I believe in spending as a portion of income instead of asset.
For dividend investors, when we look at dividend returns, do we look at it from angle of cash assets from company cash or is it from
Free cash flow?
I believe that in order for dividend returns to be substainable, it should be from what is recurring.
When we spend a portion of recurring income while
Leaving capital untouched, we can use the capital to invest and in return even higher cash flow. Hence, I believe in spending as a portion of recurring income instead of vs assets. Similar to how we evaluate dividend companies.
With regards to 1:100 or 1:1000. Using the same approach, but vs income. When income is $4000, spending $4 won’t be painful. But spending $40 builds up rapidly.
Hence, before income is high enough to spend at 1:1000 rate, the focus should be on accumulating assets to get high enough active + passive income before spending to reward ourselves. But then, that’s just my POV. [Cool]
Spending vs. Assets: Are You a 1:100 or 1:1000 Type?
There seems to be a proportional relationship between people's spending levels and their assets.
As someone pointed out, it’s possible that our spending capacity and cash reserves are in a 1:100 ratio.
For example, if you have $100,000 in savings, you might not hesitate to spend $1,000 on something; and if you have $1,000,000 in savings, you might not hesitate to spend $10,000.
However, some people say that when it comes to regular daily expenses, a 1:1000 ratio better reflects their spending habits.
------------
What's the ratio between your spending and assets?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Comments