Can You Achieve FIRE On Only $10,000 In Dividend Income?

I want to talk about FIRE today. FIRE stands for: financial independence, retire early.

It’s all about getting enough passive income to cover the bills so that you can do what you want, when you want. This is living life on your terms.

But what’s the bare minimum you need to achieve FIRE? What’s the fastest possible timeline to FIRE? I think I’m in a pretty good position to discuss this.

After all, I went from below broke at age 27 to financially free at 33. I started out in debt and only averaged about $50,000/year at my day job. Yet I still got to the finish line in only six years.

And I certainly didn’t have seven figures when I quit my job and started living off of passive income.

In fact, based on my experience, now seven years into FIRE, I think it’s easier than a lot of people make it out to be.

Today, I want to tell you how it’s possible to achieve FIRE with only $10,000/year in dividend income. Ready? Let’s dig in.

First, let’s get something out of the way. You achieve financial independence when the “crossover point” is hit – that’s the point at which passive income exceeds, or crosses over, expenses.

As you might imagine, the crossover point is not a fixed number.

It all depends on your individual circumstances. Your lifestyle, spending, family size, geographic location, etc. All of it will have a lot to say about how much you’ll need and how long it’ll take to achieve FIRE.

Obviously, the less you spend, the easier it’ll be to achieve FIRE. 

That’s because you create a lower spending threshold for reaching the crossover point. And that means less assets and less passive income will be necessary to cover that lower spending base. I was able to achieve FIRE so quickly not because of a huge income but because I was able to keep my spending very low.

Indeed, we just recently put out a video covering how I just spent less than $1,000 for everything in an entire month – in 2022, after rampant inflation has taken hold. And I wasn’t even really trying. Most importantly, that video also shares how you can spend less, invest more, and achieve FIRE faster.

But how fast can you achieve FIRE? 

Faster than you might think. I did it in six years. But it could be done even faster, depending on how focused you are, how high your income is, how low you’re able to get the spending, and what you do with your investments. If you manage your finances correctly – across income, spending, and investing – it’s quite possible to achieve FIRE in five years or less. And I’ll even give you a number to shoot for.

I think it’s quite possible to live off of only $10,000/year in passive dividend income.

I must be joking, right? Nope. I’m not kidding. Now, look, I’m not promising a life of luxury here. And this is for only one person, not a whole family.

But I really do think if you’re after FIRE ASAP, it could be had on only $10,000/year in passive dividend income. This is for someone who just can’t stand the thought of spending most of their waking hours at a job they don’t like.

However, there’s a big caveat here. This idea will almost certainly require you to execute geographic arbitrage. I’ve talked a lot about this concept before, but it basically comes down to setting up your assets and passive income in a developed country, like the UK, and then spending that passive income in a developing country, like the Philippines, where that money goes much further.

I executed geographic arbitrage myself back in 2017 by moving from the US to Thailand.

Why did I do this? Many reasons. But one of the big reasons came down to what I knew would be a big increase in my local purchasing power. Indeed, after moving to Thailand, my local purchasing power more than tripled. So every dollar I spend here is like spending three dollars back in the States. I basically get a “66% off sale” everywhere I go. And that means $10,000/year in passive dividend income in the US magically becomes at least the equivalent of $30,000/year in passive dividend income in Thailand.

$10,000/year in dividend income, spent in the right location, can actually buy a decent lifestyle. 

Let’s break it down. $10,000/year is $833/month. Okay. You’ve gotta tackle shelter first. Where I am, over in Thailand, you can rent a fully furnished studio condo with air conditioning for about $200/month. My own condo, which I’ve shown in a video before, is a luxury unit that’s basically at the top of the market, and it’s less than $400/month. If you can knock out housing for only $200/month, that leaves you with more than $600/month to spend on everything else.

See? This is more realistic than you might think. 

We’ve already tackled housing, which is the biggest of “The Big Three” – housing, transportation, and food. These are “The Big Three” because these three spending categories are where most people spend most of their money. Next? What about transportation? Well, this is another win for geographic arbitrage. In the US, for example, you need a car in 99% of the country. It’s super difficult to live in the US without a car outside of a few select, and very expensive, cities.

But that’s not the case in a lot of developed countries.

