Becoming an income investor changed my life. I used to believe that working hard at my job would eventually set me free.
Sadly, this was not the case. My day job pays me a lot of money; however, learning to invest for income relieved me of my stress.
Today, I want to give you a synopsis of my life as an income investor—to inform you of this beautiful lifestyle better. With that, let’s jump right into my story.
Living Overseas on Passive Income
What is income investing? Investing for income is the art of buying high-yield securities on the stock market to generate immediate revenue.
Income investing differs from growth stocks, dividend growth, and passive income investing.
These other methods all seek to grow via capital gains and dividend increases. Eventually, you will create an income stream sometime in the future.
When I invest for income, I want my income today. Instead of getting 8% growth, I get an 8% dividend yield.
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What are high-yield income products? There are many types of high-yield income products to buy. Luckily, I covered them in my Dirt to Dividends series. I’ll link to those below so we can focus on my daily life.
- From Dirt to Dividends 1: Gardening & Preferred Shares
- From Dirt to Dividends 2: Livestock & Closed-End Funds
- From Dirt to Dividends 3: Insects & Business Development Companies
- From Dirt to Dividends 4: Community Farming & Mortgage REITs
- From Dirt to Dividends 5: Composting & Dividend ETFs
- From Dirt to Dividends 6: Vermiculture & High-Yield Blue-Chip Companies
My daily life as an income investor. My life consists of this cycle: researching products, investing in dividends, reinvesting dividends, and enjoying dividends.
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Researching products. I read about income investing, the overall stock market, and dividend stocks daily.
Most high-yield products are sensitive to interest rates, so I follow the bond markets, Treasuries, mortgage rates, housing, and commodities.
Basically, I read the headlines on Seeking Alpha and read 2-3 articles a day. I also enjoy reading the comments to get differing opinions.
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I only read the news to find hidden gems or mispriced securities. I am not a trader; I am a long-term, buy-and-hold investor. I rarely sell any of my stocks, ETFs, or bonds.
News articles are excellent, but you also want to invest some time into reading books. You must form your investing thesis, or you’ll lose confidence in the markets over time.
Investing in dividends. The second step of income investing is investing your money. You can get your money from various places such as your job, renting rooms, rental income, bond interest, royalties, or a business.
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Most of us will invest for income with the money from our job. To build cash flow to invest, you will need to live below your means and budget religiously.
I know that budget is a bad word in our society, but it’s a must if you want excellent outcomes. I invest $2,000 to $3,000/month across index funds, DGI stocks, and income.
Of that, roughly $1,000/month goes directly into my income investing portfolio. As I invest for income today, I also want to build a nest egg for tomorrow—it is a balancing act.
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The more money you invest, the faster your income will grow. Once you see your income stream growing, adding more cash flow will become quite addicting.
Reinvesting dividends. Another way to increase the speed of your income is to reinvest your dividends. Some people reinvest all dividends back into their portfolios.
I firmly believe that using a portion of your dividends to improve your life is necessary—what you reward, you repeat.
I reinvest about 70% of my dividends. I use the cash flow from my Dividend Debit Card to enjoy my life.
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How much you reinvest is up to you. The point of building dividend income is to assist with day-to-day life NOW.
The long-term goal is to live on cash flow from your income portfolio. Even when you retire entirely, you will want to reinvest 25-30% of your dividends.
This allows your income to grow year-over-year, so you beat inflation. For example, if you earn $5,000/month in dividends, you will want to reinvest $1,000/month.
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Enjoying dividends. Now for the fun part—enjoying dividends. You don’t have to spend too much time on the other steps.
You can just buy a few closed-end funds (PDI, PDO, PTY), a preferred ETF (PFFA), a municipal bond CEF (NVG), and a CLO fund (ECC), and be good.
I choose to go deeper with high-yield blue-chip stocks (MO), individual preferred shares (GLOP.C), business development companies (ARCC, ORCC), and mortgage REITs (AGNC, NLY).
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I enjoy following yields and interest rates, so I love the research portion of the process. Your mileage may vary. With closed-end funds, you can dollar-cost average every month and just collect your dividends.
Using my Dividend Debit Card changed my life. Waking up to find $50-$100 is an incredible feeling. I also know that if I keep on the path, these dividends will eventually become $500-$1000 each.
Conclusion. You will start with a tiny income stream, but don’t let that discourage you. Anything worth doing is worth doing right.
Here is a snapshot from my M1 Finance income portfolio. In November 2021, I received $25 in dividends. In November 2022, it was $88.
Write Product Reviews for Passive Income
One day, I hope this income stream reaches $500/month. This way, it can keep reinvesting into itself, creating a lucrative feedback loop.
As an income investor, life is great. I invest in great products that give me income today. I can involve myself in the markets, but some days I have more time than others.
I let my dividends collect inside my Dividend Debit Card and use them for fun things like going to restaurants and buying new Pokemon games.
Life as an income investor is fantastic, but you will have to do the work to get here. If you want to earn $1,100/month in dividends, prepare for the journey of a lifetime. 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. All Right Reserved Military Family Investing
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