Cash Flow

Last year, I spent three days working on a Cantonese Dictionary for the Kindle. Not only is it helping me to learn Cantonese as I read Chinese texts, it also earns me about USD 1.50 in commissions each month, or $18 a year, which doesn’t seem like much. Then I got to thinking – how much money would I have to invest at a 3% rate of return each year in order to get this amount of cash flow? Divide $18 by 3% and the answer is $600. Since I spent three days working on it, speaking in terms of the power to generate cash-flow, for each day I worked, I created the equivalent of $200 of cash-generating capital.

So, just assume that this is repeatable. I don’t know whether this is a good assumption, because in the worst case I will either run out of ebook ideas or in the best case I will get far better at generating them. I am generating $6 a year in cash flow per day worked. Suppose I work a normal work year of 250 days. That is $1500 a year that I can generate. At the end of 15 years, one could retire on a pension of $22500 a year. What’s more, this would be safe from inflation, since one could just raise prices to keep pace. To generate this cash flow, one would have to have $750,000 of capital earning 3%.

With these numbers, independent work writing ebooks is comparable to salaried work.

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