A friend at work asked why am I working so hard to saving dividends to pay for my lunch expenses.
Cross-over point to the positive
He was actually referencing the fact that I don’t go out as much because of my experiment called: Lunch Dividend Experiment. He thought it was a risky move because what happens if the stock stops paying dividends or goes belly up and I lose my entire investment in that company.
Well, my friend is only seeing part of the equation. The part he forgot about was that if I paid for expenses with my earned income, my money is gone after I pay for the expense. However, with stocks that pay dividends, I have the opportunity to keep my initial investment, only spending the dividend portion. It’s true that such stocks won’t increase in value as fast that way, but the idea is someday that I will increase my investment in that stock too, once the dividend payout is more than what is required to pay for the expense and taxes.
At the very least, I’m not spending my earned income, never to see that money again!
That said, I won’t be able to use dividends to pay my mortgage (if I still had one), but everything else is fair game!
Almost all of my dividends are overloaded in purpose. By this I mean that I’ll use my dividends for a want, but if something happens, I’ll switch it to cover a need. For example, I’m working on building up my dividend payouts so that they can cover future vacations, or at least help pay for vacations, but if some disaster happens like I’m unemployed, that dividend stream will go to other more important things such as food or paying my real estate taxes.
That the beauty of dividend goals! Just because they are ideally focused on one goal, doesn’t mean that they can’t be switch to a new high priority goal if the need arises.
Bests,
MR
Personally, I would rather reinvest the dividends. In fact, that is exactly what I do. 🙂
So do I, but I’m starting these in addition to my retirement savings.
Dividends are important, and I think these stocks should be well represented in a balanced portfolio. Although, I tend to agree with KC on this. I don’t really want to receive dividends as income until I am retired. I prefer to chase growth and reinvest dividends.
I have similar goals, but as in my lunch experiment, I’m not really taping my investment and retirement streams. I”m really tapping the money I spend on expenditures. A little sacrificing (and creating reconfiguring) on those expenditures now so that in the future I stop throwing money away on them.
I like this idea. I have yet to do something like this, but I think I am going to start doing this more and more. The fact that it is in addition to your retirement savings is really cool. If you keep doing this, by the time you want to retire, you will have tons of dividend paying stock that you had collected over the years (paying for small things here and there) and could cover all of your expenses together. At least, it seems like a great goal and a fantastic way to force yourself to spend less.