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I live in Pakistan where cost of living is very low. My expense is $250 per month and I have $4000 saved with me. How can I use $4000 to make $250 per month for the rest of my life?

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    No way. You would need 62.5% effective interest, which is far beyond any investment. You need 40000 to make it work. – Aganju Aug 25 '16 at 11:30
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    The good news is that it will cover your expenses for another 16 months. :) – NL - Apologize to Monica Aug 25 '16 at 15:57
  • @NathanL: This was the plan I was following. I read an advice on the the internet that I should work for 2 years and save 50% of my expense every month. This made me save the amount for a year and a little freelancing helped me save even more. –  Aug 25 '16 at 16:12
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    If what you want to do was possible, then everyone could retire after working just 2 years, instead of 30-40 years. – TTT Aug 25 '16 at 16:52
  • @FahadUddin if you change that 2 to a twenty, then the article would be reasonably accurate (assuming that you can maintain a 50% savings rates rate for twenty years). As after 20 years you would have 20x your annual cash needs saved (more actually since that money would be growing). But this requires that you continue to live on only 50% of that original income. – Eric Johnson Aug 25 '16 at 17:17
  • @EricJohnson: https://www.quora.com/What-advice-would-Jimmy-Wales-give-to-the-young-generation/answer/Jimmy-Wales?srid=gBPG. One needs to save 50% expense not original income. Pretty easily doable. –  Aug 25 '16 at 17:47
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    @FahadUddin The example goal in the article was to save enough money to stop working for one year. Your $4000 at $250/month is sufficient for that goal. – A. Webb Aug 25 '16 at 20:03

2 Answers2

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If you are looking to begin living off the money now, then Dheer's answer is correct - it is not possible.

However, if you are looking to grow that money (and potentially additional money added at later dates), then you could make this work.

250 a month corresponds to 3000 per year. A first approximation is that you will need a diversified portfolio of 20-25x that amount (60k-75k) to get the required return. This approximation is based on the rule of thumb for how much life insurance to buy.

Therefore you need to determine how to grow the 4k you currently have into 60-75k. These numbers, however, are not adjusted for inflation. In the US I would like put the long term inflation adjust diversified market return at 4% per year (your money doubles about every 18 years).

So your best approach if you have time is a diversified portfolio with rebalancing and adding additional money each year.

Eric Johnson
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How can I use $4000 to make $250 per month for the rest of my life?

This means the investment should generate close to 6.25% return per month or around 75% per year. There is no investment that gives this kind of return. The long term return of stock market is around 15-22% depending on the year range and country.

Dheer
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    Should be 6.25%, not 62 5% monthly. I tried suggesting edit but it's not long enough – homer150mw Aug 25 '16 at 13:23
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    Also, the "15-22%" long term return of the stock market is incorrect. It's really in the 6-10% region, depending on which markets you want to include (and the timeframe). – bkoodaa Aug 25 '16 at 13:26
  • Some aspects of the illegal-drug industry can give that sort of return, as can loan-sharking. Of course, these are rather high-risk investments... – Mark Aug 25 '16 at 20:34
  • Agree with Atte. Long term stock market return seems way too high. – SMeznaric Aug 26 '16 at 18:08