How to use stock dividends to buy your freedom
Making money in your sleep is more achievable than you think.
When I was back in college, I came across an interesting article about how individuals use the stock market to make money every month and retire early. Now, at that time I didn’t really understand how the stock market worked but after learning about it, my view on money changed forever.
The key here is to buy more investments that will generate more income for you. Most people decided to spend their income from their jobs on nice cars, an expensive vacation, and bigger homes. There’s nothing wrong with that except if you’d like to be working for the rest of your life, you might want to double think your spending habits.
I’m not going to tell you to live below your means or to save more from your paycheck, that’s up to you to decide. What I am going to share with you is how you can use some of your income to work for you a little harder than just having it sit in your savings account.
If you search on YouTube, there are several people living off of their dividends every month. I became obsessed over this idea when I saw regular people collect their stock dividend checks every month. It really just boils down to generating enough money to cover your daily living expenses. For example, if you invested enough capital in the stock market and you were collecting $1500 in dividends every month, depending on where you live but in my city, that’s enough to cover your mortgage and live for free!
I’m going to mention the fact that this is not the only way to achieve this type of financial lifestyle but it is one that you can start today. You might also consider real estate rental income to be something similar to dividends as well but there’s a huge difference in the two. Before attempting to buy my first rental property, I educated myself heavily in real estate investing and decided it was something I did not want to pursue in this moment in time. Leveraging debt to build wealth is a risky game.
You don’t need a lot of money to start
You might think you need a lot of capital to completely live off of your investments but that’s not entirely true. You can start by investing any remaining income after paying your monthly expenses. Even if that’s only $100, if you do this an entire year that’s $1200. The most important part to this puzzle is being consistent on your portfolio and just starting it. You can spend months thinking about opening up an account when you could have been using those months to already be saving up.
Choosing the right Stocks
The next thing to focus on and probably the most important part to this, is choosing the right stocks and ETFs (Exchange Traded Funds). Not all stocks generate a dividend, and not all of them are created equal. Some companies payout bigger dividends and others can completely eliminate it in a moment’s notice. There is no such thing as an investment without any risk though there are ways you can lower that risk.
Continue Building your Portfolio
Each stock you purchase with a dividend will eventually add up. The key here is to lower your expenses to the point where the dividend payments pay off your monthly bills or you can re-invest them back into your portfolio as well. With this in mind, it will take some time to build it to the point of paying your expenses.
Don’t give up on your strategy and be consistent. Over time, you will be proud of the portfolio you build with dividend payments coming in as an extra source of income.
