Live Off Dividends

Passive Income and Personal Finance

Where I Expect To Be Financially At Age 30

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While it’s extremely difficult to try to predict where we might be in the future, it’s fun to speculate. We can never know what hardships we may run into in life making it even harder to determine what kind of situation we may be in next year or even next week for that matter.

I’ve made some extremely conservative calculations to try to figure out where I’ll be financially by the time I’m 30. I’m currently 23 for anyone who doesn’t know. I’m making all my calculations based on the fact that I’ll be working the same job, making ZERO dollars in side income per year and that I’ll have two income properties. This is very conservative. I will without a doubt make thousands of dollars in side income per year, but I’m going to assume $0.00 per year so this remains an extremely conservative number. I also have a goal to own 3+ income properties by the time I’m 30. I’m actively working on buying one now, so to say that I’ll have two by the time I’m 30 is definitely conservative, three could be a bit more challenging.

 

Day Job:

I’m assuming that I’ll be working my same job for the next 7 years. Whether that’s true or not who knows! But for the sake of this calculation I’m assuming I will be. We have something called a “step program” at my job where on your anniversary date each year you get a “step” raise. We also get a contract raise every year, usually 2%. So based on the current steps (which I’m locked into so even if they add more steps it wouldn’t affect me) and a 2% raise for the next 7 years I should be making about $60,000 per year from my day job before overtime. We get a consistent amount of over time every year which I’m also not including into this clalculation, making it even more conservative.

 

Dividends:

The average historical yearly dividend increase for the S&P 500  has been about 5%. So I assumed a 5% increase in dividends per year. I also assumed that I will gradually increase my contributions to my dividend portfolio as I get raises at work, which I plan to do. This calculation also assumed that I’ll maintain an average yield of 4%. With these assumptions I should be making about $7,600 per year in dividends by the time I’m 30. I also think this is a conservative number because once again I’ll definitely be making money on the side and a large majority of that money will go into my dividend portfolio.

 

Rental Income:

For this one I’m going to assume I buy the house I’m currently trying to buy (2 unit) and then I buy another 2 unit. I don’t know if one will be paid off by then or both, but for the sake of this calculation it doesn’t really matter. It’s mainly a calculation of income. I’m making this calculation on the premise that I will owner occupy one unit of the five and the rent of the remaining 4 will average $750/month. That’s a pretty safe number for what I would receive today so in 7 years that may be a bit low. But for my conservative calculation it’ll do just fine. So I should be receiving roughly $36,000 per year from my two rental properties (4 units at $750/month).

This obviously doesn’t include the operating expenses of the rentals. But again, this is an income evaluation and not a calculation of expenses.

My Conservative Income Projection:

So after all these assumptions I think I should be making roughly $103,600 per year by the time I’m 30. Granted there are things that break and what not but this isn’t an extremely specific calculation, just a fairly decent rough estimate. And this is all speculation 7 years out, I could be extremely off for all I know. I’m just taking my best guess.

Assuming these calculations are accurate. by the time I’m 30 I should be receiving a conservative $43,600 per year in passive income. To me, that’s awesome. That’s almost 50% of my projected income!

 

A Less Conservative Projection:

Day Job:

I make a few thousand dollars per year from overtime at my job as it is. As my pay rate increases my overtime will increase with it. $5,000 per year is a safe number to assume.

Rental Property:

The goal is to own 3 properties by the time I’m 30 and I don’t think this is unrealistic. If this were the case I would make another $18,000 per year roughly.

Side Income:

I’m certain that I will continue to earn money on the side. I think $5,000 per year is also safe to assume for this category.

Dividends:

With these less conservative calculations I’ll have much more money to invest, thus bringing my dividend income way up. $12,000 per year should be extremely attainable.

Total: $146,400 per year with $66,000 of that being passive income. This is definitely the number that I’m going to shoot for but even if I landed somewhere in the middle I really couldn’t complain.
This calculation also doesn’t take into consideration what my debt will look like at this point. I may have a large mortgage on the rental properties to pay off. If this is the case then all of the passive income from my rental properties would be going straight towards the mortgage. And I know for a fact all my dividends will still be reinvested at this point so I won’t be collecting it as income. Either way, it’s an interesting thing to think about and try to calculate. This reassures me that by age 35 I should be extremely close, if not already there, to achieving financial independence!

 

I would love to hear some feedback from you guys! Has anyone else ever tried to figure out where they might be 5-10 years, or even longer, down the road? Is there anything else that I should include in this calculation that I may have forgotten?

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Dividend Portfolio Update: February 2017

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Well, I’m happy to say that I finally closed on my house! My girlfriend and I are all moved in and my tenant upstairs signed the new lease (month to month) so she will be staying for the foreseeable future. I did raise the rent from $550 to $650 per month and received my first check March 1st. I’m happy to say that I have a new stream of passive income! I’m going to start including a little bit about the rental property in this post from here on out as well. We’re going on a Caribbean cruise from March 3rd-12th so I’m pretty excited about that too!

