Now is the time for young people of America to unite under something that most people do not understand—income investing. Income investing is vital to your ability to retire early, pay bills, and build wealth.
This article will serve as the anthem for all young, aspiring income investors to begin their journey toward financial security and freedom. Let’s begin.
What is income investing, and why is it important? Income investing is the art of investing in the stock market, specifically to receive a high income.
Income for Retirement: High-Yield Dividend Stocks
Income investing is important because investors receive their income today versus a promise of income tomorrow. Investors can put money into the market knowing exactly how much income they receive.
Even better, investors can purchase stocks, bonds, and funds the market has mispriced, generating even larger yields.
Income investors receive their dividends in cash each month and can decide how to use them: keep them in cash, spend them, or reinvest.
Why keep dividends in cash? Cash is king. Nothing makes you feel more financially secure than having a large emergency fund.
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An emergency fund prevents you from using those dreaded credit cards during an emergency or routine operations.
An income-investing portfolio can generate enough income for investors to use the additional cash flow to build up their emergency funds.
It’s also cool to have extra cash in your accounts for a rainy day. You may decide to hold your dividends in cash until the next paycheck arrives.
Is it important to spend your dividends? Many investors tell the youth to reinvest all of their dividends to guarantee the largest returns; I think differently.
Income for Retirement: Business Development Companies
I believe it’s even more important to spend 25-50% of your dividends on things you love doing or even to pay bills.
Why spend dividends? The most challenging part of investing is spending your investments. Some people work for 40-50 years to build their 401K retirement plan.
When they retire, they have a tough time spending down their portfolio and enjoying their lives—they live in investment hell.
When young income investors spend some of their dividends, they are training themselves on how to live on passive income.
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The school system and our parents teach us how to live on a paycheck. When we retire, our paycheck no longer arrives in our checking accounts.
Trusting our passive income streams and income investing portfolio is challenging; however, we’ll eventually trust them—even more than our paychecks.
I learned to use my dividends early in my investing career. As I learned to live on dividends, I invested more of my new capital (from paychecks) into my portfolio to generate more income.
The more money you put in, the more passive income you get out. It’s a lovely cycle, and spending your dividends makes you hungrier to add more capital to the system.
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Reinvest some dividends. Finally, you will want to reinvest at least 25% of your dividends because it helps you outpace inflation.
My wife and I just hit $2,000 per month in dividends. It’s an exciting time, and reinvesting at least 25% will ensure that $2,000 keeps growing ahead of inflation, deflation, disinflation, or stagflation.
We have no idea what the future holds, so we want more income in our pockets. Reinvesting dividends ensures we are never left holding the bag when housing or grocery inflation occurs.
Putting it all together. Let’s look at my favorite dividend payment of the month. I receive $129 monthly from AGNC mortgage REIT (AGNC) on my Cash App brokerage.
Using the three options, I can save $26, reinvest $23, and spend $80. With that $80, I can take my wife to sushi to purchase a new pair of sandals.
Income for Retirement: Dividend ETFs
The best part of being an income investor is choosing to use your money how you want. The best part of being young is you have a lifetime to build your income streams.
Getting started with income investing. You may be wondering how to start building your income-investing portfolio. I am glad you asked.
Understanding wealth is the most essential step to building a prosperous lifestyle. Wealth is having excess income versus expenses.
There are only two ways to build wealth: increasing income and lowering expenses—it’s that simple. Take the definition to heart.
The Dividend Debit Card 3
To build your income investing portfolio, you must create a hardcore budget and a large positive gap between income and expenses. We call this cash flow.
If you earn $5,000 per month, learn how to live on $4,000. You can use this extra $1,000 to invest in your shiny new income-investing portfolio.
The naysayers will say you will never have enough money to save and invest. I say good riddance to all of them.
You can have as much money as you like to invest as long as you change something about your lifestyle. You may need to move in with your parents or get a roommate.
You may need to drive Uber, start a business, become a content creator, or rent your car for additional income. Do whatever it takes to fund your income investing portfolio.
Income for Retirement: Mortgage REITs
Our income investing story. My wife and I were broke parents of two when we saw the writing on the wall—we were never going to escape the debt spiral.
We went from -$77,000 in debt to +$300,000 in an income investing portfolio by getting roommates and budgeting our butts off.
It wasn’t the most fun four years of our lives, but it set the stage for us to retire in our 40s and receive tons of income from our portfolio.
Make Enough Passive Income to Cover Your Mortgage
You must do something different from everyone else if you want different results. Do you want to work forever, or do you want to enjoy passive income while you chill on the beach?
Conclusion. Once you determine a way to begin funding your income investing portfolio, it is only a matter of learning the six types of income products.
Study the stock market daily (I recommend SeekingAlpha.com) to see what products you favor. I personally have a penchant for closed-end funds.
Income for Retirement: Closed-End Funds
You are the youth of America and can create the American dream. The American dream isn’t having a massive house or fancy car.
The American dream is the ability to jump from one class (poor) to another (rich) in one lifetime. Income investing is part of a bigger story of your life.
If you are sick of being broke, behind, and bullied at work, then you must find a way to free yourself. Income investing is that way, but it takes work.
It requires you to become the person of your dreams. I went through this metamorphosis, and my family is all the better for it. 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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