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.

Comments

  1. Great post. It made me picture the place I am now (cubicle) and where I want to be (lake house).

    ReplyDelete
    Replies
    1. Thanks 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.

      Delete
  2. Amen. 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.

    ReplyDelete
    Replies
    1. Hi 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.
      Regards,
      DFG

      Delete
  3. 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!

    ReplyDelete
    Replies
    1. Thank you Henry! I am trying my best to focus. Lots of distractions out there these days (marketing.)

      Delete
  4. Hi DFG,

    I 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

    ReplyDelete
    Replies
    1. Hey DL,
      Not 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.

      Delete
  5. Great post about the benefits of dividend growth over initial yield which we should all try to achieve.

    Just 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

    ReplyDelete
    Replies
    1. 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.
      DFG

      Delete
  6. 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.

    ReplyDelete
    Replies
    1. Morning SWAN,
      It will definitely be interesting to see how many of us are left in say 20 years.
      Regards,
      DFG

      Delete
  7. 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.

    ReplyDelete
    Replies
    1. Hey Captain,
      Yeah 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

      Delete

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