Many investors assumes that once you focus primarily on investing, you can stop caring about frugality. You might think that you can never get a huge return from being thrifty, but think again.
Lets say you followed strictly to my frugal tips (here and here) and manage to reduce your monthly expenses from $2000 to $1500. That is $500 earned indirectly every month. Which is equivalent to $6000 extra cash annually. How much money do you think you need to put into a 1.5% p.a fix deposit before you can get $6000 a year? The answer is: $400,000. How much money do you think you need to put into a 6% p.a Reit investment in order to get $6000 a year? The answer is: $100,000. If you work backwards like that, you will start to see how useful it is to be frugal.
Not to mention, the extra money you earned indirectly every month from being frugal is non taxable. You should treat the money that you saved as an additional indirect source of income. No just any source, but a reliable and risk free one.
Might not be risk free Haha! And for reits, u probably need to top up capital in the form of rights every now and then.. Some reits actually take on more money and give out as dividends..
ReplyDeleteBut generally agree to what you said here. Good post :)
Hi LP,
DeleteIf we think of it in this angle, it makes alot of sense to conform to thrifty habits :)
But u need to do homework, not all paying 6% reit are safe. If the shr px drop big time. All your hard earned is gone.
ReplyDeleteHi, this post is not talking about reits, but rather "earning" money indirectly from being frugal. It is tax free and risk free.
DeleteI agree. You can also grow this $500 a month at 6-8% with our STI ETF.
ReplyDelete