Why keep at it?
One picture is where
I want to be in life.
The other picture is
where I am at (literally).
I was recently
reminded this past weekend while where on a trip for my wife's birthday. That reminder was the vision of spending more
time with my family, traveling and doing things I enjoy (love nature.) You see my work building (the next picture)
is right next door to a dump. It is a
huge mountain of construction debris so while unpleasant to look at, it luckily
doesn't smell in the summer.
What it
does remind me of is my goal to not have to sit in a concrete building every
day away from sunlight in a thing called a cubicle earning money for other
people. If I remain committed to
spending less and saving more I will end up at the first picture.
Take a simple
example on the power a dividend champ could do (calculations borrowed from Dividend Life.) If I just plunk down $1000 in a company that
pays a 3% yield and grows it by 10% a year or even better a 2% yield that grows
it's dividend by 20% a year watch the power of reinvesting those dividends and
growth combined. This doesn't take into
account any taxes or inflation but gets the point across.
|
Year
|
3% Yield @ 10% Growth
|
2% Yield @ 20% Growth
|
|
1
|
1,030
|
1,020
|
|
2
|
1,065
|
1,045
|
|
3
|
1,104
|
1,076
|
|
4
|
1,149
|
1,113
|
|
5
|
1,201
|
1,160
|
|
6
|
1,260
|
1,220
|
|
7
|
1,329
|
1,295
|
|
8
|
1,409
|
1,391
|
|
9
|
1,503
|
1,516
|
|
10
|
1,613
|
1,681
|
|
11
|
1,744
|
1,902
|
|
12
|
1,899
|
2,207
|
|
13
|
2,087
|
2,638
|
|
14
|
2,315
|
3,267
|
|
15
|
2,594
|
4,224
|
|
16
|
2,940
|
5,748
|
|
17
|
3,375
|
8,320
|
|
18
|
3,927
|
12,966
|
|
19
|
4,640
|
22,083
|
|
20
|
5,575
|
41,836
|
Now that I look at
this I can see why TJX
is so attractive to people (if they keep it up for 20 years.) Both are neck in neck until that 10 year and
then that 2% yield dominates the table.
So imagine after 20 years all the people who save a couple of hundred
dollars a month and keep investing that over the same period. Savings + Compounding + Dividend Growth = Financial Independence. When that happens instead of going to work
and watching that landfill get higher I would spend my time working to reduce
waste and donate time to my favorite charity.
In the end it
doesn't matter which scenario you pick.
Just so long as that money you save is invested in stocks that
perpetually raise their dividends and pay a high enough beginning yield you
will eventually be able to live a life that is your own. Now things are turned around and the
corporations are making money for you (the shareholder).
Are you doing well with your saving? Even if it is a little give me a shout.
Full Disclosure: I do not own any stocks mentioned in
this article.
Great post. It made me picture the place I am now (cubicle) and where I want to be (lake house).
ReplyDeleteThanks CI. It is hard to see in the second picture but you can see the dump trucks and back hoe up on the hill moving garbage around.
DeleteAmen. Consistent investing + reinvestment of dividends + dividend growth + time = financial independence. I think having a written goal and a visual of where you want to end up is a great motivator for those days when it gets difficult.
ReplyDeleteHi PIP. Yeah without something to remind you it does get tough. It is also a good motivator to not buy whatever you want when your out shopping.
DeleteRegards,
DFG
Both photos show some nice scenery. Of course, the first photo is much nicer. I love lake and beach scenery. You're focus now, which is what counts. So good luck and cheers!
ReplyDeleteThank you Henry! I am trying my best to focus. Lots of distractions out there these days (marketing.)
DeleteHi DFG,
ReplyDeleteI recently sat down with my manager and did a half-yearly performance review. He asked 'where do I see myself in 5 years' time?'. Usually when I'm asked that question I think "retired on a Caribbean beach with a cold drink on hand' but that answer doesn't typically go down well. So I had to take a rain-check on that question and need to figure something out. My career is not something I really try to plan.
Not long until the end of August so I can report the status; everything's on track so far though.
Thanks for linking my site too - Keep up the great work!
Best wishes,
-DL
Hey DL,
DeleteNot sure what keywords you had in this but it got dumped to my SPAM comments. Had to move it out. Anyway I have the same problem. In 5 years I don't want to be anywhere near a cubicle but I guess I need to suck it up until I have another income stream or steams. After 16 years of sitting at a desk I can't wait for a change.
Great post about the benefits of dividend growth over initial yield which we should all try to achieve.
ReplyDeleteJust as a note on the view from the office window, the real problem is not what the view looks like, but that you are inside when you really want to be outside, I have a view similar to your first picture from my office, but it still doesn't make being artwork any better!
Best Wishes
FI UK
HI FIUK, You are absolutely right. The best part of my work days are going out for a walk at lunch. Very relaxing. Thanks for stopping by.
DeleteDFG
That's great! Can't wait to watch us all get there. Keep on investing, reinvesting, researching, and writing. We will get there and prove those who doubt it wrong.
ReplyDeleteMorning SWAN,
DeleteIt will definitely be interesting to see how many of us are left in say 20 years.
Regards,
DFG
Great example of the power of compounding! One problem is in order to keep dividend growth at that type of pace a company must have consistent earnings growth to keep up with it. If not then the stock will lose pace and the yield will inevitably rise. Once the yield increases beyond managements comfort zone that dividend growth will stall. So we may find stocks with some spectacular growth today it may not last as long as we hope. Thanks for the article.
ReplyDeleteHey Captain,
DeleteYeah this was a fun one to write. But like you said once the dividend reaches a decent level it's growth will slow down. What is most important is they keep increasing the dividend (and keep up with inflation). If you get that you will do well.
Cheers,
DFG