Make $40K+ per Year Doing Nothing?  Here’s How:

A woman sitting on a dock overlooking a lake and mountains.

It’s called early retirement!  

I didn’t think much of retirement until I heard first-hand experiences of friends and bloggers who retired in their early 30’s while earning $40K+ per year from their investment income.  I decided I needed to get on board.

How Did They Do It?

Ever Heard of Index Investing?

It’s an inexpensive, effective investment strategy that matches an index fund.  An index fund is a mutual fund (or collection of investments) that follows a market (Stock, bond, real estate,etc.).  You’re not investing in one individual stock but the whole index like the ever popular S&P 500 (500 of the largest US companies).  

It typically always outperforms actively managed mutual funds and due to its diversified strategy your account will never go red.  There is risk in anything you do when it comes to investing, but history has shown if the index has gone down, it will always go back up…Economics 101

How to Decide When You Can Retire

Now that you know this can be accomplished, you can use the 4% rule.  What’s the 4% rule?  It’s the process you will use to find out if you are ready to retire…If you can live on 4% of your portfolio (dividends) you have reached your promised land.

To figure out your magic number take your yearly expenses and multiply them by 25 (4% is the same as 25 in this example).

What number did you get? Most people will need to build their portfolio up to 1 million or more and you can do that. Using a 6% compound annual return, use this calculator to see how long it will take for you to get to that number and base it on how much you can contribute each month and what you can initially invest.

This is all hypothetical but also consider the increase in your income as your kids grow older and the multiple streams of income you take on to get there sooner.

Related: 30 Ways to Make Money from Home

So, are you ready to start investing?

Wait!  Before you consider investing, answer these two important questions:

  • Are you debt free? What’s the sense of investing your money if you still owe someone, pay off your debt first!
  • Do you have enough money in your emergency fund?  Yes!  Emergency fund.  Experts say you should have a cash reserve to cover three to six months of your living expenses.

If you answered No to any of the questions above.  STOP HERE…YOU CANNOT PASS GO!

If you answered Yes, I highly recommend following one of the bloggers that taught me about index investing FREE Step-by-Step Guide to Investing (I also got a chance to interview her! See how she retired at 31 with a million dollar portfolio) or Jlcollinsnh posts called Stock Series.

Final Thoughts

We are all at different stages of our lives financially, so let’s analyze our current situation and decide what works best! Share your thoughts!!

Let’s connect as I share my progress towards financial freedom and other ways to make and save money!

Thanks so much for reading! If you found this content helpful, please be sure to subscribe to Tried and True Mom Jobs email list.

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Where are you on this financial journey?

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16 thoughts on “Retirement?”

  1. These look like really credible advice. I know investing is a great way to earn passive income, however, I am still working on building our emergency fund. I think three months worth of living expenses is a good amount to set as a goal.

    1. Yes, that’s great and you are doing it the right way. First things first, making sure you are debt free and are comfortable with your emergency fund.

  2. Retirement seems like a dream to me, to have enough saved up that you don’t have to work anymore seems so impossible, so I’m glad you’ve written this. Retiring feels like a little more concrete of an idea to me now. Thanks!

    1. Thank you! I don’t think most people give it a lot of thought, I know I didn’t but glad someone inspired me so I had to share.

  3. Unfortunately I have debts and all so I wouldn’t be able to go through with this. But a great article and I’m sure it could work for a lot of people!

  4. Never heard of Index Investing, to be honest. Lately, I have been interested in reading about finances so I am glad I found this post. In my opinion, you need the courage to go ahead and invest which is fair enough. If you simply wait, nothing is going to happen.

    1. Yes, Index Investing was something new to me too. As your reading about finances, I’m sure you’ll see this more and more. I definitely agree that you need the courage to make that leap and it’s nice to see that it has been Tried & True for others.

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