When you have income-generating assets working for you, what does financial freedom or financial independence mean? Instead of you working for money, your money (invested in these assets) will work for you. This will allow you to live a life free of job. Because you have income-producing assets, you don’t need to work to keep up with your monthly expenses. To get you started, here are some income-generating asset ideas.
What does it mean to have income-generating assets?
Although some may disagree, a primary property is not actually an asset until you rent out a piece of it because it does not generate money. To accomplish so, one must concentrate on assets that provide revenue. If you don’t have cash flow, your net worth is meaningless.
And, in order to generate cash flow, you should concentrate on holding assets that provide income.
You can pay cash for a $1,000,000 house, but if you don’t have any money coming in, you won’t be able to pay for food, energy, property taxes, or financial freedom.
Here are 10 Income-Generating Assets to help you attain financial independence and live your life on your own terms. Stocks, bonds, ETFs, and rental properties are examples of income-generating assets.
High-Interest Saving Accounts (HISA)
Between 0 and 2.5%, you shouldn’t be look at HISA unless you need this money for short term availability such as emergency funds.
If you need to look somewhere for a HISA I recommend Tangerine Back and their Tangerine Saving Account as they currently have a 2.50% promo for a few months.
Real Estate Investment Trusts (REITS)
The term REIT refers to a real estate investment trust. You may own property without ever leaving your home or dealing with obnoxious renters. REITs are real estate investment trusts (REITs) that possess at least 75% of their assets in real estate and receive rental income.
The rental income is distributed to the company’s stockholders. You can also reduce the risk of investing in a single REIT company by purchasing a REIT ETF (Exchange Traded Fund). Of course, REITs are not without risk. Interest rates have been rising, which has caused REIT prices to fall.
You can find a good list of REITS on the Globe and Mail.
Dividends are a portion of a company’s earnings that are distributed to its shareholders on a quarterly or monthly basis. For decades, many long-term dividend-paying corporations have paid dividends to shareholders. Furthermore, many corporations (that have consistently raised dividends in the past) have continued to boost dividends, typically at a faster rate than inflation.
A company’s dividend yield determines how much money it pays out in dividends. Let’s imagine a company’s stock is worth $100.00 and its dividend yield is 4%. That means they pay out $4.00 per year, or $1.00 every quarter.
So, if the firm expands and outperforms the market, and the stock price rises to $150, the company’s earnings rise, and the dividend is increased, you may end up with a $500 annual payment with only a $10,000 investment.
Renting out a property
If you own property that isn’t your primary home, you can rent it out as a rental. The definition of a rental property is one that generates income.
When renting out a property, there are numerous aspects to consider. Will you be doing a short-term rental (for example, through Airbnb or VRBO) and is it legal in your town? Are you planning to rent for a long period of time? What is your target demographic for tenants, and how much will you charge? Is the rental revenue greater than the expenses (if it is not, it means you are not earning money from your asset!)?
Consider costs like upkeep, property management (if you go that way, they normally charge 5-10% of your monthly rent), mortgage interest (if applicable), and property taxes… the list goes on and on.
Personally, I like to deal with rental property that is within a short commute or simple access for me, as this saves me time. When I was out of town, I used Airbnb to rent out my property, and it was a terrific method to cover the expense of my vacation (and then some).
Furthermore, if your strata allows it, you can rent out your parking place. Parking spots might cost anything from $50 to $100 per month (and above), depending on the location.
A little is better than nothing
Hopefully, at least one of these four methods for acquiring income-producing assets will assist you in your quest for financial freedom and independence so that you might become wealthy in Canada.
The easiest method to accumulate these income-generating assets is to set aside money from each paycheck.
What are your favourite income-generating investments or assets that generate income?