The question comes up “So, are you living off investment income in retirement?” The term investment has evolved so much in my personal dictionary that it no longer covers only mutual funds and real estate. Though I hold both of those in my portfolio, the best investment I have made is in myself.
My portfolio has money invested in tax-deferred retirement accounts in form of index funds (passive, low-cost mutual funds). There are similar holding in the private brokerage accounts which suffer a slight tax burden.
These are tangible investments. They are more traditional and easy to track financially through websites such as Personal Capital. The less traditional investments are the projects which we hope will one day prove lucrative. These may not generate any income for years.
Risk Vs. Return
When I started reading up on passive investments and started my Project $1k, I realized that my personal income-earning abilities contributed more to my net worth than my investment income.
It’s worthwhile to invest in some mainstream investments such as index fund and real estate. They are highly regulated and the majority of individuals have skin in the game. Investment income from such endeavors can be had with minimal risk – but also minimal returns.
I am not saying that passive index funds don’t offer enough of a return for their risk profile. However, I am recognizing that with increased knowledge, practice, and expertise, I have potential to earn more than 4-6% with my money.
InvestMent Income Paying For Overhead
I am 39 years old, single, with no debt obligations. I have no dependents and no further schooling. I have a wide network of acquaintances whom I can bounce ideas off of, who are willing to be coinvestors, and who can offer great insight into niche topics.
My basic monthly household budget is ~$1,500. This is a fraction of what I can earn through my work as a physician. Because of this spread I have no need to live off of my securities (stocks, bonds) investments. These investments will earn a lot more money if left alone to go up in value and accumulate more dividend earnings.
There are a plethora of pursuits which interest me, all of which would allow me to earn an income. I haven’t been able to fully commit myself to anything yet. I consider this my exploration phase. It’s uncharted territory because I’ve always been taught that our personal interests and passions are rarely lucrative.
In the past, the lowest hanging fruit was trading my time for an education which in turn would allow me to obtain a degree that could earn me a solid income.
Future Earning Potential
When we are younger, time is certainly not the most precious asset we possess; creativity, passion, motivation, and energy are. But all traditional career pursuits aim to extinguish those quickly, with parents often leading the way.
At nearly 40, I still think I got some of those things left in me and I want to fertilize them.
My medical degree is what’s earning me the income needed to pay for my overhead during my retirement. I earn money seeing patients doing telemedicine and on occasion seeing patients face-to-face.
I wanted to try telemedicine because it seemed fascinating – the side effect is the income. It’s a “side effect” because earning an hourly wage can be detrimental to your income growth potential.
The more time I spend earning an hourly wage, the less time I’m investing in my future earning potential. It might be a stepping stone to reach more lofty goals or it might be keeping me back because I’m too afraid to break free from the income.
I discussed in previous posts that I have more than doubled my hourly wage after retiring. The point isn’t to earn more money, be wealthier or work less; I want to do good work which I enjoy. Work which is positive and helps raise up others around me.
Incubated Investment Income
I am a few projects which aren’t generating any income at this time. They are investments, of sorts. I am investing time and money into them. I take courses on some topics and spend hours writing about others.
I enjoy vegan cooking and baking. I spend time trying recipes and reading up on plant-based diets. My goal isn’t to become a chef, I don’t care to buy another job like I did with medicine. With enough knowledge, however, I can invest in local businesses working on plant-based foods.
I have always enjoyed working on cars. I owned a mechanic shop in San Diego and feel that I could give the automotive repair industry another chance in the future.
Fiddling with transportation doesn’t have to only involve cars. With the advancement of battery technology, electric bikes will undoubtedly be a big part of future transportation. A reseller, a repair technician or an investor in such businesses are all potential future investment options.
Investment income from such a venture would come from building the business, hiring the right help, and having enough management skills to run a profitable business.
Most of us have dabbled in some home projects. The labor can be exhausting and is best left to the younger bodies. Managing a construction project requires people skills, time management skills, and tenacity.
There are few contractors out there who are poor. The investment income from such a venture is likely going to be solid.
Both residential and commercial real estate require ongoing services from contractors to maintain or remodel them. This is a lucrative opportunity because there is less need to speculate on the future value of the property.
Personal finance can take many shapes in the future. It can be a way to become a financial officer in a business or it can be the gateway to managing someone else’s fortune.
An interest in personal finance can be used to build a financial adviser practice, a consulting practice, or a coaching firm.
When you can translate personal finance geek speak and deliver it coherently to your peers, you can generate value in terms of intellectual property.
The majority of Americans want to be rich and they want to be thin. A person who is rich and thin who has good communication skills can sell their time to help others achieve a physically fit body and a healthy lifestyle.
The point is that you shouldn’t dismiss your skills in any way. Whatever assets you have at your disposal, if you are willing to cultivate them then they can generate you an income in the future.
I discussed consulting in previous posts. I won’t get into it much further.
I have realized that I can either continue seeing patients at 3-5 patients an hour or I can sell my expertise as a physician to companies that need it.
Such companies are likely interested in developing services and products for the health industry. In order to do so they need the expertise of a clinician who can guide them in the right direction.
My current work with telemedicine and the writing I do in personal finance are both hobbies. Telemedicine fortunately earns me and income but I hope to cultivate both of these skills further and possibly extract an income from them.
Investing in my skills and knowledge paid off with medicine. However, I purchased a job and not a business. This time around I will invest more wisely and work on building a project which I’m passionate about and which can generate a perpetual income with less of an ongoing time commitment.