Financial Independence: build passive income with stocks and bonds
- Vimal Fernandez
- Apr 12
- 2 min read
Updated: Apr 19
As my stocks tell my bonds, ‘Let’s diversif—hiiiiiii!’
Hopefully, that joke landed. Ok, let’s talk about the dream: truly passive income that fuels your lifestyle so you can eliminate that job.
Passive income is the holy grail of Financial Independence (FI), the biggest of ‘why’s’. It’s cash flow with minimal effort, letting you focus on what matters—family, hobbies, or maybe just an afternoon nap. Imagine, while you’re out enjoying your life, you’re generating enough money to cover your bills, rent, vacations, Yeezy's etc. Now, that’s living!
There are many ways to build passive income. Some folks dive into real estate, flipping houses or renting properties. Others invest in private companies, hoping for a big payout. Me? I’m a stocks-and-bonds guy—it’s what worked for us, it’s accessible for most families, and markets are very liquid. A well-crafted portfolio of stocks and bonds can churn out steady gains, dividends, and interest, funding your lifestyle without you doing much. It ain’t sexy and it takes time, but it’s practical, and that’s what we’re about.
A simple example of passive income
Say you want $100,000/year in passive income to cover your family’s needs—mortgage, vacations, meats, etc. Here’s a pretty basic portfolio to illustrate how it could work (not a recommendation, I’m not a financial advisor, just an example):
Stock ETFs (~60%):
$1.6M in the Vanguard High Dividend Yield ETF (VYM).
Yields ~3%.
That’s $48,000/year in dividends.
Bond ETFs (~40%):
$1.2M in the Vanguard Total Bond Market ETF (BND).
Yields ~4.5%.
That’s $54,000/year in interest.
Total portfolio:
$2.8M.
Generates ~$102k/year in dividends and interest, passively.
Fun fact: if a family of 4 had no other income, they would pay ZERO federal income tax on this.
Big fat caveat
This is a rough sketch, not a recommendation. Markets aren’t predictable. Your $2.8 million could drop in a tough year, and dividends or interest might shrink. Stocks fall, bond prices rise—there’s risk. That’s why the FIRE community uses concepts like the 4% rule, mixing dividends, interest, and careful withdrawals to make your money last 50+ years. A financial advisor (not me!) or other experts can help sharpen this, but I’ll also show you how we do it in the 'how we rebel' series. For now, I just wanted to show what's possible.
Picture this: passive income from your stock/bond portfolio paying the bills while you’re on the beach, watching your kids snorkel chasing sea turtles. You can get here too, start your journey by finding your ‘why’.
This post is part of our 'finding our why' series, sharing real-world stories of why families choose financial independence and early retirement with kids.
AI epilogue
You can explore further with Grok, going beyond the simple example above.
Prompt: “How much money do I need in a 80/20 S&P 500 and Bond portfolio to give me $100k/year in passive income? Select low cost ETFs and leverage the 4% rule."
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