of compounding and time -


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## burglar (6 October 2013)

ROE said:


> There is a thing call delay gratification - why do you want to travel when you struggle to save?
> It is better the other way around... Build asset first, then use dividend generates from that investment and as long as you discipline you rarely run out of cash by the time you 45-50
> 
> Spend money in your younger years, you will be twice as disadvantage as someone who save early in their twenty and build asset ... Compounding and investment return require time and this is something you can't buy or get more...every day gone you can't buy it back...you can however buy more car and holiday any time..




Hi ROE,

I agree with what you say here, with one small proviso.

Travel is best done when young.
When one is mentally flexible enough to learn about other cultures and other regions.
To broaden one's outlook.

Not just lounge in the sun for Vitamin D uptake.

Take me, I'm 61, like to sleep in my own bed.
Won't travel much anymore!


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## fiftyeight (6 October 2013)

ROE said:


> Compounding and investment return require time and this is something you can't buy or get more...every day gone you can't buy it back...you can however buy more car and holiday any time..




Youth is also something that you cant buy. We have always wanted to backpack around Europe, so we did. I dont really want to be in a backpackers when I am 40 partying with 20s. Backpacking around Europe is a completely different life experience than doing with at an older age. I will 100% go back later in life and have an amazing time BUT a very different amazing time.

We didnt spend our money on cars and nice things, just mortgage and life experiences

Different people, different priorities


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## Smurf1976 (6 October 2013)

fiftyeight said:


> Youth is also something that you cant buy.



Humans live for, on average, roughly 80 years which seems like a reasonable amount of time in which to do things. But in reality, the window of opportunity is actually quite short for many activities.

The first 18 years are pretty much out of your hands. Education and growing up. 

The last 10 years are also at least somewhat risky in terms of health. Some will be fine until they are 90, others will have health problems in their 60's but from what I've observed there's a rapid increase in the risk of ill health past 70. Even if you are alive, your health may not be good enough to contemplate travelling far.

So that leaves 52 years in which you can be reasonably confident of living as you please.

But even within that 52 years there are a lot of constraints. If you want to pursue a career in film or music then with few exceptions you need to start pretty early to have any real chance of success. Likewise a professional sporting career also needs to happen early. There are exceptions of course, but in general that is the case.

Partying is another one. By the time you're in your 30's you'll feel out of place at many clubs etc. And by the time you're 40, they won't let you in the door anyway unless it's some kind of retro night / venue or the place is practically empty. You won't be going to a popular club on a generic Saturday that's for sure. And even if they do let you in, you won't likely want to be there anyway.

Same with concerts, music festivals and the like. Sure, there's nothing stopping you buying tickets to something at any age over 18 (and under it in many cases) but do you really want to be seeing some band you've never even heard of when you're 60? There are exceptions of course, I'm sure that Bon Jovi will have a diverse crowd attending their upcoming tour, but in general popular music is youth focused (particularly for styles other than metal or mainstream rock). Obviously this won't be an issue if you're into classical, jazz etc.

Travel is another one. If your aim is to go to Disneyland then you can go no matter what your age. But for most people, the realistic options for international travel are before you have children or after they have grown up. Taking a 5 year old out partying, or even to a place where partying is a primary activity, is going to be difficult at best. And most won't be interested in looking at works of art or ancient monuments etc either.  

So far as travel is concerned, focus on international travel when you are young (no children) since travelling within Australia is relatively straightforward and can be done fairly quickly. A two week trip within Australia during school holidays is easily doable especially if you're starting from a city whereas going to the other side of the world will be far more difficult given the time constraints of schooling etc and the reality that, if you haven't been to the place before, most of what you want to do and see will leave a child bored at best (notable exception of places with lots of theme parks etc but in that case you're travelling for the children more than with them as such).

Then there's your own commitments. Leaving your job at age 20 to travel the world is one thing. Doing that at age 45 when you have a mortgage and school fees to pay just isn't an option that most would contemplate. Unless you've worked for the same employer for long enough to have long service leave, 4 weeks a year leave is all you've got. 

In short, yes you need to save and invest for the future but you also need to live now.


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## TikoMike (6 October 2013)

Everyone has different tastes of what "living" is all about. Thank god travelling and partying isn't one of them for me, which thankfully allows me more money and time to invest and to take advantage of compounding while I'm still young.


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## Julia (6 October 2013)

TikoMike said:


> Anyway as I have seen, the more people earn the more people feel they are privileged to things.



 "Privileged to things":  what does that actually mean?


