Dear DTA,
My goal is to retire early. I’m 44 years young. I haven’t saved a penny yet. My hope is to learn the tricks of trading in order to make money and be able to retire quickly.
-Lori D.
Hi, Lori.
Appreciate you writing in. Thanks for your readership!
It sounds like you’re ready and willing to turn things around, start saving, and put yourself on the right track.
Before we get into “tricks of trading”, you’ll first want to nail down some financial fundamentals.
This piece of advice is coming from someone who kept it simple and focused on basic financial principles on his way to retiring early.
My Early Retirement Blueprint describes how I went from below broke at 27 years old to financially free at 33.
I’m now 36 years old. And I’m living out my early retirement dreams.
I was able to get to this spot because I learned how to do two things well.
It came down to living below my means.
And then I invested my money intelligently for the long term.
If it sounds simple, that’s because it is. But simple doesn’t mean easy.
It’s simple, but it’s also difficult.
Don’t worry, though. I’m going to share with you some resources that I think will make it a lot easier.
You’ll first have to realize that your time is worth more than money.
Time is the most valuable currency out there.
You can always make more money, but you cannot make more time.
I personally couldn’t imagine wanting to own anything more than my time.
With that in mind, it’s pretty easy to go about forgoing unnecessary purchases that drain your capital.
Whereas most people will talk about cutting out small expenses (like cable or lattes), I would actually recommend focusing on your “big three”: housing, food, and transportation.
It’s these large, recurring expenses that will have the biggest impact on your budget.
So do your best to figure out how to reduce them as much as possible.
I personally saved 50% to 70% of my net income, routinely, for years in order to retire early.
From there, it’s important to intelligently invest your capital for the long term.
Putting that savings in the bank isn’t going to cut it.
Now, there are a lot of ways to go about investing.
But I believe that dividend growth investing is the best way to invest in order to retire early.
This investment strategy involves buying shares in world-class businesses.
These businesses are proficient at producing growing profit. So proficient, in fact, that they end up with more money than they can effectively put to work.
That excess profit ends up being returned to shareholders (the owners) through a mechanism of cash dividends.
And as the profit grows, so do those cash dividend payments.
By limiting yourself to only great businesses that “prove” the growing profit via increasing dividends, you’re avoiding low-quality businesses that can’t afford to pay you growing dividends.
Check out the Dividend Champions, Contenders, and Challengers list to see what I mean.
That list contains data on hundreds of US-listed stocks that have raised their dividends each year for at least the last five consecutive years.
You probably won’t be surprised to see that there are dozens of blue-chip stocks on the list.
That’s because it takes a special kind of business to be able to pay shareholders increasing cash payments for years – or even decades – on end.
Lori, it doesn’t make sense to invest in an inferior business. Just the same as it doesn’t make sense to eat inferior food, be with an inferior partner, or work at an inferior job.
Moreover, and most importantly, growing dividend income is a fantastic source of totally passive income that can be used as the foundation of your early retirement.
If you can underpin your life with enough passive income to live off, you’re free!
I’ll even show you what that looks like in real life.
My FIRE Fund is my real-money dividend growth stock portfolio.
It generates the five-figure and growing passive dividend income I need to cover my bills.
Building that portfolio simply required taking my savings and buying up high-quality dividend growth stocks at appealing valuations.
I don’t show you my portfolio to show off.
Rather, I reveal it to show you what’s possible.
My portfolio was built one day, dollar, and bead of sweat at a time.
It didn’t happen overnight. But small steps forward add up over time.
The key is to start.
To help you get started, make sure to read through fellow contributor Dave Van Knapp’s Dividend Growth Investing Lessons.
These articles educate how this strategy works and how to successfully implement it.
Once you’re ready to invest, Lori, I personally highlight a compelling long-term dividend growth stock investment idea every single Sunday.
This occurs through the Undervalued Dividend Growth Stock of the Week series.
This series only features high-quality dividend growth stocks that undergo a stringent analysis for quality, growth, and dividend suitability.
And they’re only brought to view when the valuation is attractive.
You have some amazing resources at your disposal. They’re all free. And they can all get you on the right track.
But it’s ultimately up to you to take action, Lori.
There’s no time like today to get started.
I wish you luck and success.
Jason Fieber
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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.