Dear DTA,
Being a teacher in childcare there is little money after paying bills. I do not have enough to last until the next pay day. We also do not have life or health insurance. I was watching a show on TV where this guy invested, and now he can relax. I myself need some relaxation in my life. I don’t want to be so stressed out over money issues.
-Donna B.
Hi, Donna. Thanks for taking the time to write in. I just want to quickly thank you for your teaching and childcare. Teachers and those who take care of children are typically underappreciated and not appropriately compensated.
That said, let’s see if we can help you solve at least part of that latter conundrum.
[ad#Google Adsense 336×280-IA]While significantly increasing your income overnight is not going to happen, a systematic and holistic approach to saving and investing can absolutely change your life over time.
The guy you saw on TV probably did something like this.
Because outside of winning the lottery, there’s practically no other way to build enough wealth and passive income to relax and enjoy life.
A lot of books have been written on how true millionaires have built their wealth, and how they go about living their lives and spending their money.
Perhaps surprising, they live pretty modest lifestyles, for the most part.
They typically drive regular cars. They live in fairly average homes. So on and so forth.
True and lasting wealth doesn’t mean you’re a globetrotting jetsetter.
In fact, many millionaires are first-generation wealth builders who arrived at their positions in life by adapting a systematic approach to saving and investing that prioritizes long-term wealth saving and investing over short-term spending.
Indeed, I’m a pretty good example of this.
I was broke just a few years ago. Not just broke, actually. My debts and liabilities exceeded my assets and money. That means I was in a hole. I was worth less than zero dollars.
This was 2009. I was 27 years old when I realized this.
If we fast-forward to today, I now control a real-life, real-money six-figure portfolio that generates five-figure passive dividend income on my behalf.
At 33 years old, the passive income I was generating started to exceed my basic core personal expenses in life, rendering me essentially financially independent. (If you haven’t seen it already, I recommend checking out my “blueprint” to early retirement.)
But I had to aggressively save and invest to get from where I was to where I now am. I woke up every single day thinking about how I could save and invest. I optimized everything in my life toward the end of becoming free and living a life like that guy on your TV. I just wanted to relax and live life on my terms.
However, I didn’t earn some massive salary. I’m not sure how much you earn. But I can tell you that I wasn’t a world away from you. When I first started my journey, I was only earning about $40,000 per year. I was working at a car dealership. It wasn’t Wall Street, that’s for sure.
So incredible things can happen in a pretty short time, even without a ton of money.
But the key is doing as much as you can with what you’ve got. And if you can improve what you’ve got, even better.
This involves budgeting, first of all.
You must budget and track every single penny coming in and out of your life.
Only then can you know what’s really going on with your money.
The key to all of this is your savings rate. That’s the difference between your earning and spending. And your goal should be to get your savings rate as high as possible, developing a large gap between earning and spending.
You say you have nothing left after paying bills. That means your savings rate is 0%. So it won’t be surprising to see your earning and spending roughly match each other after you budget everything.
But you’ll have to then make some hard decisions about spending. Just like I did.
We all have some fat in our budgets. And so you’ll have to determine whether that fat is worth your future independence and relaxation.
I can tell you I did some pretty crazy things to get here. I moved. Sold my car. Ate ramen noodles for lunch for a year straight. Cut cable TV. Dropped my mobile phone plan. Rode the bus. Stopped shopping for things almost completely.
But I set the rest of my life up to allow for plenty of choice and freedom.
Not only did I cut the fat, I also went out of my way to increase my income. After all, you can only cut the spending so far. At some point, you need to increase that income, too.
And so I worked a second job. On top of the 50+ hours per week I was pulling down at my main day job.
Anything worth having is worth working hard for.
Once you’re building some savings, you’ll have to start investing that money.
Just putting the money in the bank probably isn’t a very viable long-term strategy, as the money won’t only not grow, but it’ll likely lose ground to inflation over time, meaning you’re slowly falling behind.
I personally chose dividend growth investing as the investment vehicle to eventually buy me my freedom.
And it worked fabulously, as I outlined earlier.
Dividend growth investing simply means you’re buying stock in high-quality businesses that routinely increase their profit, and they share that increasing profit with their shareholders in the form of growing dividend payments.
In my view, it doesn’t make sense to invest in a company that isn’t regularly increasing its profit.
Likewise, as an investor (who owns a small slice of a company), I expect my fair share of that increasing profit.
That’s where growing dividends come in.
A dividend is essentially a portion of the profit a company generates. If profit is increasing (as it should), so should the dividend.
Dividends are wonderful in the sense that they’re completely passive.
You don’t have to call a company for your money. You don’t have to do anything. The money just shows up in your brokerage account when it’s supposed to.
Talk about relaxing!
Investing in dividend growth stocks is pretty straightforward and intuitive, which made it a natural choice as I started to invest my savings.
Many of the companies that I’ve invested in are household names. These are global companies.
PepsiCo, Inc. (PEP), AT&T Inc. (T), and Visa Inc. (V) are just a few examples.
But fear not, as you’re not alone.
We have a ton of resources available right on the site, all designed to help you become a more informed and ready long-term dividend growth investor, if you’re so inclined.
For instance, fellow contributor (and dividend growth investor) Dave Van Knapp put together a great series of lessons on dividend growth investing.
This series reads like a book, allowing one to learn about dividend growth investing from scratch.
In addition, I cover a dividend growth stock each Sunday that appears to be a solid long-term investment candidate, based on fundamentals and valuation.
But the onus is on you to read these resources and act.
If you want to be like that guy you saw on TV, you have to get started today.
I wish you luck and success.
Jason Fieber
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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.