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## TikoMike (6 October 2013)

Julia said:


> "Privileged to things":  what does that actually mean?




What is there to explain? Something to assist as an example if you are still having a hard time comprehending:

http://www.enemyofdebt.com/2013/09/you-cant-out-earn-bad-spending-habits/


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## Julia (6 October 2013)

The 'example' is yet another generalisation.  About as meaningless as your original phrase "privileged to things".


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## ROE (6 October 2013)

burglar said:


> Hi ROE,
> 
> I agree with what you say here, with one small proviso.
> 
> ...




You need to get fit and get out ...61 is way too young...
When I am 61 I can still run marathon


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## TikoMike (6 October 2013)

Julia said:


> The 'example' is yet another generalisation.  About as meaningless as your original phrase "privileged to things".




Julia, you are building a mountain out of a mole hill and trying to create an argument out of nothing. Grow up. I said "I have seen" people act this way and I am sure others have too. I was pointing out that *some* people as income increases (which was mentioned before) still do not set aside more savings to invest as they feel they can spend more. Something people can learn from. 

In fact if you want to talk about meaningless, I'm sure all 15,000+ of your posts have been meaningless. Looking through the first few pages of your post history it is all meaningless banter about off-topic things other than stocks. I can't even see that you've even discussed one stock at all on Aussie *Stock* Forums from a TA or FA perspective. So please get off your high horse.


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## Smurf1976 (7 October 2013)

TikoMike said:


> I was pointing out that *some* people as income increases (which was mentioned before) still do not set aside more savings to invest as they feel they can spend more.



I've seen it happen.

Had a personal loan and a low rate of pay. Got a pay rise, then a credit card, didn't insure, ended up with a pile of debts and nothing to show for it. I've seen that scenario more than once.


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## sydboy007 (7 October 2013)

I think the problem with calling it passive income, is that quite often it's actually a very active / considered decision to get there.

As with most things in the journey of life, there's quite a few ways to get to the destination, and the right combo for you is probably different than the right one for me.

Being sensible with your money, doing most things for yourself, spending less than you earn, enjoying what you have rather than constantly trying to get "more" are all ways to build the wealth to allow you to have some assets that provide extra income with hopefully less effort than the jobs we put up with.

At least most on this forum have decided that's the journey they'd like to take.  You only have to see the newspaper reports, or the odd post news show to see what happens when you don't take an active role in how your life can turn out.

I fear it will be harder for Gen y and those yet to come, due primarily to our over priced shelter and the fact that more and more people have a lot less job security than compared to the past.  Easy to see the casualisation of work continuing, which makes it difficult to have the excess income to invest in assets to provide the passive income.

Sometimes I think we've allowed the economy to become the master


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## Julia (7 October 2013)

Smurf1976 said:


> I've seen it happen.
> 
> Had a personal loan and a low rate of pay. Got a pay rise, then a credit card, didn't insure, ended up with a pile of debts and nothing to show for it. I've seen that scenario more than once.



Sure, but it's not inevitable.  Presumably your income has increased over the years, but your own description of your own habits indicates no increasing spending.  That would apply to most reasonable people.

There are always going to be people with different priorities.  I remember trying to explain basic budgeting to a member of a gambling addiction group.  She said she knew how to budget:  every fortnight when she received her Disability Pension, she set aside 60% for her gambling.   Seemed uncomprehending at the idea that rent, services etc should be the first priority.


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## Julia (7 October 2013)

TikoMike said:


> I'm sure all 15,000+ of your posts have been meaningless.



Thank you for your assessment.


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## burglar (7 October 2013)

sydboy007 said:


> ... Sometimes I think we've allowed the economy to become the master




Yes!


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## Garpal Gumnut (7 October 2013)

Another thought that has occurred to me is the statement.



> Passive Income - the secret to long term financial security




It sounds a bit Ponzi to me.

Thus if everyone aspired to passive income, the whole show would collapse, as there would be no active income.

Which I believe is the definition of a Ponzi Scheme.

gg


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## Smurf1976 (7 October 2013)

sydboy007 said:


> Sometimes I think we've allowed the economy to become the master



Just listen to what politicians say....

"Australia is a great economy" or "we live in a modern economy".

Um, no. I thought we lived in a society, with the economy as just part of that. At least that's how it used to be (and in my opinion ought to be now). There's more to society and life than GDP.


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## ROE (7 October 2013)

Garpal Gumnut said:


> Another thought that has occurred to me is the statement.
> 
> 
> 
> ...




