Dear DTA,
I’m a first-time investor. I want financial freedom for my family.
-Gerry R.
Hey, Gerry. Thanks for writing in to us. You just made your first move toward financial freedom by doing so.
The first step to becoming financially free is actually wanting it. If you don’t want it – or if you’re not aware of it – it’ll probably never happen. Something as amazing as financial freedom doesn’t just fall into someone’s lap. You have to know it, want it, and work toward it.
If you don’t work toward something, you’re not likely to have it.
[ad#Google Adsense 336×280-IA]Well, financial freedom requires plenty of hard work.
But what could be worth working harder for than financial freedom?
If you have that desire and will to work, let’s see what we can do to help you get there.
So you’re a first-time investor. That’s okay.
The good news is that you don’t have to be some advanced, experienced investor in order to successfully invest your way toward financial freedom.
I’m a great example of this.
I was actually broke not too long ago. In the summer of 2009, I relocated to sunny Florida (in search of better opportunities) with nary a dime to my name. I did have plenty of debt, though. So with lots of debt and no money, my net worth was actually negative. Said another way, I was worth less than zero dollars.
I was 27 years old. And I was below broke.
But I was absolutely determined to become financially free, just like you.
So I educated myself on all things investing and money management.
And what I found is that a really simple strategy exists that allows just about anyone out there to build serious wealth and passive income over time. Enough passive income to potentially live off of one day.
This strategy is dividend growth investing.
And I personally used it to become financially independent in my early 30s, just six years after I started saving and investing.
The financial result of all that saving and investing is the real-life, real-money six-figure portfolio that generates five-figure passive dividend income on my behalf.
You’ll notice many blue-chip stocks in my portfolio.
Household names like Clorox Co. (CLX), Colgate-Palmolive Company (CL), and Hershey Co. (HSY).
Well, I’m here to tell you that blue-chip stocks and dividend growth stocks are often the same thing.
Great companies that sell products and/or services to people and/or other businesses all over the world typically ring up ever-increasing profit, year in and year out.
Well, that growing profit can lead to a showering of cash unto shareholders, as shareholders of publicly traded companies are actually the collective owners.
If you buy a share of a company like Johnson & Johnson (JNJ), you now own a very tiny slice of the company.
And that slice entitles you to a slice of the profit the company generates.
That slice of profit is the dividend.
And as profit grows, so should your dividend, right?
That’s a central belief at the heart of dividend growth investing.
Any company worth investing in is high quality and able to routinely generate increasing profit. And shareholders – the collective owners of a publicly traded company – should directly collect a portion of that growing profit.
Johnson & Johnson, for example, has paid out increasing dividends to shareholders for 55 consecutive years.
For over half a century, shareholders have been able to count on ever-increasing dividend income from Johnson & Johnson.
Well, that growing dividend income could be the lifeblood of your family’s financial freedom.
Dividend income is a fantastic source of passive income. But growing dividend income is even better.
You don’t have to do anything to receive a dividend.
Once you buy the stock, you can just sit on it and collect for years.
Over time, a significant dividend growth stock portfolio can be built. And this could generate thousands of dollars in totally passive income that grows faster than inflation.
That last part – inflation – is important, because if your passive income isn’t growing, it’s eventually going to fall behind as today’s dollar becomes worth less tomorrow.
That’s why just putting your money in a savings account isn’t necessarily a great way to build true long-term wealth and passive income.
Moreover, that growing dividend income snowballs over time, buying more and more shares as the dividends increase. And those extra shares you’re buying with your increasing dividend income should also be paying out growing dividends, thus buying even more shares that are also paying increasing dividends.
You see where this is going…
This is why I personally invest in these stocks with my hard-earned cash. And it’s why I write about them: I cover an undervalued dividend growth stock every Sunday, which provides readers actionable ideas.
But don’t just invest in something because I am. Or because someone else is.
[ad#Google Adsense 336×280-IA]Knowledge is power, Gerry.
That’s why you should definitely check out fellow contributor Dave Van Knapp’s dividend growth investing lessons, which is a series of articles that are designed to explain dividend growth investing from the ground up.
It’s an incredible resource that’s free, and the whole series basically reads like a book, educating anyone on how dividend growth investing works and why it’s so effective.
However, while investing is certainly very important to achieving financial freedom, you can’t invest what you don’t have.
So it’s the savings that you’re able to generate that will largely determine just how fast you and your family become financially free.
That’s why you (and likely your significant other) need to get a budget together, and you need to start tracking every penny in and out of your life.
You need to start doing this today.
The bigger the gap between your income and your expenses, the better. This will increase your savings rate, which will thus increase the amount of capital you have to invest toward your financial freedom.
It may require some tough choices in order to start saving more.
I can tell you I had to make some really hard decisions in order to save and invest as aggressively as I have over the last seven years.
I moved to a cheaper place. Sold my car. Rode the bus. Cut cable. Stopped eating out of the house. Stuff like that.
But, you know, these choices aren’t really that hard when they’re stacked up against financial freedom.
So I suppose you need to ask yourself what’s really important in your life.
If you really want freedom for you and your family, I think you’ll find that most other things all of the sudden become less desirable, interesting, and valuable.
So start that budget. Start saving. Start to educate yourself on investing so that you’re ready to put your capital to work as soon as possible.
And start all of it 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.