Trader Story: How Much Money Do You Need To Live Off Of Dividends?

I started dividend investing in earnest back in 2010. At the time, I was making about $40,000 per year as a service advisor for a car dealership. I was determined to save and invest as much as I possibly could. Because I had a dream. A dream to retire early and live off of dividends by the time I turned 40 years old.

And now here I am, more than 10 years later, living off of my dividend stocks income. A dream come true. Better yet, I actually quit my job at only 32 years old. I decided at that age to concentrate on my online ventures and use the invested savings from these endeavors to get me the rest of the way there. And by 33, my passive income was enough to cover my bills. All well and good, but this does beg a question. How much money do you need to live off of dividends?

People are different, portfolios are different, life situations are different, etc. Most importantly, how much money you need depends on how much money you spend. In order to achieve financial independence and retire early - also known as FIRE - I had to live super frugally. This was in part due to the fact that I simply wasn't making that much money at my day job. Spending less money does two things for you. This helps you to compound your wealth snowball at a faster rate. But there's a hidden benefit to spending less. One you might not initially realize.

Ask someone exactly how much money they make. I'll guarantee you they could answer in a nanosecond. Now ask them exactly how much they spend. Watch as a blank stare washes over their face. Because I started tracking every cent, I was able to quickly cut out a lot of fat from my budget.

And I think you'll find the same thing when you track your spending. You'll see the fat, cut it, and then get to your goal so much faster because of the increased savings and the lower threshold. Once you know spending, you can match dividend income to it. From there, it's just a matter of doing some math to arrive at an ending portfolio value, which can vary depending on its yield.

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Disclaimer: Please consult with a licensed investment professional before investing any of your money. Never invest in a security or idea featured on this channel unless you can afford to lose ...

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