Dividend Increases: 5 Increases

Coca-Cola increased their dividend from $0.35 to $0.37. This was a 5.71% increase.  This increase will earn me an extra $1.92 annually.

Home Depot increased their dividend from $0.69 to $0.89. This was a 28.98% increase. This increase will earn me an extra $8.80 annually.

General Parts Co. increased their dividend from $0.658 to $0.675. This was a 2.58% increase. This increase will earn me an extra $0.75 annually.

Waste Management increased their dividend from $0.41 to $0.425. This was a 3.65% increase. This increase will earn me and extra $0.42 annually.

3M Company increased their dividend from $1.11 to $1.175. This was a 5.85% increase. This increase will earn me an extra $0.065 annually.

 Combined, these five increases will earn me an extra $11.955 annually or $0.996 monthly with nothing more invested.

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These are all the companies that paid me dividends in January amounting to $101.02. Not bad for the second month of the quarter!

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My dividends year over year in February increased from $57.82 to $101.02. This was a 74.71% increase year over year!

 

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Now that I’ve closed on my house I finally felt comfortable making some changes to my dividend portfolio. Last month I sold all my shares of HRL and WFC. I replaced these two companies with LOW and ADM. I’m extremely happy with this switch and I’m happy with the prices that I paid. My annual dividend increased from $1,272.624 to $1,290.198 this month ($106.05/monthly to $107.5165/monthly). I have a list of stocks that I will be removing from my portfolio and replacing with new stocks.

The premise of this portfolio change is basically lower payout ratios as well as much larger dividend growth. Of course, sacrificing initial yield in the process. Which is fine with me, I’m in it for the long haul. Dividend growth is much more important to me than current yield.

I’m still extremely far behind on my portfolio contributions. I’m now behind on 8 contributions totaling $3,520. I’m not going to let this number go away and I still fully intend to make this up. Trying to find value in this market is getting more and more difficult so I may wait for a pull back and seize the opportunity with some large purchases. At this point, any month that I earn over $100 in dividends is great with me.

Rental Property: $550

I received my first rent check of $550 (it will be $650 next month) and I haven’t had to invest any money into the rental apartment at all yet. So far so good. The apartment that my girlfriend and I are living in is a different story though. I did a ton of work to this place and spent a bunch of money. I’m going to write a separate post about the entire process from writing an offer to closing to moving in and all the expenses in between.

 

How did your portfolio perform in February? Are you buying or hoarding cash at this point?

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Dividend Portfolio Update: January 2017

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The first month of a quarter is usually pretty light for dividends and this month was no exception. My financial situation is still far from normal. I’m still out of work for roughly another 6 weeks so my income is much lower than I’m used to. I was also supposed to close on my house in January but I still haven’t. Everything got slowed down initially from me being on disability, luckily I have an accident insurance policy and that coupled with my disability income is enough to afford the mortgage. So now I’m just waiting on the seller to get all the title work to their attorney so we can schedule the closing, which they were supposed to have done last week. It doesn’t look good for this week either. I’m hoping to close next week but I think worst case scenario will be two weeks from now. There’s no rush to close, but it basically has all my finances on hold.

Dividend Increases: 3 Increases

EPR Properties increased their dividend from $0.32 to $0.34. This was a 6.25% increase.  This increase will earn me an extra $7.44 annually.

Realty Income increased their dividend from $0.203 to $0.211. This was a 3.94% increase. This increase will earn me an extra $0.86 annually.

Cincinnati Financial increased their dividend from $0.48 to $0.50. This was a 4.16% increase. This increase will earn me an extra $0.08 annually.

 Combined, these three increases will earn me an extra $8.38 annually or $0.698 monthly with nothing more invested.

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These are all the companies that paid me dividends in January amounting to $35.53.

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Starting the new year I’m going to include a year over year comparison in my dividend updates, like the one above. Last year was the first year I really started investing and I didn’t receive any dividends in January last year. So from $0.00 last January to $35.53 this January is a 3553% increase year over year. This year over year percentage is obviously inflated due to $0.00 last January but seeing a $35.53 increase is encouraging. I hope to see similar gains in the coming months as well.

 

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My portfolio has basically remained unchanged since last month. I’m now 6 contributions behind totaling $2,640. The reason I’m not contributing to my portfolio currently is 1.) I’m still waiting to close on my house and don’t want to spend extra money until I do. and 2.) I’m making much less money while on disability. My plan after I move into my house and get back into a fairly normal routine is to begin making my bi-weekly contributions again and start playing catch up.

After the down payment and the closing costs for my house (I’m putting 20% down) I won’t have a ton left in the bank for my emergency fund. Things will be going rather slowly for me until I’m back at work but I still feel confident that I will be able to make up all my missed contributions. I’m excited to see what February and especially March bring!

How did your portfolio perform in January?

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