Because of various differences in cultures and socioeconomic factors, you can easily live in many cities across the world without a car. Mexico City, Tbilisi, Bangkok, Manila, etc. That means walking, local transportation, a bicycle, or even a scooter of some kind. Personally, I spend nearly $0/month on transportation. I walk almost everywhere. It’s easy, enjoyable, and healthy. When I do need to get across town, I can take local transportation for less than a dollar. You could budget $50/month for transportation, and I think that’d be more than enough in most cases.

But you’ve gotta eat. Aren’t you going to starve on only $10,000/year? 

Nope. Here in Thailand, you can get a freshly cooked meal for less than two dollars at a local market. And it’ll be delicious. You could be down in Mexico and get a few tacos from a street vendor for the same amount of money. You can eat very cheaply in many places across the world. It’s not going to be fancy dancy dining at a Michelin-starred restaurant, but local flavor can often be had for very little money. If you’re eating for less than $10/day, which is easily doable where I’m at, that’s another $300/month.

You just knocked out the Big Three for $550/month. That leaves nearly $300/month for everything else.

That goes super far in the vast majority of the world that’s not developed. I spend $15/month for my mobile phone bill. Home wifi here runs about $20/month. My electricity bill is about $30/month. And I’m not even trying to spend less. Healthcare isn’t a problem because hospitals over here charge a tiny fraction of what hospitals in the States do.

If you can figure out the visa situation in a country you want to go to, which isn’t that difficult for most of these places, you could be unlocking one of the greatest financial multipliers you’ll ever experience in your life. Speaking of visas, the country of Georgia, for example, gives Americans a one-year free entry on arrival. Most nationalities can live in the Philippines for three straight years on tourist visa extensions. Many options exist.

All of this begs a question. Can you retire on only $200,000?

Well, see, the great thing about being able to live off of only $10,000/year in dividend income is, it wouldn’t take long to build up the asset base necessary to produce this kind of dividend income, even if your job income isn’t super high. That’s because the underlying asset base wouldn’t have to be very big.

A $200,000 portfolio yielding 5% produces $10,000/year in dividend income. 

Did you catch that? It’s possible to retire early on only $200,000! And it would not take long at all for someone in, say, the US to build up that kind of asset base. Plus, I’m talking about living off of only the passive dividend income produced by the asset base. That means you don’t sell the assets and slowly drain your wealth, which could put you on a dangerous path back toward the day job.

Am I recommending this? No. Of course not. I don’t know anything about your specific life or finances. And, to be honest, a 5% portfolio-wide yield is starting to get in the neighborhood of chasing yield. But this opens up possibilities for you.

Maybe it’s not these exact numbers. These are just examples to get the ball rolling. It’s a starting point for conversation.

But if your strong dislike for your day job drives you like it drove me, it’s encouraging to know that you could potentially bounce, if you absolutely had to, on this kind of asset base and passive dividend income amount. It’s a “break glass in case of emergency” type of thing to have in the back of your mind. And it’s always nice to have that kind of optionality in your life.

I’ve been told over and over again that these ideas don’t work. 

When I was still in debt, in my late 20s, I told my family I was going to save and invest my way toward financial independence, quit my job, and retire before 40 years old. They laughed at me. And this was my own family. When I quit my job in my early 30s, a lot of people thought I’d be coming back after a year or two.

When I moved abroad to Thailand in 2017, a number of people figured I’d only last for a little while. On and on it goes. Yet here I am, seven years after achieving FIRE, five years after moving to Thailand, and I’m wealthier, happier, and freer than ever before. If you listen to the naysayers out there, they’ll only bring you down to their level.

It is possible to achieve FIRE on only $10,000/year in passive dividend income. 

Admittedly, this is probably the bare minimum for a sustainable financial situation. It could offer a lifestyle that’s perhaps just slightly above basic subsistence. But what’s the point of having more money for a far better lifestyle if you’re too busy at your day job to enjoy any of it? Plus, here’s the thing: You won’t be at that bare minimum for long.

That’s because the investment strategy we routinely cover in videos – dividend growth investing – is all about investing in world-class businesses that pay reliable, rising dividends to shareholders. If one is invested properly, that $10,000/year in dividend income should continue to grow and compound, year in and year out, like clockwork. As for which dividend growth stocks to consider for a portfolio like this, make sure to follow the channel. We put out videos every week covering specific names for your consideration.

— 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.

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Source: DividendsAndIncome.com