Mathematically it is an impossible event based on the number of human we have on this planet
the number is too large for a uniform action...

there will always be people who cant do it, wont do it or don't know it or did know and failed and back
to slugging old jobs...

just on the simple delay gratification most cant even manage that or don't want to ..with just these 2 groups they sure to be working for a long time


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## sydboy007 (8 October 2013)

Smurf1976 said:


> Just listen to what politicians say....
> 
> "Australia is a great economy" or "we live in a modern economy".
> 
> Um, no. I thought we lived in a society, with the economy as just part of that. At least that's how it used to be (and in my opinion ought to be now). There's more to society and life than GDP.




Yes, they do love their ever increasing GDP and the ability to brag about "managing" the X.X trillion dollar economy.  As if.

Then we have excessively high immigration, adding to GDP yet not to GDP per capita, so what's the point of bringing more people into the country when it causes those already here to suffer ever increasing levels of congestion, massive hikes of utility bills, and well generally a lower quality of life.

Possibly it's a great passive income for our Dear Leaders and those able to extract concessions from the Govt, but for most of us in the great unwashed I really don't see the point.  When it's costing us tens of billions of dollars to upgrade the infrastructure to support a bigger population, maybe it's time we had an honest and open look at how big an immigration program we really want.


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## coolcup (8 October 2013)

sydboy007 said:


> Yes, they do love their ever increasing GDP and the ability to brag about "managing" the X.X trillion dollar economy.  As if.
> 
> Then we have excessively high immigration, adding to GDP yet not to GDP per capita, so what's the point of bringing more people into the country when it causes those already here to suffer ever increasing levels of congestion, massive hikes of utility bills, and well generally a lower quality of life.
> 
> Possibly it's a great passive income for our Dear Leaders and those able to extract concessions from the Govt, but for most of us in the great unwashed I really don't see the point.  When it's costing us tens of billions of dollars to upgrade the infrastructure to support a bigger population, maybe it's time we had an honest and open look at how big an immigration program we really want.




The infrastructure should have been built instead of the handouts and tax cuts the government did pre GFC. It was always needed even then but the government of the day (which was on its last legs) was more interested in self preservation through buying votes. You can't build an infrastructure strategy after the event. It has to be done well in advance.

With a rapidly ageing population, who is going to support the long term demographic problem Australia and the rest of the developed world are going to face in 20 years time? As current tax payers in their 40s and 50s move into pension phase and no longer pay tax and instead become a net user of government dollars instead of a provider through concessions, the pension and / or use of healthcare (for those who are not self funded, which will be the majority) who is going to help fill this gap? That is what the immigration policy is aimed at doing - increasing the number of people in their 20s to 40s who can become tax payers for the government in the future. Without them, Australia will become a retirement village with no income and aging facilities.


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## sydboy007 (8 October 2013)

coolcup said:


> The infrastructure should have been built instead of the handouts and tax cuts the government did pre GFC. It was always needed even then but the government of the day (which was on its last legs) was more interested in self preservation through buying votes. You can't build an infrastructure strategy after the event. It has to be done well in advance.
> 
> With a rapidly ageing population, who is going to support the long term demographic problem Australia and the rest of the developed world are going to face in 20 years time? As current tax payers in their 40s and 50s move into pension phase and no longer pay tax and instead become a net user of government dollars instead of a provider through concessions, the pension and / or use of healthcare (for those who are not self funded, which will be the majority) who is going to help fill this gap? That is what the immigration policy is aimed at doing - increasing the number of people in their 20s to 40s who can become tax payers for the government in the future. Without them, Australia will become a retirement village with no income and aging facilities.




What you're proposing is just kicking the can down the road.  To keep a constant dependency ratio requires a bigger and bigger immigration level.  Eventually we have to face up to the demographics.

Japan is a classic example of an economy with little to no immigration and a rapidly aging population.  it aint pretty, but then no one has spent much time working out how to make an economy work without every increasing population.


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## Smurf1976 (8 October 2013)

sydboy007 said:


> no one has spent much time working out how to make an economy work without every increasing population.



Constant growth on a finite planet can't continue forever. You don't need to be a green to see that, it's obvious to anyone who understands compounding (which ought to be everyone on a financial forum....).

It works up to a point, then the non-economic costs increase to a point where at best it stabilises and more likely there's an overshoot followed by collapse.

Cities are a classic example. You could foreseeably double the population of Adelaide or Hobart without too many drastic downsides, but does anyone really think that doubling the population of Sydney would actually improve anything? It might make money for someone, but it's hard to see how it would actually improve the city as such. 

