Is Living Off Of Your Dividends A Mistake?

Delete "MISTAKE"

Part of the reason I started this blog was to become a better investor. I’ve found that having to justify my investing decisions publicly has made me a better investor as it encourages me to think and justify my actions. It also provides a platform where I can hear and learn from readers.

I’m always curious to hear opposing views so that I can hopefully defend my strategy or make necessary adjustments. Part of my retirement strategy involves utilizing a growing stream of dividends to help pay for retirement. Naturally, when I read a National Post article by Jason Heath titled “Why living off your dividends in retirement may be a mistake“ it got me thinking about my retirement plan. One quote stuck with me particularly.

Retirement planning is a personal decision, but you might be making a big mistake if you go out of your way to ensure you can live off your dividends, since you will be leaving a great deal of money when you die. In the process, you may have worked too hard at the expense of family time or spent too little at the expense of treating yourself.

I thought the

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My Goals

Greatest Goal II

I’ve been reading a lot of blogs about 2015 goals. Most of the blogs I read are personal finance goals, so their goals are usually financial. Goals like contribute an extra $100 per month to the mortgage, pay off all my debt, earn $5,000 in dividend income, etc. I think financial goals are important, but this represents only one aspect of life. I decided I would break down my goals into four sections: Financial, Career, Health, and Personal. I got the idea from Lululemon which has some good information on goal setting along with a worksheet which I used, but altered a bit.

Their worksheet says to visualize your life in 10 years. I chose to visualize my life when I reach financial independence which will likely be later than 10 years.

  • What would you dare to do if you knew you could not fail?
  • Describe what you see, hear, and feel in your ideal life.
  • Who is there? How do you spend your time?
  • Where do you spend your time?

Once you make your vision statement you are supposed to work backwards setting 10, 5 and 1 year goals

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How To Combat Inflation With Dividend Growth And Protect Your Purchasing Power

Financial Crisis / Finanzkrise

As you know from my past few posts I’ve been reading Lowell Miller’s The Single Best Investment: Creating Wealth with Dividend Growth. One thing that surprised me a bit was his comments about inflation. The author pointed out that the 60 year average inflation rate in the United States is 4.1%. The book was written 8 years ago in 2006 and has a US focus, so I decided to do some of my own research to see if this figure was still accurate.

What is inflation?

Before I dive into the results, I want to explain what inflation is. Investopedia defines inflation as

“The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.” […] “As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year.”

The Bank of Canada website has an inflation calculator that you can play around with to get an idea of how inflation affects your purchasing power. Here are a few of my results:

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My Retirement Goals

weary from his battles...

sandcastlematt / Beach Photos / CC BY-NC

Part of a successful life involves setting goals. It’s my plan to use this blog as a way of tracking and achieving my investing and early retirement goals. Setting goals for yourself can be a difficult thing, but I find it’s best to start with the big picture idea.

Big Picture Goal:

When setting goals it is important that they are achievable, but also ambitious. You want a goal to strive for, but at the same time you don’t want it to be way out there otherwise you will get demoralized because it’s too unrealistic. For me, big picture, the goal is early retirement. OK, so that’s out of the way, what next? Big picture goals are a great start, but they are usually too vague just by themselves. When goal setting, it is important to have a measurable goal. If you can’t track your progress and adjust accordingly it is less likely you will reach your goal. This is especially true for long term goals. Having a measurable goal with a plan will improve the likelihood of succeeding.

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