I was just online checking my forward dividend income today. I had neglected to put in a raise from Realty Income Corp that allowed me to smash past a passive income milestone. When I started looking at the dividend growth as a great option for building a stream of passive income over time, the idea that the companies that I own giving out regular raises was one of the top concepts that drew me to this strategy.
A New Passive Income Milestone
I input the raise from Realty Income into my spreadsheet (I’m an Excel guy). I have ten shares, which is obviously not an impressive amount. But the raise put me up over $300 in annual anticipated dividend income.
Admittedly, this is not a huge amount of money. I’m now slightly above $300 in my estimated income for the year. That’s just slightly more than $25 a month.
Figuring Passive Income In Hours Worked
Every month when I give a new passive dividend income report, I look at how many hours of work I could theoretically take off by replacing active income with passive income. Every $100 passive income milestone that I pass effectively gives me five hours of freedom, theoretically for life.
With $300 built up, I’m now at 15 hours if I figure that I would need $20 of passive income for ever hour of work. That’s 1 hour, 15 minutes every single month. I would not need to pay any income taxes up to nearly $73,000 of income if the income is related to qualified dividends. There would be no Social Security taxes coming out. I would not be putting any money into retirement programs.
That’s quite a lot of money coming out on a monthly basis that I don’t even see. Therefore, my current standard of living would not change much, if at all, if I made $20 an hour.
Isn’t This The Slow Way To Build Wealth?
Some of you might wonder if this is the slow way to build wealth, and you’d be right if you think that it is. Each passive income milestone seems to take a while to hit; however, this is basically the only way to build wealth.
There are tons of get-rich-quick schemes out there. They generally tend to cut wealth rather than build it. Flipping a house can quickly turn into a money pit if you don’t know what you’re doing. Borrowing money to buy pork bellies isn’t any better. You have a better likelihood of getting struck by lightning than you do of hitting the lottery.
Building wealth is kind of like the story of the tortoise and the hare. Those who try the get-rich-quick schemes might look like they’re getting ahead, but they’ll tend to wind up with less wealth than the steady plodders who put away a little bit of their income on a weekly or monthly basis.
I’m thrilled that I’ve smashed through this passive income milestone, but it’s hopefully just one of many more to come. What milestones do you use to track your progress? Let me know in the comments.
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Disclosure: I am not a licensed financial professional. Be sure to perform due diligence making any investments. I intend my posts for educational and entertainment value only.
Image Credit: African Spurred Tortoise by Photographer 2008, via Wikimedia Commons CC BY-SA 3.0