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Create Income-Streams For Elective Spending

Developing The Mindset That Elective Spending Should Come From A Side-Income

I don’t generally feel guilty spending on things I enjoy even if they aren’t necessary for day-to-day living. The only times I feel a little bit of guilt is when I spend on things just for the sense of gratification instead of using that money towards a specific financial goal such as retirement or any other form of financial independence.

I recently came across a new idea that resonates well with me. The concept is to spend on elective items only with money that you are generating from an investment. Which means that you should spend your hard-earned dollars from your full-time job only to pay for your basic overhead and in order to save for retirement. Money you make from a side-gig, a side-business or an investment is money you can use to pay for whatever luxuries you desire.

It’s a variation of working a few extra hours of overtime in order to buy that new motorcycle or pay for that engagement ring. But instead of doing more work and risking burning yourself out, you would pursue some other hopefully fun endeavor that could make you a little money on the side.

I try stressing this point of differentiating between necessary and elective expenses because it’s very much a disease of our current modern society to feel that life isn’t worth living just because we cannot afford certain amenities.

We Live In A Very Abundant Time In The World

In 2016 a person can live in safe places in the USA paying as little as $500/month for rent. You can go to any grocery store and feed 1-2 persons for as little as $300/month (yes, even the fancy ones). With computers and cell phones being as ubiquitous as they are one can use a top of the line computer at a local library for free and take a shitty old cell phone and use a free Google account to have phone call and texting abilities for free.

So a person could spend around $1,000 a month and still have an amazing quality of life because they would still get to enjoy so many hiking trails, biking paths, beaches and wonderful downtowns to stroll through. There are a ton of free things to do and enjoy in the US, here is a list.

My point is that we don’t need all the fluff in life to be happy and satisfied. It’s nice to have them but not necessary. Happiness should come from interacting with family and friends, enjoying the beauty of our environment and exploring our surroundings. We don’t need a cell, a car, a fancy house, nice clothes or organic food to live a happy life.

If we hang our happiness on systems designed for us by others or base it on objects we can buy then our happiness can be manipulated by whoever is able to control those things. Sometimes it’s not even an intentional manipulation… you might lose your job, the economy might tank or you might suffer some other financial disaster.

Making Some Money On The Side To Spend on Elective Stuff

Let’s say you enjoy photography, like my good friend Gevork, and have decided to sell some of your pictures online. The money you generate from that could be used to pay for fancy dinners, a vacation or the extra channels on your TV.

Or maybe you are good at giving relationship advice. This person on seems to have done quite well for herself reviewing people’s online dating profile. There are numerous ways to earn a little on the side, check out the exhaustive ideas listed on Side-Hustle Nation.

It’s not that you cannot afford spending on extracurricular activities from your paycheck; the point is to get you into the mindset of differentiating between wanted expenses and needed expenses. Not only will this help you achieve your financial goals but it will also be great learning lesson for the kids.

Instead of saying no to children all the time when they want the latest and greatest you can tell them that they are welcome to pay for it from the dividends they collected by investing in their favorite stock, or from a small business they built online or from things they have built and sold online or in the neighborhood.

Making passive income isn’t hard and I’ve been spending a lot of time recently figuring out my various passive income options. In the end it seems that the people who are actually making money passively are those who either invested a chunk of money upfront or those who have spent a good amount of time building up the system that will be their money-maker later.

Be creative and don’t start by looking at what will make money. Instead find what you enjoy or have an interest in and pursue it. Eventually you can find a way to make money off of that concept or idea.

Actionable Steps

Let’s talk about a few realistic investments you can get into which could provide you with some spending money. Remember that the point is to have 2 different buckets from which you spend:

  • You job’s income
  • Investment income

Imagine a day that your investment income goes up enough that you can replace a large portion of your job-income with it, would you continue spending the revenue on entertainment or instead work less and have more freedom? To each his own.

Wall Street Investments

I’m actually going to try this so you can play along and see if it’s a worthwhile concept for you. I have around $60k invested in index funds, another $40k sitting around in cash. I’m going to slowly convert the cash into purchasing more index funds and start spending the dividends.

Normally when you invest in mutual fund your dividends and capital gains are automatically reinvested. But most online accounts have an option to distribute the profits into an account. This is nice because it will be a realistic way of seeing what your investments are making you and of course you can start spending them if you like.

The way it works with mutual funds is that you normally get 4 dividend distributions annually worth around 2% of your total investment (if you investing in the average broad index-based fund). So for $100k invested I would get around $2k/yr or $170/mo. It may not be a whole lot of money but the goals isn’t to just have $100k invested.

