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Personally I think rather than aim for a high passive income people should learn to live a modest lifestyle. Blogs like early retirement extreme talk about this. Low cost of living is very powerful because it does a few things simultaneously. A low cost of living increases your savings rate while also reducing the passive income requirements for retirement.


For example person A earns $60,000 per year after tax and manages to save $30,000 per year after tax, and therefore is capable of living on $30,000 per year. Whereas person B earning $60,000 after tax (i.e. likely around $75,000 to $80,000 pre-tax salary) and is only saving $20,000 per year. Person A has a passive income goal of $30,000 (inflation adjusted) per annum to replace their current lifestyle and is saving $30,000 per year to get there. Person B needs a passive income (inflation adjusted) of $40,000 to maintain their lifestyle and is only saving $20,000 a year to get there. You can see how a relatively modest difference in spending habits makes a huge difference to the final outcome.


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