Living Overseas on Passive Income #1: Dividends

I never heard of passive income until I visited Turkey in June 2019. While I was there, I got the idea to retire overseas. However, how would I earn income?

There is no reasonable way for an American to work in Turkey and earn a living. Therefore, I would need to bring my own income.

I knew I would eventually retire from the military and have a pension, but that would not be enough to travel back and forth between Turkey and America.

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To solve this problem, I needed to learn how to generate income without working. Frankly, I had no clue how to do this.

What is passive income? I began researching how to make money without working, and the term “passive income” continued to pop up.

I first read about earning passive income through high-yield savings accounts. At the time, the prevailing interest rates were about 2%. Doing the math, I would need $1.2 million to generate $2,000/month in interest income—not an easy feat.

The next way to create passive income was through dividend-paying stocks. Once I read about this income-producing method, I was hooked. I have been a hardcore dividend investor for the last six years, which has changed my life dramatically.

Today, I earn over $3,000/month in dividends (or $36,000/year), which is enough for a comfortable lifestyle in Didim, Turkey. 

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However, if you combine dividend investing with passive income streams like real estate investing, royalties, business, and a military pension, you get a complete package of financial security.

I will discuss all of these other types of passive income in the coming articles, but today I want to focus on the big dog: dividend investing.

Why are dividends the best? Dividends are the best form of passive income simply because they are the most passive form of income. Real estate offers better tax incentives, but also requires more management time.

I prefer dividends because they are highly liquid, so I can change my investments at any time. This means I can wake up, sell underperforming assets, and reinvest more to my liking.

Dividend investing is also much easier in today’s age. You can simply download one of many apps and start investing in less than 10 minutes. There really isn’t a reason why everyone in America isn’t investing for dividends.

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Living overseas with dividends. But let’s put everything in context. Why do we want to use dividends to retire abroad? The short answer is that our income will continue to grow and outpace inflation.

There are three ways to grow your dividend income continually: adding new capital, reinvesting a portion of your income, and when your stocks increase their annual payments.

Living overseas will not be as magical as people envision, but you can live comfortably if you pick the right location. An increasing income stream will prevent you from stressing about currency fluctuations and exchange rates.

Let’s set the stage. First, you’ll need to determine how much income you’ll need to live in a particular overseas location. Let’s say you need $2,000/month to have a great life in Bangkok, Thailand.

You would want to make at least twice the dividends before you get on the plane. That’s right; you want to generate at least $4,000/month in dividends before moving. Why is there a difference in income?

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Not only do you want to reinvest at least 25%, but you will also want to set 25% aside in an emergency fund. Just because you are in a foreign country doesn’t mean you won’t have emergencies. 

In fact, an emergency in America can cost much more if you need to travel back home. Therefore, you should always think ahead and prepare yourself financially.

You can achieve your $4,000/month quota much faster as an income investor than a dividend growth investor. Income investors seek higher yields by giving up growth.

I prefer income investing because I purchase securities based on their current yield, which we call this fixed income. I am not buying stocks based on future growth potential; I want my income today!

Preparing for living overseas on dividends. Lots of calculations go into moving overseas and living on dividends. Some things to consider are:

1. Will you purchase a home or rent?
2. How will you travel around? Do you need a car, or can you walk or take a taxi?
3. What will you eat?
4. Will you need any help with translations, cleaning, or cooking?
5. Can you make a little side money in town?

As you can see, money can solve all these problems—that’s why you need it. You want to have so much money that these problems disappear into thin air.

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Dividend Investing can get you there. Along with your $4,000/month stipend, you’ll probably want to have $20,000 to $50,000 in your savings account.

During my military career, I lived overseas for eleven years and observed many random things that can happen outside of America.

You will want to prepare yourself for the unexpected. The more money you reinvest into your portfolio, the larger income stream you will create.

Personally, if I need $2,000/month to live comfortably in Thailand, I want to bring in at least $10,000/month. I do not like living close to the edge.

The good part is that you can move overseas on $4,000 and slowly continue to grow your income stream by living below your means and reinvesting.

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The magic of dividend investing. Dividends give you the most options and flexibility. You can conduct all of your dividend business online.

If you want to invest local money, you will need to find a way to transfer it into your American accounts. Therefore, it is wise to have a banking solution before you enter the country.

After six years of dividend investing, I am just now starting to discover how powerful the process is. How magical is having $3,000/month of “portable” income that I can take anywhere?

If you take the time to manage your dividend portfolio well, it will reward you with more income than you can spend. Prepare to spend one hour daily reading about the stock market and your investments.

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Conclusion. The toughest part of dividend investing is getting your money into your brokerage account. Most of us will need to exchange time for money to build our initial nest egg.

However, once you get past $100,000, things will take a life of their own. You should consider dividend stocks that will help you “safely” reach your goals quicker.

Dividend investing differs from retiring on a 401(k), where you sell shares to generate income. Dividend investing actually allows you to have MORE shares at the end of each year.

Now think about moving overseas. Do you want to have more or less shares at the end of the year? That’s the magic of dividend investing.

You can move overseas faster if you require less money. For example, moving to Japan will cost much more than moving to Thailand.

As you do your calculations, consider safety and living conditions. It is possible to have the life of your dreams for a lower price; you will just have to do the work. Good Luck!

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