I have been considering investing in government bonds. I would like to diversify my investments and government bonds are completely risk free. New Zealand and Australia both have relatively high interest rates, so bonds can pay as much as 5 or 6 percent per year. The problem is that 20 percent of the interest income will be deducted for taxes and with other exchange rate risks and fees, it is likely that I would make less than 3 percent. This is comparable to what US government bonds are currently paying.
Therefore, if I invest $100,000, I will make $3000 per year or $250 per month. $250 per month on $100,000 tied up for at least a year. So basically that means, making an extra $250 per month is equivalent to having $100,000 in bonds. In order to make an extra $2500 in passive income, you would need to be the government bond equivalent of a millionaire. A million dollars in bonds would only provide you with $2500 a month of income.
How about looking at this from a different perspective. Every $250 you could save in your current living expenses would be the equivalent of having $100,000 in government bonds. Let’s say you currently make $3000 per month in take home pay. If you are saving $500 per month now, and you increase your savings by an extra $250 to make a total of $750, you have increased your monthly savings by 50%. If you could cut back your expenses $500 per month, you could actually double your monthly savings, a 100% increase. The equivalent of having $400,000 in government bonds. ($400,000 X 3 % = $12,000 per year or $1,000 per month.)
Just for fun, look at it another way. What if you could find an extra $250 of income. Remember an extra $250 is like having $100,000 in government bonds. Can you find ways to add some passive, recurring income with minimum time and upfront investment? I don’t think it is so hard and I am currently working on a few ideas myself.
One of my passive income ideas is a website of PDF downloads for English teachers.
Time investment: 200 hours. (For the creation of the downloads and setting up the website)
Money Investment: $3000. (For artwork and design)
If I value my time at $20 per hour (200 X $20 = $4000), the total investment will be $7000. (Plus a nominal amount of time every month for marketing, admin etc.) $7000 invested at 3% per year will yield $210 profit per year. This is only $17.50 per month. So if I can generate more than $17.50 per month in ongoing income, I am better off than investing in government bonds.
Of course, learning how to make money online also has its own benefits. I will certainly learn more and make more money over time if I invest in myself. Undoubtedly, I will make far more than 3% per month by investing in myself. Forget the bonds, build yourself a business!