The same goes for natural resources with the coming destruction of manufacturing, mineral processing and possibly agriculture in Qld so as to keep growth going in the short term via a one-off boom via gas exports a prime example. We've passed the point of efficient growth, and are now consuming more and more natural resources in order to produce a growth rate that is well below the increase in consumption as the losses ramp up.

Growth per capita has already stalled in many ways. Look at the USA - GDP might be growing but the average American isn't any better off than they were some years ago. Resources too - oil production might still be slowly growing globally, but per capita oil availability in developed countries peaked in the late 1970's.

At some point, growth will stop. At least it will unless we find a way to grow the planet itself.


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## TPI (10 November 2013)

Interesting thread! 

And some interesting definitions of what is "passive" and what isn't.

I think businesses should generally be considered "active" rather than passive pursuits, and although some businesses may be able to generate a relatively passive income, setting out to start a business with this as your primary objective may not be the best approach.

In my view, most people are better off focussing on shares, commercial property, residential property and bonds for passive income.

And investing directly wherever practical and possible.

Anyway this topic is a particular interest of mine and I have a website/blog setup discussing this in detail for those who are interested - it's @ www.thepassiveinvestor.com.au ...


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## TPI (10 November 2013)

*Re: Passive Income-----The secret to long term financial security*



Bill M said:


> OK, here is a great idea for passive income. Buy an unrestricted Sydney Taxi Plate. Cost $400,000 to $430,000 you do not buy or drive the taxi, you buy the plate only. You just lease the plate to a taxi operator, hands off, do nothing and get $550 per week rent for it. The lessee of the plate pays all taxi running costs including, putting a car on the road, radio room, insurance and any other outgoings. $550 p/w income for you, all you need to pay is your own personal tax.




That's a 6.65% yield on a $430k purchase price.

What sort of capital growth will you get on this investment?

And how would it compare to buying shares or commercial property?


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## TPI (10 November 2013)

Also worth highlighting that super or SMSFs are just investment structures, you can invest passive or actively in either.

Share trading is more an active pursuit as it involves buying and selling, unless you are doing something like writing covered calls or naked puts that don't reach their strike prices.

And I don't think online websites/blogs are the new way to generate a passive income!


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## Bill M (11 November 2013)

*Re: Passive Income-----The secret to long term financial security*



TPI said:


> That's a 6.65% yield on a $430k purchase price.
> 
> What sort of capital growth will you get on this investment?
> 
> And how would it compare to buying shares or commercial property?




Thanks for asking. In 1985 a Sydney Taxi plate cost $78,000. Today they are selling for $430,000, someone else can do the math on that. A lot of my friends got into this and profited very well on cab plates. As for how it compares with other investments, again someone else can do the math on that.

Right now my best passive income investment is my rental unit on the Northern Beaches of Sydney. I pick up a nice tidy rental sum each and every Month and do absolutely nothing for it (except put in my tax return each year). In fact I haven't even looked at the property in 3 years now, that's passive.


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## TPI (11 November 2013)

*Re: Passive Income-----The secret to long term financial security*



Bill M said:


> Thanks for asking. In 1985 a Sydney Taxi plate cost $78,000. Today they are selling for $430,000, someone else can do the math on that. A lot of my friends got into this and profited very well on cab plates. As for how it compares with other investments, again someone else can do the math on that.
> 
> Right now my best passive income investment is my rental unit on the Northern Beaches of Sydney. I pick up a nice tidy rental sum each and every Month and do absolutely nothing for it (except put in my tax return each year). In fact I haven't even looked at the property in 3 years now, that's passive.




For $78000 to turn into $430000 over a 28 year period requires a 6.29% compound growth rate.

During this period the All Ordinaries Index grew from 1031.6 to 5394.4, so at a 6.09% compound growth rate (before fees).

So on this measure alone the taxi plate wins!

But, you would need to compare the total rent collected from the taxi plate (minus any "vacancy") over this period to the total grossed-up dividends from the shares accumulated over this period to see which was really the better investment.

I would think that dividends have the potential to grow much faster, but don't know enough about taxi plate lease growth rates to comment further.

But if I had $430,000 spare cash today I would probably put it into a few shares rather than a single taxi plate.


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## Bill M (11 November 2013)

*Re: Passive Income-----The secret to long term financial security*



TPI said:


> But if I had $430,000 spare cash today I would probably put it into a few shares rather than a single taxi plate.




Me too


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