You can get fancier and invest in index funds which focus on higher dividend investments. You can easily get into the 4-6% dividend rate with such investments, taking you up to $500/mo of passive income with only $100k invested which you can spend on your hair extension, Botox, stamp collection, lowering your minivan or on your model train set.

Real Estate Investment

Even if you live in a posh neighborhood there are likely some condo or townhomes for sale that you could get in on and probably make a bit of income every month. In return the asset you purchased may appreciate in time and whatever loss or depreciation you have can be written off on your taxes.

I’m looking at a condo in my hood going for $320k. If I put $100k down and bought this as an investment property I could rent it out for $1,800/mo and after my overhead I would be left with around $300 per month. It’s not a lot but the longer I own this the more profit I will be left with every month and it will be the tenant making the payment on my mortgage, no me.

Marketing A Product Online

I have a friend who keeps telling me how amazing it would be if this one particular children’s clothing line was available online and yet she has never made it her mission to buy or design and market something like that.

I have another friend who in her dental field designed her own tool to get better access to teeth when doing a specific procedure and she started marketing this to her dentist friends. After enough traction she sold it to medical device company.

You might be a mountain-biking enthusiast, a surfer or a rock climber and have an idea for a product that could improve the game. If you don’t go for it, design the product, get a prototype built and then market it, then you’ll never really know what you were missing out on. Sure, it might flop but it won’t be a failure, because you’ll have one more skill and experience under your belt.

Design Intellectual Property

There are many sites on which you can post your music, videos and photos which are a product of your own creativity, called intellectual property. If customers then purchase these products you will get a cut of the profits.

If you find yourself having a knack for this sort of thing you could then open your own e-commerce site and sell directly for yourself instead of going through a middleman.

Teaching Products/Tools

This one is going to be a huge hit in the future so get in on it while you can. Let’s say there is something you know a lot about and it’s perhaps something that’s hard to research online. Well, if you can package your knowledge for sale online then you are likely going to profit nicely.

Keep in mind that more specific topics will be a lot easier to market than broad topics for various reasons. One reason being it’s easier to create search words on google using keywords and second you’ll have less competition. If someone searches for “How do I get into UCI medical school” it’s much more likely for them to land on your page where you are selling a “How-To Guide” for UCI med school admissions. Other ideas are:

  • How to get into medical school
  • How to write great medical school resumes
  • How to get into radiology residency
  • Everything you need to know about anesthesiology before choosing it as a career
  • How to make the highest salary in family medicine


The key with these things is to put your effort into it upfront. Design a nice video, create a good online course etc. Next is marketing. Marketing will be part of anything you do these days because competition is stiff so you need to learn how to stand out.

Once all the hard work is done upfront you simply need to keep advertising and make your profits from the sale of the items you already created.

5 replies on “Create Income-Streams For Elective Spending”

I just flew into Portland, that’s my excuse for not getting up at 5am… what’s yours? I’m back to 5am-wakes tomorrow.

I used to use locum tenens work to cover / justify extravagances that I would otherwise not be comfortable with spending.

We could go to Orlando… or… If I work an extra weekend of call, we could upgrade to that Galapagos Island tour.

We saw Lonesome George (the last known tortoise within his subspecies) within a year of his death. Going forward, blog revenue (the half I don’t donate) will be my slush fund for such spending. Great concept.


Dr Mo,

Good advice regarding using secondary income to “splurge”. Might even want to take it a step further and work to increase the secondary income enough where it covers all living expenses and the primary income is 100% into savings/retirement.

Believe it or not, New England Patriots tight end Rob Gronkowski reportedly follows this investing style. He saves 100% of his NFL salary towards “retirement” and lives off his endorsements and non-NFL income.

Agreed. I think developing this mindset early is helpful. Some of the docs now who are in their 50’s are scrambling, I see it routinely. I like talking finances with my colleagues and they know the stuff I write about on this site so they are comfortable sharing their details with me. It blows my mind that with this much income docs are still scrambling in their 50s to pay off student loans, to refinance homes and meet with a financial adviser for the first time.

So doing this early is important because it becomes a habit. Even then it’s not a fully linear path towards financial independence. We all gotta make some mistakes, make some good and bad investment decisions until we get the feel for it.

There was this chart I came across a while back, basically showing that depending on what percentage of your income you save/invest you would have x-number of years before retirement. So that makes sense, if I am making $10k a month and my investments make $1k/mo then by continuing to save & invest I would slowly increase the passive $1k and need less income from my job to live off of.

My example is a bit extreme since my overhead is low, needing only money for property taxes, HOA, utilities and food expenses. With the various side-gigs I’m doing I don’t even have a need for a job. But the journey doesn’t end there. Anyone who gets to this point could next focus on how to diversify their investments, pick up some other skills (I know that you, John, are pretty good with equities trading) and maybe even find their encore career.

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