Passive Income

Now that the day has slowed down, I'm finally capable of sitting down and writing for a bit.  Operational changes can be complete havoc on my day, and any hopes I have of following a schedule is hopeless.  Doesn't help that I'm several days behind on testing another new rollout.  But, I digress. 

Anyways.  I said I was going to take about "income I don't have to work for" this time, so I will.  My method is quite simple.  Go to Yahoo! Finance.  I use it because 1) It's free, and 2) It's free, and 3) The FREE information provided gives me what I'm looking for.

Now, I am going to talk about stocks.  I am not going to talk about buying stocks like a house flipper.  I'm not going to talk about buying stocks like the midnight cable TV guys.  I'm talking about buying a stock and ALMOST NEVER selling it.  Why?  Because you're going to buy 1 stock for one (that would be ONE) and only one reason.  There are reasons you would sell, but I'll get to that in a moment. 

What we are looking for are dividends.  Dividends are payments made by companies to the shareholder.  Some give dividends quarterly, some yearly, and some never.  I want to find a stock (or mutual fund) that pays a dividend MONTHLY.  Why?  Because my bills come every month, and I want income EVERY MONTH to pay those bills.  I may be diligent and driven, but I can't plan three months of bills out and expect it to work regularly.  So you are looking for a stock that pays a dividend every single month.

Here is the one situation in which you would sell this stock: if they decide they aren't going to pay the dividend.  The stock you are buying can choose to do that.  But if they don't pay every single month, sell and go buy somewhere else.  We're buying them for the long term because they are willing to fork out cash every single month.  If they miss a payment, FIRE THEM and get someone who will pay you every single month. 

Now that you've picked your stock, the question comes as to where to reinvest the dividend and make compound interest work for you, or not reinvest.  It sounds stupid, but it helps my brain to NOT reinvest the dividend.  That's because that .37 cent payment shows just how much fine my retirement will be.  And that's the whole point, right?  It's much easier if you can look and say "yup, I can afford to live on that".  But getting a tiny payment gives a constant reminder that I need to invest more to get more. 

If you don't need that constant reminder, you are a better person than I am and compound interest will make you rich and famous. 

Now, would I do this as a "retirement strategy" in tax-advantaged plans?  No.  A "retirement strategy" assumes you are going to work until you are 62 1/2 or whatever ridiculous age the government comes up with and then retire.  What if I have the money to retire at 40?  What's wrong with that if I have the income to support it? 

If I follow the typical Roth plan, then I can't touch that money without huge penalties and interest.  I do have a 401k, but I no longer contribute to it.  I use highly risky funds and an income fund.  Hopefully, they will ride the roller coaster up and down and eventually be worth something.  But I'm not going to bet on it.