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Investing for monthly income. Make your money work for you.

The wealthy think about money differently from the average Joe, and that’s because they don’t need to work for their money and make their money work for them. So, even while playing with their kids, teeing off, or hiking in Patagonia, they earn income without lifting a finger.

But let’s say you’re not super-wealthy and want monthly income for your retirement. What are the best ways to generate this passive income?

First, let’s take a glance at why investing for monthly income can be right for you.

You may want a constant stream of money flowing into your bank account for many reasons. Who wouldn’t? But here are a few of them.

  • An early retirement
  • A more comfortable retirement
  • Reduced dependence on your job
  • Increased financial freedom

Whatever your reason to earn passive income, and there are definitely more than the above, there are many ways to do so.

Buy-TO-let property

This is one of the most convenient ways to secure a monthly income.

You can choose a commercial property or residential property. The best investment here is in the former: a building offered as a workspace. They attract a higher rent than other real estate, so you’ll earn a higher regular income. Residential property is the next most profitable, as these are living spaces; let’s face it, everyone needs a place to live.

So how do you pay for it? A mortgage is the most obvious if you don’t have the cash upfront. You’ll need tenants to enjoy monthly income so you can pay the repayments. Be aware, though. You’ll have to foot this bill yourself if you don’t have tenants.

The long-term benefit here is that, after the mortgage term is over, you’ll enjoy a net positive monthly income in the form of rent your tenants will pay you.

Equity Real Estate Investment Trusts

Real Estate Investment Trusts, or REITs, are companies that invest in real estate for you, so all you need to do is invest in them. You can choose Equity REITs which rent out the property for income, or Mortgage REITs which sell mortgages and loans.

It’s cheaper than buying a property because you’re only buying a share of the property, not the whole thing. But it does guarantee you dividends, which are usually monthly payments.

Preferred stocks

A stock or share means part-ownership of a company. There are two types, common stock and preferred stock. Common stocks give you partial interest in the company. In contrast, preferred stocks give investors more consideration when dividends are given out. You want a preferred stock here as it guarantees you a higher income, usually paid monthly.

Living annuity

A living annuity provides you with income during retirement. With this, you decide how to structure your savings within a basket of investments. You also choose how much income to draw within the regulatory limits of 2.5 to 17.5% annually.

A living annuity is popular because it provides transparency, investment flexibility, and tax efficiency. When you pass, as we all do, the remainder of the capital is transferred to your loved ones without estate duty or executor’s fees.

Short Term Bonds

Bonds are also an excellent way to gain a monthly income. They are debt instruments that the government, an institution, or a company issues to raise funds or capital. Essentially, you are giving them a loan that they repay with interest.

The interest that bonds earn is paid before the debt is paid back. That is how you can make a monthly income. The principal amount is paid back at the end of the term (known as the maturity date). Be cautious, though. Bonds come with a risk of default, so they don’t guarantee you a monthly income; you may lose your investment entirely. This is more true when buying company bonds. Government bonds are generally far safer. But be sure to do your investment homework!

Long term bonds

Long-term bonds last between 12 and 30 years. Thus, they come with the advantage of a higher interest rate but the disadvantage of a higher risk of default. If you have a lump-sum amount and want regular income, these are options. You can also invest in local bonds like unit trusts or on the JSE.

In closing, don’t think that the list above is exhaustive. There are many ways of investing for monthly income. Fixed deposits, money market accounts, and high-interest savings accounts will generate passive income. But because they barely keep pace with inflation, if they do so, many investors wisely choose one of the higher interest investments we’ve discussed earlier.

So, congratulations! You now have a source of monthly passive income. You can join the wealthy on their hiking expeditions, have a more comfortable retirement, or rely less on your 9-5. And what’s wrong with that!

written by moneybetter

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