{"id":40359,"date":"2021-07-04T18:01:23","date_gmt":"2021-07-04T22:01:23","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=40359"},"modified":"2021-07-04T18:22:15","modified_gmt":"2021-07-04T22:22:15","slug":"monthly-investment-income","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/","title":{"rendered":"Monthly Investment Income: Reach Financial Freedom"},"content":{"rendered":"\n

Are you charting your monthly investment income? Have you projected your crossover point to know when you might reach financial freedom?<\/p>\n\n\n\n

Getting a handle on your monthly investment income and crossover point are key aspects of achieving financial independence<\/a>. In this article, you’ll learn the two steps of charting your investment income and discover how to project your crossover point.<\/p>\n\n\n\n

Read more to get the details.<\/p>\n\n\n\n\n\n\n\n

Visualizing Your Monthly Investment Income<\/h2>\n\n\n\n

Follow these two steps to chart your monthly investment income:<\/p>\n\n\n\n

1. Calculate how much monthly investment income your capital will generate per month with the same formula discussed above: monthly investment income<\/strong> = capital<\/strong> x current long-term interest rate<\/strong> divided by 12. For current long-term interest rate, use the interest rate for 30-year US Treasury Bonds, or the interest rate for certificates of deposit. <\/p>\n\n\n\n

This isn\u2019t how much investment income you have at the moment you calculate it. It\u2019s a projection of the monthly investment income you can expect if you invest your capital, regardless of the method you use to invest it.<\/strong><\/p>\n\n\n\n

Example: You have $1,000 in capital and the current interest rate is 4%. Plugged into the formula, you\u2019d get $1,000<\/strong> x 4%<\/strong> divided by 12 = $3.33 per month<\/p>\n\n\n\n

This capital, if you invested it now, would conservatively yield $3.33 per month in compound interest, or $40 per year. Using a third color, plot $3.33 on your graph. Over time, as you build your capital each month, your graph will look something like this:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

2. Apply this formula to your total savings each month. For example, if you save $500 next month, plug $1,500 into the formula.<\/p>\n\n\n\n

Projecting Your Crossover Point<\/h3>\n\n\n\n

As your expenses stabilize, and your monthly investment income grows, you\u2019ll be able to project your crossover point\u2014approximately when you\u2019ll reach financial independence.<\/p>\n\n\n\n

To estimate your crossover point, you need several pieces of information:<\/p>\n\n\n\n

  1. average yearly spending<\/li>
  2. monthly withdrawal rate\u2014the percentage of assets you\u2019ll withdraw each month.<\/li>
  3. total assets\u2014how much money you\u2019d need to make paid work optional.<\/li><\/ol>\n\n\n\n

    Four percent is widely considered a safe withdrawal rate to avoid overdrawing your assets. <\/strong>Effectively, you need 25 times your annual expenses in order to guarantee a 4 percent per month withdrawal rate indefinitely. Use the following equation: total assets needed<\/strong> = average yearly spending<\/strong> x 12 divided by the withdrawal rate<\/strong>.<\/p>\n\n\n\n

    Example: You spend an average of $36,000 per year, or $3,000 per month. You want to be able to withdraw 4% of your assets per month. The formula would read: total assets needed<\/strong> = $36,000<\/strong> x 12 divided by 4%<\/strong> = $900,000.00<\/p>\n\n\n\n

    In graph form, your monthly investment income line will have risen above your monthly spending line, as shown below: <\/p>\n\n\n\n

    \"\"\/<\/figure>\n\n\n\n

    When you track your monthly investment income, you’ll have a better handle on your crossover point. This is key to striving toward financial independence.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Are you charting your monthly investment income? Have you projected your crossover point to know when you might reach financial freedom? Getting a handle on your monthly investment income and crossover point are key aspects of achieving financial independence. In this article, you’ll learn the two steps of charting your investment income and discover how to project your crossover point. Read more to get the details.<\/p>\n","protected":false},"author":9,"featured_media":40365,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7,31],"tags":[396],"class_list":["post-40359","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lifestyle","category-money","tag-your-money-or-your-life","","tg-column-two"],"yoast_head":"\nMonthly Investment Income: Reach Financial Freedom - Shortform Books<\/title>\n<meta name=\"description\" content=\"Learn how to chart your monthly investment income, and discover how to project your crossover point as you strive toward financial freedom.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Monthly Investment Income: Reach Financial Freedom\" \/>\n<meta property=\"og:description\" content=\"Learn how to chart your monthly investment income, and discover how to project your crossover point as you strive toward financial freedom.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/\" \/>\n<meta property=\"og:site_name\" content=\"Shortform Books\" \/>\n<meta property=\"article:published_time\" content=\"2021-07-04T22:01:23+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-07-04T22:22:15+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/s3.amazonaws.com\/wordpress.shortform.com\/blog\/wp-content\/uploads\/2021\/06\/monthly-investment-income.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"750\" \/>\n\t<meta property=\"og:image:height\" content=\"310\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Elizabeth Whitworth\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Elizabeth Whitworth\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/\"},\"author\":{\"name\":\"Elizabeth Whitworth\",\"@id\":\"https:\/\/www.shortform.com\/blog\/#\/schema\/person\/d2928cf6c11a69ced1491d6a5b74fb13\"},\"headline\":\"Monthly Investment Income: Reach Financial Freedom\",\"datePublished\":\"2021-07-04T22:01:23+00:00\",\"dateModified\":\"2021-07-04T22:22:15+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/\"},\"wordCount\":461,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2021\/06\/monthly-investment-income.jpg\",\"keywords\":[\"Your Money or Your Life\"],\"articleSection\":[\"Lifestyle\",\"Money\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/\",\"url\":\"https:\/\/www.shortform.com\/blog\/monthly-investment-income\/\",\"name\":\"Monthly Investment Income: Reach Financial Freedom - 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