Are you tired of living paycheck to paycheck or being broke? Do you crave to take your family out to nice restaurants and sports events on the weekends?
There are three ways to climb out of the rat race: getting promoted, living on a budget, OR taking control of your passive income. The first two ways are more complicated than they seem.
I tried the “getting promoted” method for 20 years, but my finances always came up short. Looking back, I remember being excited to get a $400/month raise.
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However, once I took control of my passive income streams, specifically dividends, my lifestyle and happiness changed dramatically.
From dividend investor to income investor. I started dividend investing in 2019 and quickly wanted more income. I began to study higher-yielding income products that most people avoid.
In short, I became an income investor. There is a massive distinction between income and dividend growth investors. You can read about the difference in the article “Are You a Dividend Growth Investor or Income Investor.”
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Today, I want to focus on why you should become an income investor. It’s a hardcore path with a satisfying pay-off, but is it right for you?
- Get your income today
- Leverage the rule of 72
- Your income grows faster than inflation
- Understand interest rates
- Use your income today
- Control your tax situation
- Live your dream life
Get your income today. The best part of income investing is receiving your payments today. You can invest $1000 into AGNC (AGNC) and receive a monthly payment of $13.
Imagine having $13 monthly to go to the gas station and purchase a hot dog and energy drink. That’s the power of income investing.
That $13 will turn into $86/month with enough investments. Now, you can purchase a round of pizza for your family. How could extra income change your life?
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Leverage the rule of 72. The rule of 72 states that if you divide 72 by the dividend yield, that’s how long it takes to return your original investment.
Therefore, if you invest $1,000 into AGNC at a dividend yield of 16% (72/16), it’ll take 4.5 years to receive $1,000 in dividends.
Most investors focus on capital gains that can vanish in a heartbeat. Income investors focus on getting back their initial investment and moving on to another one.
However, they still keep the original shares of AGNC. Income investors are multiplying the amount of investments they own over time.
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Your income grows faster than inflation. It’s easy to find income investments that pay over 10% in yearly dividends.
Inflation is currently around 3%, which gives you over 7% of additional resources to help you throughout life.
You can also reinvest 25% of your dividends to grow your income further. Instead of asking for a raise at work, you can reinvest 50% of your dividends to supercharge your income streams.
Understand interest rates. Most people do not understand how interest rates work, although they make the world go round.
As an income investor, you’ll become an expert on how interest rates affect treasury bonds, mortgage rates, preferred shares, and dividend stocks.
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All investors seek a return on their investments, and interest rates are central to most investment discussions. Therefore, you’ll be at the heart of the conversation.
Use your income today. Not only do you receive your income today, you can use it today as well.
With index funds and dividend growth investing, the thesis is to invest today so you can enjoy tomorrow. Income investors want their income today so they can solve today’s problems.
Why wait 30 years to build an income stream when they can start earning and spending today? The more paychecks we create, the more ways we can solve our problems and make our family more comfortable.
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By reinvesting 25% of our income, we still ensure we leverage the power of compounding in our favor. Income investing is a mindset that values income today over tomorrow.
Control your tax situation. The government taxes many income products at the ordinary tax rate (called non-qualified dividends).
However, if taxes concern you, you can invest in high-yield opportunities to lower your tax bills. There are high-yield dividend-paying stocks like AT&T (T) and Verizon (VZ) that pay qualified dividends.
Also, you can purchase municipal bond funds that avoid federal taxes. If you live in a state that doesn’t have state tax (like Florida), you might not pay any taxes on your municipal bond funds.
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You can also find dividend ETFs like Schwab High Dividend Fund (SCHD) that pay qualified dividends. In short, you’re in the driver’s seat regarding taxes.
Live your dream life. The number one reason to become an income investor is to live your dream life—the things you want to do all require income.
You can grind away in the workforce for 10, 20, or 30 years and never have an extra $1,000 to spend frivolously. Or, you can build an income-investing portfolio that pays you $1,000/month.
My wife and I earn $1,500/month in dividends. We can use this money for anything that we want in the world. If we desire pizza, snacks, shoes, or video games, our dividends have our back.
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Stop dreaming of taking your family somewhere special on the weekends; make it happen by becoming an income investor.
Conclusion. From the outside looking in, income investing may seem risky. You feel that way because you don’t understand how these products operate.
The best way to dive into income investing is to open a Cash App account. They will send you a Dividend Debit Card.
Invest some money into AGNC (AGNC) and Realty Income (O), both of which pay monthly dividends. Allow yourself to enjoy the income from these products each month, even if it is only $2-5.
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Over time, you’ll desire to make more “free” money via dividends. This will spark your curiosity in passive income, and the rest is history.
Last month (November 2023), I earned $400 on the Dividend Debit Card. It’s so much money that I cannot even spend it all in one month.
My dream is to keep building my income stream and take my family around the world on dividends from income investing. In fact, I am writing this article from the center of Istanbul, Turkey.
If you want to change your life, you must change your life. You can’t do the same things and expect different results.
Becoming an income investor is something no one around you is doing. If you want to stand out in the crowd, income investing is the way to go. 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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