Sometimes we need to go back to the basics. It is good to review our topics from the ground up with a fresh set of eyes. Personally, I have been getting so deep into dividends that I forget where I came from.
Indeed, I just bought my first set of baby bonds last night, and I was pretty proud of myself. I was going to write about that, but I realized 99% of the world doesn’t know what baby bonds are. Which kind of led me down a rabbit hole of how to catch people up to where I am.
So I want to go back to the early days when I started investing. I did not know s***. I didn’t even know what the words passive income meant. I learned all about these topics in June 2019, when I was sitting in my room in Didim, Turkey, with my wife and our family.
Municipal Bonds: Tax-Free Goodness
Before you even start dividend investing, you need to have a purpose. Even bigger than your purpose is your “why.” There is nothing more important than finding your “why” before pursuing passive income!
Why is finding your “why” so vital to your passive income and dividend journey? Because building an income stream takes time and dedication. There is no easy way to create money coming in from the sky. You have to have a deep knowledge of systems and methods for the money to keep coming in continually, and more importantly, keep growing.
Let’s say you received a tax-free lump sum of $1 million. What would you do with it? How would you make it last for the rest of your life and your children’s lives? If you don’t learn the ways of passive income, this money will disappear very quickly.
If you think that you will turn it over to a trustworthy money manager, think again. But you don’t want that because you want to get involved—that is why you are reading this article.
For me, if I received this money, I know exactly what I would do. I would build a nice triplex that I would ultimately pay off. My family would be able to live for free in one of the units. We would rent the other units out for fair market value. This would cost $300,000 in a small city. Now we never have to worry about money for the rest of our lives. The $2,000 in rent, plus living for free, would sustain us forever.
Dividends vs. Royalties part I
Then I would spend $100,000 on building a fleet of cars that I could use to start a rental car business. If I bought four cars, this would produce another $2,000/month, passively.
I would then invest $400,00 into dividend and crypto (3%) portfolios aiming for a 4% dividend yield plus a 4% growth rate. This would net me $1,300/month.
I would have $200,000 to put into bonds and wait for other opportunities to arise. Things like private money lending or starting an 18 wheeler business. When you have the knowledge and funding, opportunities will always come your way. Always.
So from this $1 million, I have a paid-off house, $5,300/month passive income, and a $200,000 stockpile of cash, waiting for more investments to arise. Not bad at all.
My Foray in FOREX
But I didn’t just come up with these techniques and methods or the confidence that comes with them. I learned these things in the trenches. Yes, I had to read, read, and read some more. Then I had to do stuff, like buy dividends, properties, and cryptocurrencies. I had to start a blog and publish my Kindle books. It takes action. The formula for luck is education + opportunity + action.
I can literally go on for days. In fact, if you ever want to read my articles in a straight line, that is the Financial Independence Magazine series. Every day I write, edit, create artwork, and publish an article. Every ten articles I put together into FIM magazine. If you read all of these in order, you would be able to invest your $1 million even better than I could. This is my lifelong project and my “why.”
Now, back to your “why.” Do not start dividend investing until you have your “why.” No, not your goal. Your “why”— your profound reason what you want to achieve, or an endstate, that you envision reaching.
Boring Investing is Good Investing
My “why” is to be on the beach, with my wife, kids, and grandkids and not have a worry in the world. I want to be rich, in love, and surrounded by family. It’s a pretty simple “why.”
Okay, I know you came here for dividend investing, but finding your “why” is even more critical. Dividend investing is extremely slow at first. You will be receiving pennies every month. I started investing in dividends in June 2019, and my first dividend payment was in August 2019 for $0.23 from Papa John’s. That was for the entire month.
So this month, I am looking at receiving $300/month from my portfolio only. My wife is sitting close to $120, I believe. When I receive a $22 dividend from Prudential (as I did this month), it is a thing to celebrate.
I have been working on building the knowledge and skillset to receive that considerable dividend. And now we can enjoy it by buying ice cream for the kids. That is my “why.” I can spend this money guilt-free because I know it is coming in every month and will continue to grow. It is a fantastic feeling and the reason why I keep writing about it.
You can review my Wells Fargo account above. I started it on June 18, 2019, with $250. Now it is sitting at $31,600. Today is June 25, 2020. So precisely two years. We have $180,000 in total in dividend accounts. We are very proud of where we are right now, but we had to start somewhere.
Do I Need a lot of Money to Start Investing?
Look at the annual income that my Wells Fargo account is giving us. Almost $1,500/year. That is roughly $125/month of passive income that we can spend as we choose. The dividend yield is approximately 5.2%, which is pretty high.
I am going to teach you all these things throughout this series. I want to take it super slow. I already have a ton of series on dividends, and there is no need to re-write those. This will be a prolonged, lengthy series that I want my children to read to start their dividend journey.
Let’s review what series I already have available. These will be for the people who already have decided to become dividend investors and are looking for faster-paced articles.
First, we have Stock Market Investing 101 Series, where we cover the overall stock market and some techniques you can use to get invested.
Next, we have Investing for Dividends Series 101 (book), which is purely focusing on starting and recording your dividend journey.
Compounding: 8th Wonder of the World
Then, we get into the high-yielding segment of dividends, my Real Estate Investment Trust Series and Preferred Shares 101 Series (book).
Finally, the best place to start is the article “How We Plan to Retire on Dividends (book).” This has a lot of information for your journey.
For this series, I want to go step-by-step into creating your dividend journey. Things like how much you can invest, your investment goal, what is a dividend yield, what companies will best suit your investment style, etc. There is a lot to talk about, and I will give myself a long time to cover it.
In the meantime, please consider your “why.” How do you define being rich? Who do you want to take on your journey? You have a lot to consider. I will see you next time, and I look forward to spending a lot of time in the How To Start Dividend Investing 101 Series. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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