It can be really hard for Canadians who have nothing in savings to get started on the TSX today. There is a lot of volatility, and it can be incredibly overwhelming for investors. Which is why we’re not going to ask for anything crazy from you today. Instead, if you’re looking to create a passive income portfolio and don’t have a dime to spend on it, we can get you started safely and easily. And set you up for life.
Narrow your budget
If you have a budget, great! If not, no worries! But the first step that we’re going to take is using the net-zero budget. Net-zero budgeting is a financial strategy aimed at ensuring an individual’s expenses do not exceed their income, resulting in a balance of zero at the end of a month.
Unlike traditional budgeting, which often involves setting limits on spending across various categories, net-zero budgeting focuses on giving every dollar a specific purpose, whether it’s for expenses, savings, investments, or debt repayment.
To adopt this method, determine all sources of income, including salaries, bonuses, and any other income streams. Then, list out all expenses, including fixed costs like rent and utilities, as well as variable expenses like dining out and entertainment. Finally, assign each dollar of income to a specific category or purpose. This could include necessities, savings goals, debt repayment, and discretionary spending. The result will be you putting aside money for savings, without affecting your monthly budget.
Make it automatic
The best way to achieve these goals efficiently is by then using the next tool. That tool is automated contributions. And this works in a few ways. If you have bill payments, use automated payments to make sure you don’t owe more than your bill.
This goes for debts as well. You can use the snowball method in this case. Create automated contributions at the minimum payment rate for each debt. Then, assign what you can to the debt with the highest interest. After it’s paid, move on to the next highest interest rate, until all debts are paid. Make it automatic so you aren’t tempted to spend it!
Finally, do the same for savings. By putting aside money towards your investments, you’ll see it grow further and further without you lifting a finger. Well, you’ll need to lift one finger each month, and that’s to keep up with investments.
Invest in the perfect passive income portfolio, in one click
Finally, investors will need to choose investments for their savings. While this could be overwhelming, a great option is to consider a monthly dividend passive income exchange-traded fund (ETF). A strong option these days would be the BMO Global High Dividend Covered Call ETF (TSX: ZWG).
ZWG aims to provide investors with exposure to high-dividend-paying global equities while generating additional income through the use of covered call options. The ETF seeks to replicate the performance of the Dow Jones Global High Dividend Yield Index, which includes high dividend-paying stocks from developed markets worldwide.
In addition to investing in dividend-paying stocks, ZWG employs a covered call strategy to enhance income. The ETF writes covered call options on a portion of its underlying securities, allowing it to generate additional income in the form of option premiums.
Bottom line
By using these steps, you can create more income for savings that can be used for investing. Once earned, you can use that cash to invest and create even more money through savings. ZWG ETF has seen growth of 6.9% year to date, with a dividend yield at 6.92%! Alongside capital appreciation, the dividend and option premium income is providing Canadian investors with strong growth that will continue to get stronger, without needing any more income.
