Putting Your Expenses Back In Context

 

I must confess, I have not always been a dividend investor and while the concept of passive income was something I believed in, it was not something I spent as much time thinking about as I do now. I always receive a lot of comments about the fact that my long and short technology picks are such a big contrast to the safer and consistent passive income approach. It is, but it works very well with me thanks to my buckets approach. Anyway, back to the subject. The fact is that I now see every dollar that I spend as something much more powerful.

Every Dollar Spent Is Lost Future Income

In the context of dividend investing, every $100 spent on a night out could be seen as a choice between a night out, income for years to come or a bigger sum of income once I reach retirement or start living off of retirement. How do I do the math? Here is the choice explained clearly:

$100 = 1 night out
$100 = $3-4 per year for my entire life
$100 = $20 per year starting in 30 years (assuming it is reinvested at a 6% return)

Once you start to see that night out as an annuity to be paid out for your entire life and that can then be paid out to future generations, it becomes a much more difficult $100 to shell out. Am I the only one that translates even a regular night out as a sacrifice of future income?

Don’t Worry About Me

I know, I know… Using this mentality could lead me to cut almost all expenses and never truly enjoy that passive income. I am very far from that situation. I am simply stating that I now make my choices much more wisely thanks to dividend investing and hopefully I’m not the only one that is getting better at putting current expenses in perspective.

Management System

Personally, it remains a race where the start is everything and because of that, accumulating assets in these earlier years is key in my opinion. That being said, the system that I use is simply to set pre-determined amounts to be set aside and do my best to increase those amounts over time. I have to admit that an early move that turned out to be the best investment of my life is certainly helping in that regard but I still think that the key (at least for me) remains to use a systematic savings and investment method.

 

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