It's that time of the month again to reflect on my progress as November 2020 has come and gone. By consistently investing into dividend paying stocks with every paycheck and reinvesting all of my dividends, I have given a massive jolt to the power of compounding. My financial independence journey continues.
Create And Stick To A Financial Plan
Dividend Driven's Benefits Of A Dividend Investing Strategy
- Dividend yields are not fixed and have the ability to grow over time, keeping up with inflation.
- Dividends are paid as normal dividends and sometimes paid as a special one time dividend as a bonus.
- Dividends increase the number of shares when reinvested providing exponential compounding power.
- Dividends account for a large portion of an investments return sharing profits with the investor over the long term.
- Dividends compliment the price appreciation providing an investor two ways to profit.
- Dividends help to reduce an investments risk and price volatility.
- Dividend paying companies tend to be more mature and stable companies.
- Dividends help determine the health of a company and offer tax advantages when held long term.
- Dividends are an easy way to generate passive income during retirement.
Rule Of 25
Dividend Driven's Top Personal Finance Questions To Ask Yourself
Everyone should know what questions to ask themselves when it comes to their finances and their future. If you are able to answer YES to every one of these questions, you are on your way to financial freedom AND doing what you can to not be a burden to anyone including our government.
- Do you have a Traditional, Roth, SEP or Simple IRA?
- Do you have a 401(k), 403(b), Solo 401(k), Thrift Savings Plan (TSP) or Pension?
- Do you have a savings account or emergency fund of at least $2,000?
- Do you have a monthly spending plan?
- Do you have a Last Will and Testament, Living Trust, Power of Attorney, Living Will, Advance Directive and Estate Plan?
- Do you have a Flexible Spending Account (FSA) or Health Savings Account (HSA)?
- Do you have Life Insurance?
- Do you have Health Insurance?
- Do you have Disability Insurance?
- Do you have Long Term Care Insurance?
- Do you own individual Stocks, Bonds, CD's, ETF's or Mutual Funds in a bank or brokerage account?
- Do you have a positive Net Worth or are all of your debts paid off?
- Do you manage your own investments?
- Do you save or invest at least 15% of your net income?
- Do you annually maximize your retirement account contributions?
Rule Of 72
Dividend Driven's Investing Guidelines
- Buy and manage your investments yourself.
- Buy different types of investments like ETF's, Mutual Funds, Stocks, etc.
- Buy investments across multiple sectors for diversification and to control risk.
- Buy investments based on your research, valuation and homework - not just the yield.
- Buy investments during market corrections or pullbacks.
- Buy investments early as possible to maximize compounding.
- Buy investments from different institutions like Fidelity Investments, Vanguard, Charles Schwab, etc.
- Buy investments in increments to maximize dollar cost averaging like a 401(k).
- Buy investments in your retirement accounts first for tax purposes and to keep protected.
- Buy investments that are market leaders and consist of best of breed companies.
- Buy investments that focus on Dividend Aristocrats, Dividend Achievers, Dividend Kings and Dividend Challengers.
- Buy investments with a plan knowing your full positions and weights of each one.
- Buy investments with growing dividends and growing market value.
- Buy investments with low commissions, fees, taxes and expense ratios.
- Buy investments without trying to time the market when you buy.
- Buy investments you know and use frequently.
- Buy well established and mature investments with a positive track record.
- Buy your investments for the long-term.
- Sell your investments immediately if the dividend is suspended.
- Track your investments and their performance monthly just like your budget.
Savings & Investment Goals By Age
1x Current Salary
2x Current Salary
3x Current Salary
4x Current Salary
6x Current Salary
7x Current Salary
8x Current Salary
10x Current Salary
Dividend Driven's Simple Monthly Spending Plan Targets
Insurance & Taxes
Food & Daily Living
Savings & Investments
Dividend Driven's Minimum Safeguard Plan
Being prepared for emergencies and having a plan for your money will save time and help to avoid hardships in the future. These are the steps I will take to maximize my goals and live responsibly.
- Roth 401(k) - Contribute $19,500 every year
- Receive Maximum Match by Employer to Roth 401(k) of $6,000
- Roth IRA - Contribute $6,000 every year
- Health Savings Account (HSA) - Contribute $3,150 every year
- Receive Annual Contribution by Employer to HSA of $400
- Brokerage Link Account - Contribute $15,000 minimum every year
- Checking Cash Account - Save and Maintain a $5,000 balance (daily living expenses)
- Emergency Cash Account - Save and Maintain a $2,500 balance (health costs, auto repair, etc.)
- Employment Cash Account - Save and Maintain a $7,500 balance (tide you over until you get another job)
- Need & Want Cash Account - Save and Maintain a $5,000 balance (auto, home, etc. / mattress, appliance etc.)