Passive Income for Life in Just 10 Years!

Passive income is achievable, even if you have very little time or money. You just need to spot the next Shopify (TSX:SHOP)(NYSE:SHOP).

Can you achieve passive income in just 10 years? Considering the fact that most Canadians live paycheck to paycheck, and the costs of living keep increasing every year, this goal may seem impossible. But it isn’t. In fact, you can get started with relatively little capital and still achieve passive income within a decade.

A simple three-step process can get you there. Here’s what you need to know. 

Maximize your Tax-Free Savings Account

The first step is to take full advantage of your TFSA. Most Canadians leave some TFSA contribution room unused every year. Meanwhile, the majority of their contributions are deployed in low-interest savings schemes. A low utilization and low-return strategy will drastically reduce your chances of achieving passive income. 

Instead, focus on deploying the full amount ($6,000) or at least close to the full amount ($5,000) each year. That might seem like a tiny amount right now; but by eliminating the tax burden and maximizing returns, you can certainly achieve passive income in 10 years or less. 

Invest in high-growth stocks

The next step is to identify and invest in a high-growth stock. Usually, this may be a tech stock with an aggressive growth strategy. Shopify (TSX:SHOP)(NYSE:SHOP) is probably the best example. Since it was listed in 2015, the stock has delivered an annual growth rate of over 50%. At that pace, your $5,000 annual investment would turn into $517,000 today. 

Very few investors ever achieve a six-figure TFSA, let alone half-a-million dollars. But if you’re savvy enough to spot the next Shopify, you can certainly get there in a few years. My bets on the next Shopify are under-the-radar tech stocks like WELL Health Technologies and Drone Delivery Canada

Passive-income stock

Once you’ve accumulated enough capital in your TFSA, the final step is to switch to an income stock. A robust, low-risk dividend stock will help you generate passive income. The fact that these dividends are tax-free makes the passive-income stream more potent. 

A good example of a robust dividend stock is RioCan REIT. Real estate, of course, is probably the most resilient segment of the economy. Even during this crisis, house prices have barely budged. The insatiable demand for housing is the key reason why RioCan has never cut its dividends in the past 20 years. 

At the moment, the stock offers an 8% dividend yield. Investing your $517,000 TFSA in this stock could deliver $41,360 in annual passive income. That’s about $3,450 in monthly tax-free, work-free cash flow! Enough to cover basic expenses (rent, food, etc.) in any part of the country. 

Bottom line

There’s never a bad time to start investing. Even if you’re just 10 years away from retirement and have no savings, you can start this three-step process to achieve phenomenal results. 

Admittedly, the second step is the toughest one. But even if your performance falls short of the example mentioned above, you could add thousands of dollars in monthly, tax-free passive income by 2030. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani owns shares of WELL and Drone Delivery Canada. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

More on Dividend Stocks

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

Hourglass and stock price chart
Dividend Stocks

Goeasy Stock: Is It Heading for a 52-Week High?

Goeasy stock has been edging higher, especially after another record-setting earnings report. So are 52-week highs in sight?

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Here’s the Average TFSA Balance at Age 44 in Canada

You can invest your TFSA in funds like the BMO Canadian High Yield Dividend ETF (TSX:ZDV) to grow the balance.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

The Best Telecom Stock to Buy Before 2025

Choosing the safest stock from a decimated sector can be tricky, but if there is a reasonable chance of full…

Read more »