Live Off Dividends

Passive Income and Personal Finance

Month: June 2016 (page 1 of 2)

How I Save Over $1,000 Per Year With An Amazon Fire TV Stick

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The Amazon Fire TV Stick is amazing!

 

I have a pretty tech savvy buddy who always seems to know the latest and greatest thing before anybody else. How, I have no clue but it never seems to fail. He told me about the Fire TV stick sometime last year. He told me I could watch just about any TV show, movie, live TV and sports for FREE without a monthly subscription. I shrugged it off hardly even believing him at the time thinking that it must be too good to be true. He had told me about it again recently and how much he was loving it  and how he recently cancelled his cable and Netflix subscriptions. He simply didn’t need or even use them anymore. It started to sink in…

(Purchase a jailbroken Fire Stick here. Or buy one here and jailbreak it yourself!)

Disclosure: This post contains affiliate links, this means I will receive a small commission if you sign up via one of my links. View my disclosure page for more information.

 

I was sold!


I decided maybe it wasn’t too good to be true. My buddy wouldn’t lie to me about it, he had no reason to. Continue reading

Automatic Millionaire 


I recently read a book called The Automatic Millionaire by David Bach. This book wasn’t written to tell you some secret way to instantly make a million dollars. Instead, a way that you can slowly make yourself a millionaire over time. Bach says this is done by “paying yourself first.”

 

What it means to pay yourself first

“Paying yourself first means just what it says. When you earn a dollar, the first person you pay is you. Most people don’t do this. When most people earn a dollar, the first person they pay is Uncle Sam.” Bach goes on to say that you should take full advantage of pre-tax retirement accounts to pay yourself first. He says a good benchmark to save is between 10-15% of your gross income. Of course the more the better. Most pre-tax retirement accounts have maximum yearly contributions so if you can max your account out that would be ideal. Or you can start building your own Dividend Portfolio. Paying yourself first is really like funding your future. And the sooner you start the less worries you will have in retirement. Let your money start working for you by paying yourself first.

The Latte Factor

“The problem is not how much we earn…. It’s how much we spend!” The latte factor was created when Bach was teaching an investment course. Someone in the class said it would be impossible for them to save five to ten dollars a day. Bach went through her normal work day with her and the class and discovered that she spent roughly $5 per day on a latte and a muffin. And that she also spent roughly $6 per day on her lunch. Bach did some quick math and figured if she put just $5 a day into a retirement account until she was 65 (she was 23 at the time) she would have roughly 1.7 million dollars in her account. She exclaimed, “MY LATTES ARE COSTING ME NEARLY TWO MILLION DOLLARS!” Thus, the latte factor was born. In this case, it was a latte every day but it can be applied to anything. Saving just 5 to 10 dollars a day and investing it can make you a millionaire down the road.

 

What’s automatic about it?

Bach claims that almost everyone that he’s ever advised hasn’t been able to commit to manually investing their money for any extended period of time. There was an exception but he says it was extremely rare. Bach says you need to setup an automatic withdrawal from your paycheck and you will learn to live without the extra money. He also advises to start small and slowly take more out of your paychecks as you get more comfortable. But to make it automatic! So you no longer have to think about it. You set it up one time and then leave it or increase the amount.

 

Overview

I think many of you are already doing the things talked about in this book as I was prior to reading this book. I think it was still a book worth reading. It further enforces concepts crucial to early retirement and wealth. I would recommend this book to anyone who is planning for their financial future and I would highly recommend this book to someone who is new to the early retirement world.

What good books have you read lately?

How Much Do I Need to Live Off Dividends?

How Much Do I Need

A lot of people have this same question. The fact is, it’s different for everybody. What kind of lifestyle do you want to live? How much are you willing to give up to not go to work everyday? What does “retirement” mean to you? Not many people have a lump sum of money to drop in a brokerage account and live off their dividends that way. For most people it’s a long term goal and a process. What’s more important than the “how much” is learning what retirement means to you and what you’re able to live on.

 

Expenses

Before anything else you’re going to need to know exactly how much money you spend every month. If you spend $,1500 every month you’re going to need at least $1,500 per month in dividend income. Most dividends are paid quarterly so obviously average your monthly dividend and budget accordingly. If you’re expenses vary quite a bit every month then you can use your yearly expenses or budget for the high end. Being able to track your expenses on a monthly basis is a must if you want to know how much you need to retire off your dividends. This is part of the learning process. Learn what you NEED to spend every month and where you can cut back. Track your monthly expenses every month for as long as you can leading up to your early retirement. The better understanding you have of your personal expenses the better off you will be.

 

Lifestyle

This is the big one for most people. They want to continue spending money on luxury and convenience items. That’s fine, for some people. Others would rather spend very minimal and retire even earlier. The trick is to find your personal balance. At what point are you still happy? Do you need to spend $60,000 on a brand new car or will a $5,000 used car work for you? Do you need to go out to eat 4 times a week or will 1 or 2 times a month work for you? Maybe you personally do WANT a more expensive car or do WANT to go out to eat more often. Just plan on having that extra money budgeted for every month. That could postpone your retirement by a couple years. It’s all about sacrifice and deciding what’s important to you. Personally, I want to be able to travel when I retire. For me this means I need to be able to have extra money every month to afford travel expenses. I would like to travel at least 4 times a year so for me this will definitely postpone my retirement. That or I will work a part time job (something that I enjoy doing, minimal hours a week) to afford my traveling expenses. It’s all about balance and finding what will work for you.

 

Calculating Dividends

This is pretty straight forward. If you own 100 shares of AT&T, for example, the quarterly dividend currently is $0.48 per share. 100 x $0.48 = $48. That’s how much you can expect quarterly (hopefully growing). Or, $48 x 4 = $192 yearly. Or $192 / 12 = $16 monthly. Simply do this math for all your stocks and that is your pre-tax dividend income. You will have to account for taxes as well depending on the bracket you will be in when you retire. Subtract your monthly expenses from your monthly dividend income and that’s how much you’ll have leftover every month. Or you’ll know how far off you are from being able to afford your monthly expenses simply from dividend income.

 

A Rough Estimate

If you want a simple right now answer to the question “How much do I need to retire off dividends” here’s a method that could work for you. If you decide you need $20,000 a year in dividend income and can tolerate the risk involved with an average 4% yield, then simply divide 20,000 by .04. The answer is $500,000. To make $20,000 a year in dividend income at an average yield of 4% you need to have $500,000 invested. If you want to make $100,000 a year with an average yield of 3.5% then you’re going to need to have $2.85 million invested.

 

Overview

Every single person has different goals when it comes to retirement. Maybe you want to make the absolute bare minimum that you can so you can just quit your job and never go to work again. Maybe you don’t want to retire until you can live the exact same lifestyle that you’re living now. Maybe you’re happy somewhere in the middle. These are the things that you need to consider individually and decide for yourself. The math is simple, it’s everything else that’s not. Track your expenses, decide what makes you happy and what you really want to do with your life. I don’t want to slave away until I’m 63 but I want to be able to do things with my life as well. I’m definitely somewhere in the middle as I believe most people are. Find what works for you and start working towards it!

Are you happy with a more frugal retirement or are you not willing to give up your current lifestyle?

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