Financial markets are in turmoil, gas prices are through the roof, and we are preparing for a recession—how do we survive? First, calm down; it’ll be okay.
Next, we must devise a plan to set ourselves up for financial success. We know that our jobs will not increase our salaries to match inflation. So, what other options do we have in our toolbox to add more income to our household?
With a bit of research and a lot of savings, we can build a lovely passive income stream from dividends. These payments can see us through the other side of a recession or depression.
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The emotional side of investing. I want to explore the emotional side of investing and then narrow it down to dividends.
Most people want to become financially secure, which means having enough savings to handle all situations. Financial security can also mean being debt-free from student loans, automobile, and credit card debt.
Other people (far fewer) want to become financially independent, which means their passive income can pay for their expenses and even their entire lifestyles.
Whichever path you decide to take, dividends can give you the emotional support to travel the road less taken. Taking control of your finances is a tremendous emotional hurdle most people will never achieve.
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Money and control. We don’t understand how much stress being broke puts on our lives. When my wife and I became debt-free about 18 months ago, the freedom we felt was life-changing.
Now, all our paychecks go towards our future, not our past. I look forward to reviewing our banking and brokerage accounts because there are never surprises. If there is a surprise, it’s a good one.
Most people won’t become debt-free because they don’t know anyone who is debt-free. Or the debt-free people they interact with are dull or tight with money. We do a poor job of talking about money and learning from each other.
Dividends & emotions. Investing for dividends is a step beyond becoming debt-free and completing your emergency fund. This step proves to be the most challenging part for most people.
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The average person fears losing money more than they love making money. This leaves most people with large savings accounts and nothing in the markets.
However, the best way to overcome this fear of investing is to buy into the stock market slowly. I will walk you through a typical scenario.
Start dividend investing 101. The best way to start investing is with an automated system like STASH (affiliate link). You can pick your first five dividend stocks and set the app to invest $5/week from your checking account (or how much you desire).
From there, you wait for your email announcing your dividends. You rarely have to look at your account balance. The magic of dollar-cost averaging will buy more when prices are low. Overall, DCA will allow you to come out ahead.
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Try index funds if you don’t want to pick individual blue-chip stocks. They also pay dividends that you can track directly from your emails. Index funds are a great way to get comfortable with dividend investing slowly.
Now more than ever. Why is dividend investing more critical than ever? Time is our most valuable resource; we can’t waste it. Because of inflation, we are losing our purchasing power faster than our wages can grow.
We are losing the tug-of-war between inflation and wages. We have two options: we can work more hours, or have our money work for us.
That’s right; earning dividends means our money works hard for us. Each dollar we invest is a soldier that goes to war for us. He returns from war with a percentage of new income for us—we call this dividend yield.
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I love high-yield investing, but it is not for everyone. However, everyone needs soldiers to help them throughout life. Trying to fund your lifestyle with one person (you) doing all the work is a futile exercise. I explain passive income in my first children’s book (only ten pages).
Dividends for everything. My wife and I earn almost $1,000/month in dividend income. Most of us reinvest to keep growing our revenue, but we have options.
I get at least $600/month to brokerage accounts before reinvesting. I can use this money for anything I want, guilt-free. Let me give you an example of the magic of dividends.
I receive $180/month directly to my Cash app Dividend Debit Card. The dividend goes to my cash balance. I recently received $40 from Ares Capital (ARCC). I didn’t reinvest it; it is just sitting there.
I bought something at the gas station, gave a gift to someone, and invested $5 into another stock. I still have 25 dollars left. I will receive another $180 this month to add to my cash balance.
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You can do this every month. You’ll have options to decide how to spend your cash flow. Even if you reinvent only 20-40% of your dividends, your portfolio will continue growing monthly.
An emotional boost. It’s hard to have a bad day when you receive a massive dividend in your cash balance. You can return from a soul-draining corporate meeting to find $20 in your account—it’s a pleasant surprise.
Now, you can stop by and purchase some milkshakes for yourself and your family without any guilt. You don’t need a massive dividend portfolio to enjoy the benefits. Trust me: even $10 or $20 is a great help.
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Conclusion. Most websites and investors harp on the fact of compounding interest over time. They tell you to reinvest all dividends for 30+ years.
I get the sentiment but argue against this method. What gets rewarded gets repeated. This means that the more I love spending dividends, the more I will keep investing.
Eventually, I will invest my entire paycheck into dividends and live off of the dividends alone. We call this financial independence. Waiting for 30+ years to have this much fun isn’t realistic.
If you want the best of both worlds, open multiple brokerage accounts. I use STASH as my dividend growth investing account and don’t withdraw money.
I use Cash App as my cash account, receiving dividends I can take directly to the shopping mall. You’ll feel in control of your finances when you have hundreds of dollars flowing through your accounts.
Now is the time to board the dividend train. Your employer won’t help you beat inflation, but dividends will. All it takes is that initial leap of faith. Trust the system!
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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. All Right Reserved Military Family Investing
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