I’m currently waiting at a Panera Bread for someone, and until she gets here, I have a moment to dash out a quick thought, so I’ll proceed in the Shakespearean vein that brevity is the soul of wit.
First off, Happy Thanksgiving. Hopefully, most of you are enjoying your day off. And if you are working, hats off to you as well—I think Henry Ford once said his secret to success was being able to work when no one else was.
Now, let’s take a moment to reflect upon the whole passive income from dividend investments thing. Statistically speaking, most Americans live paycheck to paycheck. For all intents and purposes, it means the following: if you do not work, no money comes in. Barring some kind of special work compensation arrangement, if you don’t work today, you don’t get paid today.
But things get much more interesting once you get some productive assets under your belt. Picture a $150,000 portfolio stuffed with all the usual suspects in the blue-chip universe. You’ve got oil money coming in from Conoco and Exxon. You’ve got soda and snack money coming in from Coca-Cola and PepsiCo. You’ve got turbine and engine dividends coming in from General Electric and Emerson Electric. Maybe you have some bank dividends coming in from Wells Fargo and US Bancorp, and some cereal dividends coming in from Kellogg and General Mills.
If your portfolio yields 3% on total, what does that mean? In the annual sense, it means you are generating $4,500 this year just for being a business owner.
It means you are making $12.32 today just for being alive. That profit that enters your pocketbook is generated on weekends. It is generated on the 4th of July. It is generated on Christmas. And yes, it is generated today on Thanksgiving.
And the best thing is, that number is not static. If you collect your $12.32 each day, it should grow to $13.18 next year, without you doing absolutely anything. And if you choose to reinvest the dividends rather than collect the, that figure will grow to $13.55 instead.
The fun thing is that you have a base of wealth working for you. If you add $10,000 worth of investments to the pile in the next two years, you will immediately be increasing the amount of passive income generated by $300.
And if you don’t want to add to it anymore, then you have to let the hands of time do its work. If you are someone who does not reinvest the dividends on that $12.32 each day, it should hit $25 per day within ten years, and be $50 per day within twenty years. If you choose to reinvest, you should be hitting $25 per day seven years from now, and $50 per day fourteen years from now. And keep in mind, that means every day. Most of us are trained to think of money generation in terms of a five-day workweek. The figures I calculated account for money coming your way every day of the year.
Fine out where you want to be, and break it down into the basic math steps. If you want a lot of passive income now, then it will take a big whallop of an initial investment now. If you are investing in terms of $100-$300 per month, then you need to let that money grow undisturbed for decades to get to a similar spot. It’s all about growth rates, time, and initial deposits. But as you start to acquire 100 shares here, 100 shares there, and build a portfolio, you will begin to notice that not insignificant sums of cash deposits are coming your way, even when you are not working.
Enjoy your Thanksgiving and God Bless.