Where are you now with your financial goals?
When do you plan to retire? 40? 50? 60 years old?
How long do you plan to work if money is not a constraint?
If you’re sick now, do you have enough money to support you and your family for at least 1 year?
These are big questions that I asked myself when I was in college even when I barely broke even in my saving account after paying for my monthly expenses by working two jobs, but I had a big dream to become financially independent before I turn 40. To achieve my goal, I started to read many financial investments books in my late teen’s. That was the time that I started to plan for my financial future.
To reach your financial goals are no difference than to reach your other life goals. You need to know what you really want and you need to have a plan on how to get there. It’s very much like when I have a goal to take my children to the Arches National park; if I never take the actions to plan for the trip and find out how to best get there, then I can’t never reach my destination.
Make your goals SMART, and it stands for:
T –Time bound
You want to be financially independent when you’re 50 years old with minimum $60,000 passive income per year and you can live anywhere per your desire. You’re now 30 year old. You have 20 years to reach these goals.
You’re currently receiving $1,200 passive income from your stocks/bonds or other passive income accounts. So you receive $14,400/year. Therefore you’re short of $45,600 ($60,000 – $14,400).
You’re currently working full time and are able to save $20,000 per year after your expenses. This saving you can invest in assets that can produce passive income. You can purchase a rental property with value of $85,000 and use your $20,000 as 20% down payment and closing cost. Assuming this property will produce $200/month passive income after mortgage, interest, tax, HOA, 5% vacancy and property management expenses.
Buying cash flow rental properties are relevant to achieve your goals because each property will bring in the monthly cash flow and it can be added to your total monthly goals that you want to achieve.
Or you can continue putting your annual saving in other assets class that continues producing monthly passive cash flow.
When can you reach your goal of $5000/month passive income?
Assuming you will buy one rental property a year that produces $200-$300/month.
by year 10th, you will own 10 rentals. So monthly passive income per rental is $250 * 10 rentals = $2500.
If you continue to buy one rental until your 20th year, then you can reach your financial goal as you set when you’re 50 year old.
20 rentals * $250 = $5000/mo.
Some of you can achieve your financial goals shorter than 20 years when you sharpen your knowledge in real estate investing. There are other real estate strategies that can accelerate your passive income faster once you own a number of residential properties. You can scale up your real estate investing with other strategies like buying apartment complex or other commercial real estate projects. (It may sound very difficult to achieve now but don’t worry, I will discuss how to find and finance those projects a little bit later.) Once you set your financial goals, take actions and you can reach them sooner than you think.
Please leave your comment below and let me know when you plan to retire and how you plan to best achieve your dreams?