How to earn an extra $500 a month: Part 1

dollars_and_centsThe concept of wealth creation at Financial Place Online is that it is a process of thrift and continuous improvement, measured over a long period of time, perhaps even over generations.  There has to be a starting point somewhere, and $500 extra income a month meets the needs of many.  The 2012 U.S. median income was just a little over $50k.  Certainly, an extra 12% is achievable, and given the U.S. median savings rate of 4%, the extra $6k per year would quadruple the median amount of disposable income if the right tax management is done to compensate.

How is $500 extra a month best earned?  Any way that it can be.  Below is a list created by FPO with investment methods to create this extra cash flow.  None of them are easy, but they are achievable.

  • If you’re 65 years old – buying the $100k annuity from our annuity example would generate $521 per month for the rest of your life.  The amount is more if you’re over 65, and less if under.
  • The Vanguard Total Bond Market Fund (VBMFX), has earned a 10-year average of 5%.  $120k invested here $500 per month.
  • It is common to see entry level houses rent for about 1% of the purchase price per month.  Paying cash for a $70,000 house would net a $500 per month extra after property management fees and repairs.  Don’t count too much on appreciation at this time.
  • Based on the 10-year return of the Vanguard Total Stock Market Fund (VTSMX), the $500 per month can be generated from an initial investment of $60,000.

This is good in theory, but the issue in the above is that there is a lot of upfront cash required.  There are two things wrong here.  One is that the cash may not be available.  The second is that each of these opportunities return less than 8%.  That’s not the smartest way to tie up cash.  Part 2 of this article will explain when it’s suitable to use the bank’s money to get a higher rate of return.

About Steve @ FPO
Hello FPO readers, I have been writing on financial topics for about 12 years now, but I have only recently reignited the fire of publishing online. I have to say, its good to be back. I am an electrical engineer by trade who enjoys all topics engineering and financial. I started Financial Place Online (FPO) to create a value added financial news and education website that would provide a refreshing daily financial read. Financial Place Online websites are built around the principles of consumer empowerment, leveling the playing field, zero spam tolerance, and none of those annoying sidebar or banner ads. For us, it's all about enjoying a good read.

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