How Much Money Do You Need Before You Can Quit Your Job and Live Off Dividends?

I’ve had a fascination with dividends since my childhood. When I’d play the board game Monopoly, my favorite Chance card was the one where the bank paid you a dividend.

In fact, I have a framed version of that Chance card right over here on my desk. As you might imagine, I’m thrilled to be in a position to actually live off of dividends in real life.

It’s literally a dream come true for me. After seeing my passive income exceed my basic expenses in life, at 33 years old, I became financially free. However, there’s an important distinction here.

I quit my job at only 32 years old, before I was financially free. Indeed, you might not need as much as you think you do before punching out one final time.

Today, I want to tell you how much money you might need before quitting your job. Ready? Let’s dig in.

Just to get the timeline straight here, I became financially free in March 2016. That was two months before turning 34 years old. But I quit my car dealership day job, where I worked as a service advisor, in May 2014, the day after my 32nd birthday.

So how did I do that? How did I quit my job before becoming financially free?

Well, I think it’s incorrect to assume that total financial freedom is required before you quit your job. That’s actually not true. If you have a solid base of investments and passive income built up, perhaps to a level that covers a rather significant amount of your basic bills in life, you might be able to quit your job before achieving financial independence.

When I quit my job, my portfolio was in the low six figures and I was only producing enough dividend income to cover about half of my expenses.

What gave me the courage to quit my job then? Well, it was confidence in my ability to add value to the world, be productive, and make money outside of the framework of a job. I’m about to blow your mind here, but stay with me for a second. You don’t need a job to make money. A job is not necessary to make money.

In fact, I’d argue that a job is probably the worst possible way to make money.

A job often requires a ton of ongoing costs, like transportation, in order to keep the job. And W-2 income is highly disadvantageous from a tax standpoint. But you can’t just go and quit your job without a foundation built up. So the important thing to do is to first build a significant amount of wealth and passive income, at least enough to cover a comfortable percentage of your bills – say 50% – and also, simultaneously to this, create some kind of side hustle or other income source that’s totally independent of your job.

When I quit my job, I had already proven out blogging as a viable business model.

Blogging was a side hustle that I had started building while I was still at my job. I enjoyed writing and wanted to inspire other people toward achieving financial freedom, so it was a natural fit. I was making a little bit of money from my blog while I still had the job. No, not six figures. Not even close. But a $1,000 or so per month. Combining that with the passive income, along with the fact that I was living pretty frugally, meant that I could cover my expenses with the dividend income and side hustle income. And I also had an ace in the hole. Something very important.

Once you quit your job, your time becomes this powerful resource that can be totally unleashed.

Imagine what you can do if you don’t have to show up to the day job 40, 50, or 60 hours per week? Just think about what you could accomplish. Well, for me, I was able to devote a lot more time, energy, and creativity toward writing, which, in turn, amped up my productivity and income. Plus, there’s the fact that my passive income was growing all by itself.

As I talk about in every article, I focus on, and personally invest in, high-quality dividend growth stocks.

These stocks represent equity in world-class enterprises paying reliable, rising cash dividends to their shareholders. These stocks aren’t just paying dividends. They’re paying growing dividends. So that meant, in the background, while I was hustling away with my projects, the passive income was growing month in and month out, getting ever-closer to covering my bills by itself. Because while bills go up, these dividends are typically growing even faster than the rate at which bills increase.

So how much money do you need to quit your job and live off of dividend income?

Well, we put out a video a few months ago discussing how much money you might need to straight up live completely off of dividends. Keep in mind, a job dollar isn’t the same as a dividend dollar. I showed how $20,000 in annual tax-advantageous qualified dividend income can be analogous to $50,000 in annual gross tax-disadvantageous job income. Why? Because of the tax savings, cost benefits of not having a job, and reduced demand for saving. And that kind of safe, growing passive dividend income could be had with a dividend growth stock portfolio valued at $500,000, assuming a 4% yield on the portfolio.

However, you don’t necessarily need that much to quit your job.

Like I said, quitting your job will result in a sudden boost in the most valuable resource of all: time. Having more time means you can devote yourself to other projects that can bring in money. Make a plan before quitting the job and figure out how you can bring in some income without the job. Think about, for example, monetizing some your hobbies. If you’ve got even just a few hundred dollars per month in passive income rolling in, you could quite possibly quit the job in favor of monetizing that which you enjoy and are good at. If you’re living frugally, which I know you already are if you’re chasing after financial freedom, it probably wouldn’t take much to close the gap.

I quit my job when I was only making about $500/month in dividend income.

So that’s an idea of what could be possible. I know it’s possible, because, well, I did it. Now, we’re all in different situations. So I’m not saying that’s what you need. I was living very lean. I don’t have children. And I was confident in my ability to make money online. Plus, I hated my job and loved creating content on investing and financial freedom, so I had plenty of motivation to take a leap of faith and see what I could accomplish. It worked out really well, because I quit my job in May 2014 and became financially free almost two years later, in March 2016. And I pleasantly slid my way into financial freedom without having to grind it out at a job I strongly disliked. No regrets here whatsoever.

In the end, you have to take a look at your own situation and come to a conclusion.

That means looking at your wealth, passive income, ability to monetize a hobby, expenses, family responsibilities, enjoyment of your job, age, ability to independently motivate yourself, opportunity cost, etc. It’s called personal finance because it’s personal to everyone. Everyone has a different situation.

Bottom line? Financial freedom is not a prerequisite to quitting your job.

If you build up a nice foundation of passive income, if you’re smart with your expenses, and if you’re able to get creative with a side hustle, you might be able to coast your way into financial freedom in a much more delightful manner than grinding it out for years on end with a job you don’t like.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.

Source: DividendsAndIncome.com

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