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Dividend Investing Basics
I'm considering using dividend investing as a key part of my retirement plan. But I must admit that I don't know much about it. Today I'll share what I've learned so far on my journey into dividend investing.
The Concept
From what I understand, proponents of dividend investing tout it as working as follows:
- Buy stocks of good quality companies that pay decent dividends (which would be 3% to 5% these days.)
- Earn income generated from the dividend payments.
- Get some growth on the value of the stocks paying the dividends.
So to make this a bit more tangible, let's take the following example:
What is the Best Free Retirement Calculator?
I recently ran into a post that highlights the three best retirement calculators. It does a great job of detailing what the author considers to be the best options, including strengths and weaknesses, and summarizing the situation as follows:
Free retirement calculators are plentiful on the web. These are three of the best, in my opinion. Try them. Try more than one. But use them all with caution!
Understand that retirement calculators aren’t giving you the answer to a simple mathematical equation. They are actually attempting to model the future. That’s a tough assignment. One that is actually impossible, in any precise sense.
How Many Americans Live Paycheck-to-Paycheck?
Time recently posted that nearly half of Americans live paycheck-to-paycheck. Their summary:
Too many of us are living paycheck to paycheck. The CFED calls these folks “liquid asset poor,” and its report finds that 44% of Americans are living with less than $5,887 in savings for a family of four.
A few thoughts on this:
Why I Use a CPA to Do My Taxes
Well, I just finished my 2013 taxes. And when I say "finished", I mean I finished my part of the taxes -- the roughly 10-15 hours or so it takes me to collect, organize, and summarize my financial transactions for last year. Then my wife mailed the info to our CPA, and he'll spend a month working on our increasingly complex tax returns.
When it comes to financial issues, I'm generally a do-it-yourself guy. I don't need a financial planner because I'm my own financial planner. I don't need an investment advisor because I'm my own investment advisor. And the list goes on. I figure that if I know how to do something, why do I need someone else to tell me how to do it? Besides, no one cares more about my money or knows what I like, don't like, and want to accomplish better than I do, right?
Money Expectations
The Motley Fool has a great piece titled How to Get Rich, Feel Rich, and Stay Rich. The piece contrasts those who make a lot of money and are unhappy with those who make relatively little and are joyful. Here's a summary of their thinking:
Wealth is relative. Those are probably the three most important words in personal finance. Gary makes $25,000 a week and feels inadequate. Pete makes $25,000 a year and feels so rich that he retired eight years out of college. How rich you are has very little to do with how much money you have in the bank and a lot to do with your expectations of what you need that money to do for you. It's a two-part equation, and a lot of people become miserable ignoring the second part.
Millionaire Interviews 22
Here's the latest in my series of millionaire interviews, discussions with everyday people who have practical tips and insights into growing and managing wealth.
My questions are in bold italics and their responses follow in black.
Let's get started...
How old are you (and spouse if applicable, plus how long you've been married)?
I am 58 and my wife is 56. We have been married 14 years, a second marriage for both of us.
Do you have kids/family (if so, how old are they)?
I have two grown children from my previous marriage ages 35 and 33.
What area of the country do you live in (and urban or rural)?
My wife and I live in the Northeast in a suburban area of a mid-size city.
What is your current net worth?
2013 Net Worth Review
Each year on FMF I post a review of my net worth and detail the ups and downs of the previous year. Here are my 2013 net worth highlights:
The Retirement We're All Trying to Avoid
When I read this piece from MSN Money it made me think of one word: yikes!
Here's the part that made me squirm:
At the height of his corporate career, Tom Palome was pulling in a salary in the low six-figures and flying first class on business trips to Europe.
Today, the 77-year-old former vice president of marketing for Oral-B juggles two part-time jobs: one as a $10-an-hour food demonstrator at Sam’s Club, the other flipping burgers and serving drinks at a golf club grill for slightly more than minimum wage.
Share Your Financial Experiences with FMF Readers
I love sharing stories from people who are working through financial issues, have made significant financial progress in their lives, or just need a bit of advice. And FMF readers like these as well, as evidenced by the comments I receive on these posts.
If you'd like to tell your story or get some advice, there are many ways to do so including:
Help a Reader: Buying a Home
Here's an email I recently received from a reader:
I have been a long-time renter, but now married with 2 small kids I’m considering buying my first home. I’ve done some research and talked to some banks, but the thing that’s making me hesitate is that I’m worried that houses are overpriced because of the current low interest rates.
The way I’ve approached the home buying process, and the way I think most people do, is to see what kind of mortgage I qualify for, and then use that to figure out what kind of house I can buy. Currently I qualify for about a $500K mortgage at a 4.25% interest rate. However, if the rate goes up to 6.25%, which is still very low by historical standards, I’d only qualify for about a $400K mortgage, which would mean that the prices of the houses that I could buy would decrease by 20%.
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