True Cost Of Recurring Expenses

To become financially free it required some fundamental changes in the way I view the cost of daily expenses in life. We all have recurring expenses we must pay every month or year likely till the day we die. We all need water, power, and shelter but we also have accounts like Netflix paying $10 a month (I personally don’t watch TV). The cost for such service doesn’t seem like much for most people but for those who actively seek financial freedom look at such costs through a different lens.

The question is how much must one have in investments to cover such costs without having to spend the income earned from ones labor. What amount of savings and investments must a person accumulate to generate a passive income of $10 every month. That answer should provide us many ways to think of the real cost of the recurring expense. In one way, to generate $10 a month, one may need to invest at least $2000 in AT&T stocks which pays a 6% annual dividend resulting in $120 a year. That passive income will cover the cost of the Netflix expense for the full year. Others may correlate the $10 to the value it provides but for me that values real cost is simply $2000 per year.

It is definitely a different way of thinking on all recurring expenses for some, but this is what it took to achieve financial freedom. I first began with my utility bills. Trying to save up and invest enough to cover all costs of utilities with passive investment income. Once I reached that goal I began to move towards larger and larger recurring expenses such as insurance, property taxes, and even mortgages. It is a slow grind at times but tracking your progression using spreadsheets, free money management platforms like MINT or Personal Capitol helps keep you motivated, organized and on track.

Here are some simple calculation on some common recurring expenses.

The total real cost amount just to cover your basic expenses seem like a lot of money but this is what it looks like. $380 per month in expenses may equal 76K in investments simply looking at things from stock dividend income source. Of course, there are many ways to generate passive income which I will get into next time.

As for the larger expenses such as the insurance, property taxes, and mortgages, it took investing in many other investments such as real estate. Rental income was a huge factor for me in finding financial freedom. I love rental income and still a large portion of my passive income comes from property rentals. Owning property rentals require more work and in my opinion is not completely passive. The purpose of the dividend portfolio is to create a more passive income source to free up more of my time to enjoy life.

The real growth and acceleration come once you begin knocking out these expenses one after the other having your passive income pay them off. As your cash flow and income becomes free, you reap the rewards of compounding and the snowball effect in savings and investing.

It is an amazing and liberating feeling to have financial freedom. I am learning something new everyday and thankful for what life has given me. I find joy in sharing my thoughts with the world and always thank you for reading.