Monday, September 7, 2015

My own "better than Minimum Wage" of $100 per month

I read this post by Christopher Ng regarding unemployment insurance and also minimum wage and I found it very interesting since it approaches from a slightly different perspective from the usual arguments.

I personally do not think that there should be a thing as mandatory national unemployment insurance. If you want unemployment insurance, like Christopher suggests, be your own insurer and create your own insurance. Most of us normal people just call this an "emergency fund". Important to have one? I would say that I would prefer one, just like I would prefer a parachute if I was jumping off a plane. Of course, to each their own. Living dangerously is a lifestyle choice.

If you want your own "minimum wage", it can also be done through building a portfolio of dividend stocks or other income generating assets. I think it is very possible to have a retirement portfolio with a value of $200,000 and yielding 6% to generate income of $1000 per month in perpetuity.

Over the past 2 years, I have managed to build up a portfolio that is 10% of that value and also 10% of the monthly income. I have a portfolio that is around $20,000 yielding 6% to generate $100 of income every month. I achieved this only just last month.

If I do this until I'm 35, I should have built up at least a "minimum wage" of around $600 per month for myself, and this is considering if I do not increase my investment contributions, the market returns only 6% (under the 8-9% long term average) and I do not reinvest my dividends and capital gains.

In a more realistic scenario, I ought to actually be able to have built up a portfolio that gives me a "minimum wage" of about $1000 per month at the age of 35.

Why do I think that this is better than a minimum wage? A minimum wage requires me to work to receive wages. Here, I do nothing and receive income. While the amount is still small, it can be a supplement to my monthly salary. However, as it grows, I hope that one day it will exceed all my expenses and I would be financially free.

I am actually quite happy that I have hit this milestone of $100 per month, but I know that I still have a long way to go to reach my goals. It's all right. Slow and steady.

Everybody has to start somewhere, right?

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