Dear DTA,
I’m looking to raise the money needed for my boyfriend and I to live nicely after we retire. I also would like to raise money to buy a house.
-Kim B.
Hey, Kim.
It’s great to hear from you. Thanks for writing in.
You have two awesome goals there.
But I’d try to think of them as separate goals that should be attacked in somewhat different ways.
What I mean by that is, I wouldn’t invest any money in the stock market that you need within the next five years.
That’s because the stock market is volatile. And you don’t want to risk losing money you’ll need in a rather short period of time.
Plus, the stock market is better thought of as a long-term generator of wealth and income.
Its power and ability to build significant, lasting wealth and passive income is greatly diminished if you don’t give it the time necessary for compounding to work in your favor.
And so I’d approach the money you want to allocate toward your house savings in a cautious way.
That means putting the money in a bank account or other savings vehicle (like a money market account or Treasury notes) that can generate you a little interest without taking on volatility.
However, the other goal you have – living a nice life after you retire – is a very different ballgame.
And it’s a goal that I have a lot of personal experience with.
See, I also wanted to live a nice life after I retire.
Except I wanted to retire decades before most people.
At 27 years old, I found myself a broke, unemployed, college dropout who didn’t even have his own place to live in.
This was 2009, during the depths of the financial crisis.
Not a great spot to be in life.
But I decided to turn it all around.
Knowing that I never again wanted to be in that kind of position in life, I realized that I had to have power over my financial situation.
If you need an employer and the paycheck they provide you, you’re powerless. You’re at the mercy of your boss. Not cool.
The solution is to become financially independent.
This is basically what every retiree is aiming for – to be able to live a good life without needing a job. We want to live life on our terms and do what we want with our time. That’s the end goal.
With that in mind, please take some time to read through my Early Retirement Blueprint, which is a step-by-step guide to help almost anyone achieve their early retirement dreams.
Even if you don’t want to retire early, the principles I lay out can help you retire successfully – at any age.
One of the major principles shared and discussed is the investment strategy upon which I’ve built my own successful retirement.
That strategy is dividend growth investing.
It essentially involves buying shares in wonderful businesses that share a chunk of their growing profit with their shareholders, via growing cash dividend payments.
You can find more than 800 US-listed stocks that have raised their dividends each year for at least the last five consecutive years by checking out the late, great David Fish’s Dividend Champions, Contenders, and Challengers list.
Those increasing dividends function as “proof in the profit pudding”: they prove that the business is producing the growing profit management is talking about. Don’t tell me about growing profit; show me!
They keep management honest and driven. If shareholders expect those bigger dividend payments, you gotta deliver. And to deliver, you must run an exceptional business.
That’s why it should be no surprise that blue-chip stocks like Johnson & Johnson (JNJ) and McDonald’s Corporation (MCD) are on that list.
These rising dividend payments also function as a great foundation for financial independence and retirement.
A dividend payment is just as good as a paycheck.
Actually, it’s way better.
It’s totally passive income. No alarm clock to wake to. No job to go to. No boss to listen to. No quotas to fill. No drama to deal with.
Enough dividends payments can set you free.
I’ve accumulated enough dividend payments by building up my FIRE Fund.
That’s a real-life, real-money, six-figure dividend growth stock portfolio.
It’s the lifeblood of my financial independence and early retirement.
It generates the five-figure and growing passive dividend income I need to cover my basic bills and live my life nicely without having a job.
I did it by living below my means and investing my savings into high-quality dividend growth stocks when they were available at appealing valuations.
If I can do it – starting out broke, unemployed, and with no college education – I think just about anyone can.
Of course, we all need a little help. We need resources and knowledge.
Well, we’ve got you covered, Kim!
Fellow contributor Dave Van Knapp put together a fantastic series of articles that collectively discuss everything you could possibly want to know about dividend growth investing.
These are his Dividend Growth Investing Lessons.
And I personally take the time each week to highlight a compelling dividend growth stock.
I analyze fundamentals, look at qualitative aspects, assess risk, and perform a valuation on a high-quality dividend growth stock, then I share my findings with the community at large via my Undervalued Dividend Growth Stock of the Week series.
It’s our hope that this series gives you some great ideas for long-term investment once you’re ready to put that capital aside for your future retirement dreams.
But it’s ultimately up to you, Kim, to make the moves and set yourself up for that nice life after retirement.
There’s no time like today to make those moves and set yourself up for a better tomorrow.
I wish you luck and success.
Jason Fieber
Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.