Started with $100…

The genesis of Easy Beer Money was a fateful click on Reddit’s random subreddit link which brought Rolf to /r/beermoney.

After reading various posts about “Get Paid To…” sites (GPT) Rolf found a post about passive earning by playing videos on old phones through the Swagbucks (internal link) app.

He found an old iPhone (still working, by the way), downloaded the app and when he redeemed his points for a $5.00 Amazon gift card a few days later, he knew he had a new hobby.

He then spent $100 setting up his first phone farm (internal link).

He began charting his earnings and then decided to start this blog to answer a simple question: can a life-changing amount of money be earned in a reasonable time in one’s spare time without taking on a second job?

A Life-Changing Amount of Money and a Reasonable Time

In exploring the central question of this blog, we have to ask two things: 1) what is a “life-changing” amount of money, or, more accurately, what is the least amount of money which qualifies as “life-changing”, and 2) what is a “reasonable time”?

The answer to the second question is so fact specific, it would not do to discuss it.  Let’s decide the answer is “as soon as possible”.

During this discussion, we will assume no taxes or fees, that is, we are using gross numbers.

Commonly, we think “life-changing” is used to mean a significant, permanent alteration or the potential for one.  What constitutes such a potential will vary with the individual (a millionaire would need significantly more money than would someone relying on SSI, e.g.) but we can make some assumptions.  We can assume people tend to live within their means unless forced not to by some happenstance – sudden sickness, loss of job, a calamity, etc.  We can also, therefore, assume that the significance of any change to a person’s lifestyle will be roughly equivalent to their means.

Given the two assumptions above, we can posit that a life-changing amount of money will track similarly, and, therefore, using a standard measure, we can answer the question this blog asks for a wide range of people.

According to Wallet Hacks, as of 2018 to be in the top 50% of earners in the United States, one must earn $30,000.00 gross.  How much would such an earner need to make a significant change to their lives annually?  If they earned 25% again of their salary, or $8,750.00, they could, for example, max out their annual IRA contributions and take a nice vacation.  That is not insignificant – especially if they were young.

For the purposes of setting a goal, let us set our target at an additional 25% of income, yearly.  Let us also decide that for maximum utility, this 25% should be earned passively, and returned as cash or cash equivalents.  In the interests of goal setting, let us decide that this money should be earned as dividend income from investments.

Naturally, dividend yields will change year to year, but let us assume the highest average dividend yield (that is, the average dividend yield of the highest paying market sector) which is likely to sustain from year to year is 4%.  From this we can conclude that our fictional $30,000.00 a year earner would need dividend paying investments worth a total of $218,750.00.

Yikes.

Assuming that $30,000.00 a year earner took a second job paying the same wage or salary, it would still take just over seven years to earn $218,750.00 (remember, these numbers are gross of taxes, fees, etc.).  If the same person earns $10,000.00 extra a year it would take almost 22 years to earn the investable money.

Ouch.

Unless the person is 10, 22 years is probably not a reasonable time frame.

But that is not conclusive by itself.  If earnings are invested along the way, and earnings from the investments are reinvested, then the power of compounding will accelerate earning on an exponential curve.

Can we make $218,750.00 worth of investments in 22 years?  Probably.  Can we do so in 10 years?  That is much less certain, but, what is life without challenge?

Challenge accepted.

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