Having taken my son to college recently, I am reminded that life is made up of various stages. The outcomes we desire from our money are a reflection of these life phases. There are two major ways to think about increasing income. The first method is by creating income streams from new business models that usually involve your work or skills, such as starting a new business. The second method to increase your income is by investing your capital in assets that generate income.
Keep in mind that you wouldn’t want to permanently live off of the investment returns of the money you have set aside to compound unless you have deliberately entered the retirement phase of your life. In other words, if you decide to pay bills with your investment income, you have made a conscious decision to live off of your investments.
Living off of investment income usually occurs for two different reasons. First, you may be financially in a place where you can do this with enough funds to generate income to cover your living costs for the rest of your life. If you can, then you have true wealth.
The second reason that investors live off of investment income is often due to a temporary life circumstance. This is frequently due to job loss or a lifestyle change that mandates a temporary period of reduced or no income. In periods of low interest rates, investors must sometimes also withdraw investment capital to pay bills. During such times, it can make sense to actively seek higher income producing strategies, within acceptable risk levels, to limit the amount of capital withdrawal.
The first step with investing your money is to decide the outcome, or objective you want. I have written several blogs about this recently. All financial women know their investment objectives before deciding how and where to invest their money.