Creating a passive income can make you financially independent, you can afford not to work anymore which you can do what is more important to you. Investing in stock market is one tool that you can do to achieve passive income. While we are earning through active income, it is good that you start to invest also for you to create passive income in the future.
Let me share with you how it is possible to surpass your salary through investing in stock market consistently.
Here is the illustration of an employee who earns a salary starting at age 23 until age 60:
Let’s assume that an employee at age 23 has a salary of ph18,000 per month,so in a year he is earning Ph216,000 including the 13th month salary. Let’s assume that the annual increase of his salary is 5% per year but in our country,it is very rare to get a job that can give you an annual increase of 5% per year. If that employee will work in a job until age 60, his monthly salary will be Ph101,044.92 Ph or Ph1,313,583.90 per year if his employer will give him an annual increase of 5% per year. This only means that if your employer now is not giving you an annual increase of 5% per year,your salary will be lesser from this assumptions in the future. But these days, there is no job security. That is why it is advisable for us to invest for us to prepare for our future expenses.
On the other hand, if the employee decided to invest Ph3,000 per month for only 10 years,look how his money will grow over time for him.
We can see that he only invested Ph3,000 per month or Ph36,000 per year for only 10 years. He let his money grow for long term and let’s assume that his investment will give him 12% annual returns in long term. You can see that on the 6th year his investment has surpassed his annual income, Annual Salary is only Ph275,676.82 and the value of his investment is Ph292,146.81 and on the 12th year his investment doubled his salary already. His annual salary is Ph369,433.30 and the value of his investment is Ph792,472.80. You will notice that his investment funds compound over time which can give more income than his salary. If he decides to still continue his job, he can use this money to create another investments for him to grow his money by diversifying to real estate or business. If the employee stops working at age 60 he will already have Ph15,088,739.23 which he can use for his retirement. With this strategy, it is possible to surpass your salary through investing consistently in stock market which it can help you to achieve your financial goals in life. Can you imagine if how much money he will have if he invested more than 10 years?
To summarize, this is the chart of the growth of investing in Stock Market compared to salary increase.
In conclusion, it is important that we need to save and invest while we are young and earning from our job so that we can create another source of income through investing in Phil.Stock Market rather than we only depend income from our job which is too risky in the future. We see that the increase of our salary will never surpass the returns that you can get if you invest in Philippine Stock Market long term. Which will you choose? Will you just stick to your salary? or you start to save and invest so that your money can work for you while you are earning from your job. It is wiser to create another source of income for us to secure our future financial needs.
Thank you for reading my blog. I hope you learn about the importance of investing. Start to create your financial plan now to reap the benefits in the future.