We should not depend on the government. That’s not to say that the government is terrible or plans to ruin our lives.
However, the government is not our best source of reliable income; we are. Therefore, it is incumbent upon us to create our own happy cash flow retirement system.
I wrote an article titled “Social Security vs. Dividends” a year ago, but now it’s time to get even more hardcore. If you want to build a substantial recurring paycheck, income investing is the way.
How to Create Passive Income for Beginners
What are your social security benefits? I read today that the social security administration uses your last 35 years of work to calculate your benefits.
That’s right; 35 years of hard labor. I don’t want to be in the workforce that long. Do you? Currently, I have 27 years to my name, and I am trying to finish in six more years.
On my birthday, I always write an article in my “No Freakin’ Way I Am Working Another 25 Years” series because the truth hits me hard every year.
They genuinely want you to spend 40-50 years working towards a paycheck. But there is a better way than working so many years and depending on a semi-funded program.
Passive Income: What Gets Rewarded Gets Repeated
My social security profile says I am on track to reach $3,000/month in benefits if I retire at age 66. However, this is skewed for me making my current salary from age 41 to 66.
The question is if I can create a $3,000/month paycheck before age 66. I can handily beat these numbers through income investing.
What is income investing? Income investing is buying products on the stock market specifically for income. This means you want to find quality securities with a high yield.
Some types of securities we use for income investing are business development companies, closed-end funds, preferred shares, high-yield blue chip stocks, mortgage REITs, and dividend ETFs.
Why I Subscribed to Kindle Unlimited as a Content Creator
Using these products together creates an income stream to cover expenses, vacations, emergency funds, and lifestyle quirks.
Does income investing truly work? In December 2022, my wife and I received a total of $1,700 in dividend income. I am 41, and she is 38. Will we reach $3,000/month in dividends before we hit 66 years old?
Income investing works because of the rule of 72. If you divide 72 by the yield of a security, it tells you how long it takes to get your money back.
For example, my bond closed-end funds typically yield over 10%, which means I’ll receive my initial investment in 7.2 years.
Dividends vs. Capital Gains 2
Once I receive my initial investment amount back, my portfolio is in an infinite return. I have all my cash and still own the asset.
Reinvesting for the win. You ensure you continually grow your paycheck by reinvesting 20-30% of your dividends into your portfolio.
Which paycheck do you think will grow faster, your income portfolio (via reinvesting and dividend raises) or your social security (via cost of living adjustments)?
Getting started with income investing. Can you build your income portfolio today? That’s a good question that only you can answer.
Build Wealth Slowly
From the outside, income investing seems risky. You are dealing with highly leveraged securities that are extremely sensitive to interest rates.
Robert Kiyosaki says, “There are no risky investments, only risky investors.” In this case, you need to research the investment groups I listed above.
I recommend starting with “The Bond Book” because all interest rates derive from the Federal Funds rate. From the FFR, there is a list of safe to riskier bond products.
The simple list is Federal Funds rate, treasuries, mortgages, municipals, corporate bonds, and high-yield corporate bonds (junk bonds).
How to Create Passive Income for Intermediates
Stocks compete against these bond rates as well. If I can get a 4% yield on a 10-year Treasury, why would I risk a 4% yield on a stock like Prizer (PFE)?
There is no easy answer. If you don’t want to concern yourself with Federal Funds, interest, and mortgage rates, you should not delve into income investing.
If you randomly throw your money into income products, only chasing yields, you will see your cash evaporate. One increase in treasury rates can wipe out your bonds—at least in the short term.
However, buying beaten-down bonds and mortgages is when you achieve the highest yields. So you have to understand the big picture to become an income investor.
From $28/mo to $700/mo in Passive Income in 2 Years
There is no easy answer to beating your social security paycheck. You can attempt to save inside a 401K or with index funds.
However, these methods do not produce income. You will need to sell stocks at opportune times, like during a bull market.
And who wants to sell their high-flying stocks during a bull market as we hit all-time highs? There is always some sort of give or take with investing.
Social security plus dividends. Wouldn’t it be nice to have your social security check plus dividends on the side?
Sell Your Creativity for Passive Income
Even creating $1,000/month in dividends is a life-changing event. Can you imagine spending $1,000 a month on frivolous things you want? I can.
I am already living the life of an income investor, and I love it. My wife and I received over $200 yesterday from the business development company Ares Capital (ARCC).
Now we are going on a date night with these funds. I don’t have to wait until retirement age to get passive income in my bank account.
My Experience Running Facebook Ads
Conclusion. If you are interested in income investing, start small. Read articles on Seeking Alpha about business development companies (CSWC), mortgage REITs (NLY), closed-end funds (PDI), high-yield blue-chips (MO), dividend ETFs (SCHD), and preferred shares (PSA.P).
After following for a few months, invest about $100 in a couple of securities. Wait for your dividends to arrive, and then spend them.
See how it feels to have $2 in your hands that you didn’t have to exchange for time. My first dividend was $0.25 from Papa John’s (in Aug 2019). Dividend investing hooked me instantly.
Read These 10 Books BEFORE Buying a House
The majority of workers will need more money throughout retirement. They will live on a tight fixed income, which means their paycheck defines their lives.
I am going a different way—my lifestyle will dictate my paycheck. I will do what I want when I want, and how I want. However, I am working now to achieve this level of income and financial freedom.
What are you doing today (besides working) that will impact your retirement? Waiting for social security is not an answer. Good Luck!
- PDF of the Month: Don’t Gamble with Retirement 9 (Free 394-Page PDF)
- Free PDF Downloads: Download FREE PDF LIST here
- Financial Mindset: Become CEO of Yourself 2 (Free 196-Page PDF)
- Retirement Planning: Your Retirement Planning Guide 2 (Free 255-Page PDF)
- Investing: How We Plan to Retire on Dividends 4 (Free 139-Page PDF)
- Cryptocurrencies: Counting on Crypto 2 (Free 159-Page PDF)
- Real Estate: Financial Independence through Real Estate 4 (Free 112-Page PDF)
- Business: Retire Rich, Retire Comfortable with a Business 4 (Free 149-Page PDF)
- Latest DGWR: Don’t Gamble with Retirement 9 (Free 394-Page PDF)
- Everything!: The Biggest Book on Passive Income Ever 3! (book)(Web Edition)(Art Edition)
- I bought a Kindle Oasis: Check it out on Amazon
- Read My Books for Free: Free Kindle Books Schedule
- Book Design: Design Tips on YouTube
- Kindle Unlimited: Why I Finally Subscribed Kindle Unlimited (learn more)
- Book Reviews: 505 Takeaways from 101 Books (pdf)
- Writing: The Publishing Chronicles (Part 1, Part 2, Part 3, Part 4, Part 5)
- Best REIT- Fundrise: REITs vs. Homeownership (Join Fundrise)
- Follow us: On our Facebook Page and Join our Facebook Group
- Support the Channel on Cash App: $Kingmarine1981
- For more detailed analysis, join my Youtube: MFI YouTube Channel
Monthly Dividend Tracker Template: Buy on Etsy
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
Leave a Reply