Anyone who has thought about passive income has asked themselves the question: how much money would I need to live off dividends?
Not that dividend income is the only form of passive income, but few would disagree that dividend income the ultimate passive income – it requires little to no effort to maintain.
Many companies pay dividends, but the dividend yield can vary greatly from company-to-company, and some companies pay no dividends at all.
Living off dividends is a long-term goal of mine. It’s not realistic unless you have a large sum of money to invest in dividend-paying stocks, hence the reason it’s typically a longer-term goal of people versus something you can achieve in a short-period of time.
One thing you will notice when you start researching dividend-paying stocks is that the yield is usually relatively low. Companies are forced to decide whether to re-invest profits into their business or to give it to stock owners. Usually companies have a mixed approach and both re-invest and give stock owners profits in the form of a dividend, with a majority of profits being re-invested in the business.
So how much money will you need to live off of dividend income? To answer that question I’ve created a dividend analysis tool.
How to use the Young Adult Money dividend analysis tool
I created a dividend analysis tool in the past, but it wasn’t very practical. It didn’t automatically pull in stock data. This new dividend analysis tool automatically pulls in relevant information, and updates automatically if you enter a different stock ticker symbol.
There are two different calculators in this tool. The first dividend calculator, shown below, will tell you how much income you can expect to receive from a certain stock’s dividend payments for a given amount invested.
The only cells you need to populate are the green highlighted cells. Google Spreadsheets does the rest of the work through formulas.
The second dividend calculator is my favorite one. You put in the stock ticker for a given company as well as how much income you want to receive from dividends.
When you go to the tool, be sure to make your own copy.
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Thoughts on the Amount of Money Needed to Live off Dividend Income
One thing you may have noticed is that it will take a lot of money to create an income you can live off of solely from dividends. It’s important to remember that companies are always trying to increase their income, and in turn, their stock price.
Instead of being discouraged by the amount of money needed to live off of dividends, use it as motivation to save more of your income and to increase your income. I might be able to make $2 million through my 9-5 job alone, but it will take me decades. Plus, I have to use that money for monthly expenses so it will take even longer to have $2 million in my account to invest.
Instead I work my side hustles and I’m always looking to increase my monthly income. I also love the idea of building businesses I can sell for a lump sum later on, which can then be invested in dividend-paying stocks.
Ideas for Increasing Income
If your goal is to live off of dividend income, the best thing you can do is increase your income. There are many ways to do this, including increasing the amount you make at your 9-5, but I’ve found the best approach to be side hustles.
With side hustles you have complete control over how much time you commit and what you decide to pursue. The biggest benefit, though, is that side hustle income is typically “extra” income that you don’t necessarily need and can easily be diverted towards things like investing in dividend-paying stocks.
Below are a few ideas that can help you get started.
Start a Blog – this is my favorite side hustle, though I will admit I am a bit biased as I’ve been blogging for years now.
There are countless benefits when it comes to blogging, from leveraging it to sell your own products and services, to using it to become an authority in your area of interest or expertise, to making money through affiliate links (there’s plenty to go around, trust me).
- Could you use a little extra money but don’t have a lot of time? Make some easy side cash by using apps like Swagbucks, Ibotta, or one of these 7 websites & apps.
- Not sure you want to start a blog and want to make more money than what Swagbucks and other “easy” extra income ideas can offer you?
No worries! I’ve got you covered. I wrote a (monster) post that lists 50+ legitimate ways to make side hustle income online and at home. This post provides ton of ideas of side hustles you can pursue to make more money and pursue the trip of your dreams.
What are your thoughts on Dividend Income? Is passive dividend income one of your long-term goals?