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The Tax-Free Savings Account (TFSA) remains one of the best places to store cash. Especially if you want passive income, and even more so if you want it each month. You can put in and take out cash from your TFSA any time you like, as long as you stay within the contribution rules.

But how on earth can you even get started trying to make passive income each month? If you’re aiming for a passive income TFSA, then let’s get you started from scratch.

First, how much do you have?

When coming up with a goal for passive income each month, it’s important that TFSA investors look at what they have to invest in the first place. The goal is to make money, so you should certainly not put away all your life savings, or put yourself into debt.

With that in mind, the first thing to accomplish is the dreaded budget. While most Canadians agree you should have one, only about half have a budget. Even fewer follow it. With that in mind, now is a great time to rethink your budget. Inflation and interest rates have likely made it pointless now anyway, so it’s time to rethink that budget.

From there, a great starting point is allocating between 5% to 10% of your income towards investing. Let’s say, then, you’ll put 5% towards your TFSA for the purpose of passive income. So we can now move to the next stage.

Choose the right investment

Now you should certainly have a diverse set of investments, and remember here we’re looking at a passive income TFSA. That means you should also have investments elsewhere for things like retirement, debt, and more. But in this case, let’s use the example of creating passive income for TFSA investors from a solid long-term provider.

In that case, a great option I would consider is NorthWest Healthcare Properties REIT (TSX:NWH.UN). NorthWest stock is on the new side, true. However, it’s in the healthcare property sector. This has to be the safest healthcare option, with healthcare an essential service in its own right.

NorthWest stock also boasts a 14-year average lease agreement, and 97% occupancy rate. Plus, you can bring in a dividend yield of 8.39% as of writing! Finally, it trades at just 8.1 times earnings, making it quite valuable.

Bring in passive income each month

So, here I’m not only going to show you what you could achieve in passive income each month starting now. I’m also going to show you what would happen if you chose to reinvest that income. If you make $60,000 per year, you have $3,000 to put towards NorthWest stock. Looking at historical growth, we can then see how much you could make over a decade.

As you can see, you’ll start out with $256 per year, or $21.33 per month. But keep going, and you’ll have $2,426.30 annually, or $202.19 each month in only a decade! Plus, a total passive income TFSA of $69,564.01 from this one stock.

The post TFSA Investors: How to Earn $202.19/Month in Passive Income appeared first on The Motley Fool Canada.

More reading

• TFSA Balance Keeping You up at Night? Sleep Well With These Stocks
• 1 Valuable Dividend Stock (With an 8.2% Yield) I’m Buying Right Now
• For a Shot at $7,000 in Annual Passive Income, Buy 8,750 Shares of This TSX Stock
• For at Least a 5% Yield, Buy These 3 TSX Dividend Stocks
• 3 Dividend Stocks to Buy for $500 in Monthly Income

Fool contributor Amy Legate-Wolfe has positions in NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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By: Amy Legate-Wolfe
Title: TFSA Investors: How to Earn $202.19/Month in Passive Income
Sourced From: www.fool.ca/2023/03/03/tfsa-investors-how-to-earn-202-19-month-in-passive-income/
Published Date: Fri, 03 Mar 2023 20:00:00 +0000

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