I see the world through math; I can understand if something makes sense financially rather quickly. I also invest in generating income.
The more income that comes into my accounts, the easier my life becomes. Revenue minus expenses creates cash flow.
Cash flow is the lifeblood of any business and every household. To consistently overcome inflation, emergencies, and life events, you will need to keep increasing your income.
Dividends vs. Military Retirement
Welcome to income investing. Luckily, we can grow our income via dividends faster than our paychecks from work.
Income investing is the practice of investing in high-yield securities to create cash flow. Income investing differs from dividend growth investing because you want your income now, not tomorrow.
The magic of income investing is that you can see your income now. For example, you can invest $1,000 in PDI and know you will receive $10/month.
The goal of income investing is to build a steady paycheck that can supplement your lifestyle. Eventually, you can live your entire life on dividends.
Five Takeaways from “The Psychology of Money”
The six types of income investing. I divide income investing into six different types. Each type has its own quirks and nuances, so you must keep learning and growing.
1) Closed-End Funds. Closed-End Funds (CEFs) are my favorite income investing product because they usually pay monthly. This allowed you to build a monthly paycheck as your base of operations.
2) Preferred Shares. You can find fantastic deals when searching for preferred shares. However, preferred shares can be challenging to find randomly.
3) Business Development Companies. Business Development Companies invest in small businesses across America. They can also take equity positions in companies, which is how they differ from banks. They pay high yields and can receive some growth as well.
4) Mortgage REITs. Mortgage REITs profit from the difference between Mortgage-Backed Securities and Treasury Bonds. They can be extremely fickle and unpredictable. Most people should refrain from investing in these products (I love them, however!).
5) Dividend ETFs. Dividends ETFs do most of the heavy lifting for you by placing hundreds of dividend-paying stocks under one roof. They don’t yield as much as the other income products but can grow over time.
6) High-Yield Blue-Chip Stocks. If you love dividend growth investing, you will adore high-yield blue-chip stocks like Altria (MO) and AT&T (T). They pay most of their profits through dividends, but you can also receive a tiny bit of growth.
Passive Income from Creativity 106: Writing
Putting it all together. The best place to start with income investing is to decide how much income you need.
Envision your dream life and work backward from there. You may not need much income if you see yourself sitting around the house.
However, if you want to be a jet-setting, high-flying retiree, you’ll need tons of income pouring into your accounts.
Let’s say you want to retire with $10,000 a month of passive income. You can then determine how to distribute this income across various sources (pension, 401K, social security, renting rooms).
Do Fitness & Finance Correlate?
You can then inject the income-investing portfolio into your plan. Your income-investing portfolio may be the largest portion of your income.
Making tons of income. Let’s say you want to generate $5,000/month from your income investing portfolio. You’ll need to invest more aggressively than most people.
I always recommend starting with closed-end funds as your base paycheck. They offer steady, reliable income to your accounts every month.
Plus, they can occasionally pay special dividends, which gives you a boost. If you reinvest 25-30% of your income, your portfolio will always keep growing.
After CEFs, you can layer on any other six income product types. Dividend ETFs are the safest of the bunch, while Mortgage REITs offer the most risk.
Your First House: Investment Property or Dream Home?
Changing course. The best part of income investing is that the income is yours. With DGI, you may feel the pressure to keep reinvesting dividends.
Income investing is similar to receiving a paycheck. Once you receive your dividends, you can use them to pay for emergencies, boost your emergency fund, reinvest into more income, or spend on daily life events.
There is no better feeling than knowing you have more income on the way. I earn $1,500/month in dividends and feel like I own the world.
You need to place your dividends into your lifestyle to get the most out of income investing. Once you see how powerful spending dividends can be, you’ll want to keep growing your portfolio.
The Metaverse 104: Education in the Metaverse
Life as an income investor. Let’s say I am planning a $4,000 vacation that will start in six months.
I can simply take $670 per month from my dividend income—no need to change my spending or cut back on my lifestyle.
My dividends do all the work for me. Life as an income investor is impressive if you genuinely incorporate them into your daily thought process.
I grew up without much money and grinded through the workforce for 24 years. I have never felt better than using my dividends as a source of fun and enjoyment.
Living Overseas Passively 108: Automated Business
Conclusion. Becoming an income investor is akin to starting a business. You live on your business’s profits, such as the dividends from your income-investing portfolio.
However, you’ll need to learn the ways of income investing. There is a steep learning curve that includes interest rates, mortgages, bonds, and commodities.
The habit of income investing will change your life entirely. You won’t worry about small details and trivial matters.
Single Ladies: What Are Your Retirement Plans?
You will simply have the money you need when you need it—no need to wait until the first or fifteenth for a paycheck.
If you struggle to get ahead, income investing is calling your name. I have been there before—living my version of Struggle-mania.
Income investing gave me the tools to get ahead and stay ahead of the financial curve of life. It can do the same for you if you jump in head first. 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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