Tag Archives: dividends

Having Stock Dividends Pay Money For Allowance

by

Once my son and daughter turn 18 (or 21), I will stop paying them allowances.

It’s not that they were bad, or that I will have a sudden change of heart with the matter, it’s just that they’ll be adults then and traditionally that’s when such things stop.  But in ways isn’t this almost like a punishment for becoming an adult?  Perhaps at some subconscious level, it deters kids from wanting to strive out on their own, becoming totally financially independent from their parents?

Money Gift

After talking this over with my son last night, we decided to change the way that he receives his allowance.  While the details are still being ironed out, basically we going to take most of his money from his saving account and invest that amount into one or more dividend paying stocks.  The idea is that I will still pay him an allowance, but the dividend from these stocks and a portion of the money from his allowance will go into buying more stocks (along with Christmas & Birthday money along with any earned money that he might receive).  We are still working out the details, but the idea is that if we do it right, we should be able to accumulate enough stocks that pay a dividend to provide him a passive dividend stream when he turns twenty-one.  Ideally the amount would be at least $21 per week, which would match the current allowance program that I have my kids on.  Of course, I’m hoping for a higher amount to offset taxes, but who knows, only time will tell.

So what are the benefits of such a Dividend Allowance Paying program?

  1. My kids continue to receive an allowance, but instead of me paying for it out of my earned income, they will pay themselves via the passive income received from dividends.  This is one of those “the gift that keeps giving” kind of ideas.
  2. They start to learn about investments and the power of dividends and passive income at an early age.  Hearing about passive income and actually receiving passive income are two different things entirely.  Until you have passive income, it’s just a money myth.
  3. They will be able to gain investment experience, learning that stock prices go up and down with time, and experiencing recessions.
  4. The learn the concept of having your money work for you.  This will help them visualize money as a tool.
  5. I may gain kids that can talk to me about stocks, we will grow closer as we will have more in common.

Of course I can always follow a different path and invest in dividend yielding mutual funds too.  But since I not that crazy about the fund fees, for now I think I’m going to stick to individual dividend stocks in the short-term.

I really like this idea and one that I’m excited about along with my son (my daughter’s to young to get excited about it yet).

Bests,

MR

Creating a Blogging Dividend Stream

by

Blogging Dividend Stream

During the first few months of blogging, I was constantly learning and searching for any articles about blogging.  On one particular blog, I read that a blogger was making big bucks ($5,000 in one week), but when she showed her Adsense account, her balance was zero.  Being a financial blogger, this raised some red flags for me!  Later the blogger posted an article about not having enough money to pay the taxes on his blogging income (which was well over $50,000).

This is when I decided to come up with a solution so that I wouldn’t spend all of the money that I hope to make blogging.  Luckily? I don’t have much money from blogging yet, but with what little I have, I decided to purchase stocks with dividends, then use those dividends to cover my expenses with blogging.  The idea is that I’m saving the money I make from blogging, and then buying dividends stocks (I only bought 1 stock, so far), then using the money from the dividend provided by the stocks to expand my online and offline businesses (mainly blogs at this point).  That way blogging doesn’t cost me any more money, and I’m growing a new financial asset at the same time.  Since I work full-time and don’t need to use the money from blogging for living expenses, it’s a relaxed pace with blogging for money, at least for me.

So now your probably wondering how much my dividend stream is per month?  Well (drum roll), it’s $40 dollars.  Doesn’t sound like much huh, but considering my normal monthly cost for blogging only runs about $13 per month, $40 is a windfall.

So now that I have my monthly expenses covered, I’m focusing on making the dividend stream grow, but at the same time I want to use some of the money from blogging to travel more.  So starting next year, I’m going to use at least 50% of the money I make from blogging to travel, and then I’m going to invest the other 50%  into stocks that have dividends.  Then each year I’m going to try to shift the percentage of blogging money that I use for travel down.  So two years from now, perhaps I’ll only use 45% to travel, then three years from now I’ll only use 40%, etc…

Blogging is a hobby that I never imaged could be as fulfilling both mentally and financially at the same time.  Blogging for me is a win-win, especially since I’m able to build up a dividend stream that covers the expenses of running the blog!

Bests,

MR

 

 

 

 

 

 

Paying Expenses From Dividends

by

Paying normal expenses is a lot like renting, you never really get ahead and may even be living paycheck to paycheck for your entire life, just barely getting by.

Or perhaps you are hording away money living like a miser until it’s time to retire.  The problem with that approach is retirement may never come, after all, accidents happen…

Maybe your plan is to just spending everything, going into massive debt figuring that you can always declare bankruptcy and start overall someday in the future.

All of these are ways to handle expenses and spend money, but what if we tried paying our expenses from dividends instead of money from our paychecks?

In fact, what if from the beginning of adulthood we started paying expenses from dividends?

If from the start, we took our salary or wherever you get your income, and bought stocks that provide a stable dividend, we could have a level of freedom that most people don’t have after 10 or 20 years!  I’m sure you are thinking that it wouldn’t be possible, and you would be right!  It would have to be a gradual process, buying some dividend stocks at the beginning, but slowly using that dividend money to pay your expenses.

Using the graph above, the red would be the money we bleed from our paychecks, whereas the green would be the dividend money that would continue to grow over time.  Eventually we would be paying all of our expenses from dividends!

You wouldn’t have to directly use the dividend money, instead you could have the money automatically reinvest back into the stock (let’s say a DRIP), while paying from your paycheck as normal.  it might take decades for your expense to totally be handled by your dividends, but it’s worth a try!

Much like the line in the graph above isn’t straight, neither would the stream of dividends.  At the end, it would dividend money would grow more quickly, so it would be slightly parabolic.

So I’m going to try this approach, but more importantly, I’m going to teach my kids early when they are young.  If they could incorporate such a system into their lifes, I think they would be well provided for in the future!

Bests,

-MR

Using Dividend Stocks For Extra Spending Money

by

I would like to buy some dividend paying stocks so I can use the dividend for Extra Spending Money instead of using money from earned income.

First let me say that each month I thought I only spent $250 as my personal Extra Spending Money, but I was wrong!  I spend well over $300.  While I’m going to use $300 as my basis for the calculations below, I want to go back to the $200 to $250 that I use to consume someday.

My current formula for using money for my “Extra Spending Money” is a more of a consumption based model.  This is where once the money is gone, it’s gone!  Here are my simplified steps:

  • The money I have allocated for spending, all gets spent
  • I have zero dollars left at the end of the month.

My future formula for using my “Extra Spending Money” will be a investing-spending hybrid model.  I envision it as the following steps:

  • I save $200 of the $300 that I have allocated.
  • $100 of the $300 is for spending.
  • Invest the savings into a stock that provides a 5% dividend.
  • After year 1use the dividends to help supplement the $100…
  • Eventually as the dividend become big enough, stop spending the $100 and have it go into the dividend stock.

This process will be similar to my Free Lunch Experiment, but this experiment require much more money invested and time than the Lunch experiment.  So I’ll have to do it gradually over years, unless I come up with a way to speed up the investment contribution.

For example, just to generate a monthly $50 from the stock, I’d have to have $12,000 lump sum at an interest rate of at least 5%.  So that would mean some far off future day, to get up to the minimum $200 level, I would need to save at least $48,000 to $50,000 at a similar 5% interest rate.  and this isn’t even taking into account taxes and inflation!  I could envision the true amount that I would need for the month $200 payout being more in the range between $80,000 to $100,000.

I will provide more details in the future, thanks!

-MR

Did you like this article?  Then please subscribe to my RSS feed so you can check out new articles when they become available.  You will help this blog grow by doing so.  Thanks!