Passive Income - The secret to long term financial security

[TikoMike]

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.

 

[Julia]

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?

 

[TikoMike]

"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/

 

[Julia]

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

 

[ROE]

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!

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

 

[TikoMike]

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.

 

[Smurf1976]

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.

 

[sydboy007]

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

 

[Julia]

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.

 

[Julia]

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

Thank you for your assessment.

 

[burglar]

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

Yes!

 

[Garpal Gumnut]

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

 

[Smurf1976]

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.

 

[ROE]

Another thought that has occurred to me is the statement.



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

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

 

[sydboy007]

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.

 

[coolcup]

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.

 

[sydboy007]

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.

 

[Smurf1976]

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.

 

[TPI]

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 ...

 

[TPI]

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.

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?