My Passive Income Plan to Financial Freedom

In my 7 year plan to one million dollars, I have mapped out my journey to financial freedom and have explained how I intend to get there. Unfortunately, one crucial detail that was left out of the equation was my consideration in passive income.

It is sort of ironic how I intend to be financially free but have no solution for paying my bills and expenses. Here is how I plan to incorporate passive income into my financial journey:

Passive income vs. future expenses

In order to determine how much passive income I will need to retire by 2020, I would need to figure out my potential expenses first. Here is a quick prediction of my future expenses:

  1. My primary residence ($1,800)
    1. Mortgage ($1,000)
    2. Property tax ($300)
    3. Utilities ($300)
    4. Insurance ($50)
    5. Cable & phone ($150)
  2. Food ($200)
  3. Spending & travel money ($1,000)
  4. Savings ($500)

As long as my passive income surpasses my expenses, I will be on the fast track to one million dollars. From the list I just came up with, my passive income will need to total $3,500 for me to be considered financially free.

These numbers assume that I will still have a mortgage by then. If not, my numbers won’t change. I’ll just allocate the additional $1,800 to recreational activities such as travelling and crossing off my 101 things to do when I achieve financial freedom.

Passive income distribution by 2020

Monthly Breakdown

  • Dividends: $1,000
  • Portfolio growth: $500
  • Business: $1,250
  • Real estate cash flow: $750

Total Monthly Passive: $3,500

Annual Breakdown

I have included an annual breakdown because I believe that it will be quite difficult to maintain the monthly quota. Stocks and ETFs can be quite hard to predict. This is why the annual numbers will be the focus of my investments.

Note: These numbers are just my monthly numbers multiplied by 12.

  • Dividends: $12,000 (28.57%)
  • Portfolio growth: $6,000 (14.28%)
  • Business: $15,000 (35.71%)
  • Real estate cash flow: $9,000 (21.44%)

Total Annual Passive: $42,000

Moving forward from here

Dividends

I know I have been debating on whether to invest in dividends or ETFs a lot on my blog. However, seeing how dividends play a big role in my passive income goals, I will now focus on a dividend growth strategy for my TFSA.

Portfolio growth

On the other hand, my RRSP and non-registered cash accounts will focus on stable ETFs and high risk stocks that have the potential for tremendous gains. 🙂

Perhaps, I will even allocate a portion of my RRSP or non-registered accounts for dividend stocks to meet my 2020 quota should the room in my TFSA not suffice.

Business

Creating a comprehensive business plan is on my long list of goals for 2015 and something I haven’t gotten around to yet.

Some of my business ideas include: starting an online business, opening a fast food joint and creating a small startup software company. (more on what I decide to do later on)

Real estate cash flow

The plan is to start investing in high valued properties and to rent it out for positive cash flow. The intention is to own 5 properties by my deadline with one of them being my primary residence.

I will rent out the other 4. According to my passive income plan, these 4 will need to generate $750 a month. This averages out to $187 per property which is much more than just feasible.

That’s it! This concludes the passive income section of my plan. Although I am someone who likes to aim high and this plan may seem somewhat conservative to most people out there, having a solid foundation is always a good place to start.

Do you have any ideas for generating passive income? I would love to hear all about it.

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14 Responses to “My Passive Income Plan to Financial Freedom”
  1. vivianne February 19, 2015
    • Jeff February 21, 2015
  2. Roadmap2Retire February 20, 2015
    • Jeff February 21, 2015
  3. B February 21, 2015
    • Jeff February 23, 2015
  4. No More Waffles February 22, 2015
    • Jeff February 23, 2015
  5. Tawcan February 27, 2015
    • Jeff March 2, 2015
  6. Andrew McDavid February 28, 2015
    • Jeff March 2, 2015
  7. Courtney April 1, 2015
  8. Jeff April 7, 2015

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