Passive Income and its importance to financial independence

As most of you might know, passive income, also known as after-burner income, refers to the income which you do not have to work physically for. Examples of Passive Income are:

1. Dividends (from business and shares)
2. Interests (from CPF, saving accounts, fixed deposits)
3. Realised Profits of Capital Gains from stocks,funds,bonds, properties etc.
4. positive Rental income (after deducting expenses and mortgage)
5. Currency Exchange Gains
6. Profits from Business

How many of the above passive income sources do you have at the moment? Many of us desire to have passive income - because it sounds cool to have money coming in without having to work for it. However the majority of us do not have enough passive income to stop working.

In Adam Khoo's book "Secrets of the Millionaire" he depicted 4 stages of finanical independence, all of which are related to the essence of passive income.

Stage 1: Financial Stability: a six months' worth of savings with no passive income

Stage 2: Fianncial Security: Passive income is just about sufficient to cover your basic expenses (like food, transport etc)

Stage 3: Financial Independence: Passive income is sufficient to sustain your current lifestyle

Stage 4: Financial Abundance: Passive income is sufficient to sustain your desired lifestyle (tour round the globe, throw birthday parties with celebrities etc)

I hope by now you would have understood the concept by now that financial independence is really a function of your passive income and your expenses.

Financial Independence = Passive Income - Expenses, and has to be greater than 0.

Which Stage are you in currently?

Sunday Times Invest Section

It seems that I cannot live without reading this section on Sunday mornings. In fact I think it's an important read for those Singaporeans who are aspiring to pick up the art of saving and investing. Every week, the section would focus on a character who would share about his or her saving, spending and investing habits.

Like week it was on the guy who created the drinks ANYTHING and WHATEVER - he made his first million at the age of 27 and subsequently retired at the age of 34. Another rag to riches story and his first pot of gold was found in digital photography. He subsequently decided to venture into the drinks industry but being a new kid on the block and is up against the big boys, he said he had to be unique - which I personally think it's the key ingredient behind ANYTHING and WHATEVER. The next step is to actually bring them on the global stage. Great.

Work Overseas and Get Paid More!

Whenever someone asks me the quickest way to increase your salary by 20%, I always reply them "work overseas!"

Being someone who has been working around the globe for the past 5 years, I know exactly what that means in terms of remuneration. For doing the same thing as in the home country, you get paid for accomodation, subsistence allowance, hardship allowance and occassionally you do get relocation package and a certain percentage rise in salary if your assignment is long(ish) enough.

Now, I can hear people shouting that overseas opportunities are hard to come by - which I disagree, to be brutally honest. It's true that people doing professional/technical work (like engineering, accounting, financial analysis, medicine etc) find themselves easier to move around than people involving in specific areas such as law and teaching, which are country-specific for more often than not.

Just this morning I read from the Saturday Recuit (6th Oct 2007) that IE Singapore are looking for a number of positions and apparently they are all required to travel.

So what are you waiting for?