Dear DTA,
I want to get ready for retirement. I also want to collect some cash now.
-Walter W.
Hi, Walter.
It’s great to hear from readers like yourself. Thanks so much for writing in to us.
So I see you have two concerns: you want to be prepared for retirement, but you also want to build some cash flow today.
I have some fantastic news for you.
These two concerns are complementary to one another.
In fact, the latter concern (building the cash flow) can and should aid your first concern (retirement preparedness). These two ideas go hand in hand.
That’s because any cash flow you build now will likely persist and grow over time, eventually providing you the retirement cash flow you need to comfortably pay your bills.
Cash flow doesn’t have an expiration date.
It’s actually the opposite: the nature of compounding means any investment income you’re generating today is almost surely going to snowball, increasing in amount. And as it increases, that effect intensifies.
Money becomes better at duplicating itself, the more it duplicates itself.
Compounding is exponential. That’s why it’s so important to start building that passive cash flow today.
This is where I come in.
I’m here to write back to you and provide you with the following information because I once had the same goals as you.
I wanted to build some passive investment income, and I also wanted to get myself ready for retirement. Except I wanted to retire decades before most people.
And I did just that: I quit my job at 32, and I became financially free at 33.
How so?
I laid it all out for readers in my Early Retirement Blueprint, which is a free report that documents my journey from zero to hero – in six years, all on a middle-class income.
Now, you don’t sound like you’re interested in retiring early.
But the principles that apply to early retirement apply to retirements of all time frames.
There are two key principles that are important to abide by as it relates to your goals.
First, you must live below your means.
That means being responsible with your spending.
Start budgeting, tracking every expense, and making sure you’re getting value out of every purchase. You should spend your money in a meaningful and purposeful manner.
The more you can save, the more you can invest. The more you can invest, the more cash flow you can build. And the less you’re actively spending, the less cash flow you actually need in order to comfortably pay your bills.
Second, you must intelligently invest your capital.
There are many ways to go about investing.
However, the long-term investment strategy I’ve chosen to make my dreams come true is dividend growth investing.
Since I went from below broke to financially independent in six years, that should say a lot about the power of this investment style.
Dividend growth investing essentially involves buying up shares in high-quality, world-class, blue-chip businesses that have longstanding track records of paying increasing dividends.
A great business should be able to routinely increase its profit. Otherwise, it’s not a great business.
Well, since publicly traded companies are owned by their shareholders, that growing profit is more or less “owed” to the shareholders.
And that’s where those growing cash dividend payments come in.
Increasing dividend income can be a phenomenal source of passive cash flow, which is exactly what you’re looking for.
And it can form the bedrock of a retirement.
Indeed, my real-life and real-money dividend growth stock portfolio, which I call my FIRE Fund, generates the five-figure and growing passive dividend income I need to comfortably pay my bills and live my life (without requiring a 9-5 job).
I built that portfolio in just a few short years by following the two principles I laid out above.
What’s better yet, dividend growth investors are never short on investment ideas.
That’s because there are a number of businesses that basically make the world go round.
And you never have to look far.
You can find hundreds of dividend growth stocks by checking out the Dividend Champions, Contenders, and Challengers list, which is a robust collection of data on almost 1,000 stocks that have raised their dividends each year for at least the last five consecutive years.
Of course, Walt, there’s more to it than saving a few bucks, looking at a list, and buying random stocks.
Knowledge is power.
But we’ve got you covered here.
Fellow contributor Dave Van Knapp put together a fantastic series of articles that are designed to holistically educate novice and experienced investors alike on what dividend growth investing is, why it’s such a powerful strategy, and how to successfully execute it.
These articles read almost like a textbook, which is why he’s titled them the Dividend Growth Investing Lessons.
This series is essential reading to familiarize yourself with all of this.
And then if/when you’re ready to put some capital to work, I personally highlight a compelling long-term dividend growth stock idea every single Sunday.
I perform fundamental analysis, look at competitive advantages, assess risks, and value a stock.
Then I share my findings with the investment community through the Undervalued Dividend Growth Stock of the Week series.
Your goals are admirable and realistic. Furthermore, they’re complementary to one another.
But there’s a little work to do.
The resources I’ve laid out above might be free, but they’re actually worth a lot of money.
It’s just our way of giving back to the community and trying to help fellow investors out there make their dreams come true.
It’s now up to you, Walt, to get started.
There’s no time like today to start working toward your goals and make your dreams come true.
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.