Emergency Fund Edited

Visiting Multiple Cities On One Award Flight

I recently had an epic fail when it came to getting the Chase Sapphire Reserve card.  I obviously wanted to earn the 100,000 point bonus in the Ultimate Rewards program. I was fortunate, however, in that my spouse was not over the 5/24 limit. After she secured the bonus, I started checking on some options for a vacation next year. I found that there was pretty wide open availability on a number of United Airlines flights to Europe, Australia, and Asia. The availability included the summer months, to my surprise. I finally decided, with the wife’s approval, to take a trip to Europe, specifically Prague, Czech Republic, and another to-be-determined city (which turned out to be Lisbon).

How is it possible to visit more than one city on one trip, you might ask. I’ve already written about my recent trip to Madrid and Paris last spring.  I utilized a routing option that’s called an open jaw on this trip. This means that you can fly into one city and then fly out of another back to the city you originated from. Think of it this way. A normal trip would be City A to City B, with a return to City A to complete the round trip. An open jaw flies from City A to City B. Then there’s a trip by another airline, train, or rental car to City C. Then there’s a return to City A from City C. The only question that comes up is how to get from City B to City C. There is some pretty impressive public transportation within Europe, but I’ve found that commuter flights are really cheap between cities. My flight from Madrid to Paris earlier this year was a whopping $69 on Iberia Airlines. I’ve also seen flights from London to Paris from as low as $53 in recent searches. This is on Air France, not on a low-cost carrier that charges for breathing, either.

For my upcoming trip next year, I decided to again utilize the open jaw. I found availability for both of the main cities that I wanted to visit on a multi-city itinerary. Prague was my main goal. I was there a few years ago, and I loved it. My wife did not make this particular trip, so I want to share my love of the Czech capital with her.

Jan Hus Memorial
A memorial to Czech hero Jan Hus, photo taken by me on a previous visit to Prague.

I first tried to book a multi-city itinerary, and the results were not as robust as they were when I looked at each individual leg. Here’s a dummy multi-city search originating from Chicago and going to Prague with the outbound flight:

United Multi-City Search: Chicago to Prague

 

Note that there is only one page in the search results with 18 flights returned, starting at 30,000 Mileage Plus miles for this leg of the trip. I then decided to make the trip two one-way award flights. Note what happens when I go to a one-way search for the same dates (I plugged in June 13-20 for this dummy booking).

One-way flight: Chicago to Prague

We’ve gone from one page with 18 possible flights to seven pages with 152 possible flights, again starting at 30,000 Mileage Plus miles for this leg of the trip. This means more options. There is the greater possibility of adding more than just the two main cities with an itinerary like this.

If you start looking for flights at your desired level of seating (coach, business, or first class) and low-level mileage requirements, you can actually look for flights that will take longer to visit an additional city or two during layovers.  I went to page 4 of my actual search (not the dummy search shown here) to find an 11-hour layover in Munich on the way to Prague. This should be plenty of time to hit the local public transportation network and see a couple of sites within the city, extending my trip to three actual cities visited in a single one-week trip.

I did the same process for my return trip, and found a lengthy flight that allowed for an overnight layover of 15 hours in yet another European city, bringing the total number of cities that we should visit to four in one single trip. All I have to figure out is what flight I want to take from Prague to Lisbon. My two one-way flights to and from my main destinations in the Czech Republic and Portugal came to 60,000 United Airlines Mileage Plus miles per person or 120,000 total (most of which came from the wife’s Sapphire Reserve bonus) and around $165, which I put on my Chase Sapphire Preferred to earn 2 Ultimate Rewards points per dollar for the purchase. These points will go to a later trip that is not yet determined.

By taking the time to play around with the United Airlines booking site, I was able to set up a trip that visits four major European cities. Most people would only look for a round-trip that visited one. Most of my recent trips have been a result of my philosophy of earning money in pajamas. I’ve looked at ways to maximize credit card rewards to save money on things that I’d prefer to spend money on anyway. Have you had any success with similar bookings? If so, feel free to share in the comments.

 

Emergency Fund Edited

Book Review–Your Money Map

A few months ago, I visited a Christian bookstore and I decided to check out the personal finance section. Some of the books appeared to be from health and wealth guys who encourage you to “sow some seed” to benefit their ministries. I’m not into that by any stretch. I then happened upon a book titled Your Money Map: A Proven 7-Step Guide to True Financial Freedom. The author of the book was Howard Dayton, and it was published in 2006. Moody Publishers published this book, and it’s pretty far removed from the health and wealth scene. I then decided to pick up the book to see if it was the same as Dave Ramsey’s Total Money Makeover, which has seven baby steps. It did not.

Rather than just giving seven “baby steps” that are singular in purpose and that readers must follow in order religiously, this book shows more of a lifetime journey that a person might take. Both Ramsey and Dayton argue that financial freedom is a process that could take quite a bit of time.

Your Money Map Is Christian In Outlook

Your Money Map is distinctively Christian in its outlook. Therefore, those who have a more secular viewpoint might have more interest in other personal finance books. This book follows a couple that Dayton counseled regarding personal finance and the advice that he gave them through each step of the way.

The book starts out by arguing that all wealth comes as a stewardship from God. Therefore, it’s important to ensure that we are effective stewards with the money that God entrusts with. Dayton argues that one of the first steps that anyone should take when getting their personal finances in order is to begin charitable giving toward religious purposes. This is one of the areas that nonreligious people might disagree with Dayton, but starting to give is part of Destination 1 on the money map that’s included in the chapters of the book, as well as the schematic money map at the very end of the book.

Step 1

Other goals involved in reaching Destination 1 include the obligatory budget and $1,000 emergency fund. These two steps seem to be pretty standard among the community of personal finance gurus. Both are pretty good ideas. Budgeting ensures that you can avoid spending more than you bring in. If you spend more than your income each month, you’ll wind up with a negative net worth if you’re not already there.

If you spend less on a monthly basis, you’ll build up a solid net worth over time. It’s pretty simple, actually. Also, stashing $1,000 allows you to pay for any unexpected expenses that might come up–like the busted radiator I had to replace a couple of months ago. Definitely not cool, but necessary. Learning to handle money God’s way is a little outside the realm of personal finance gurus who are not religious in nature.

Your Money Map

Steps 2 and 3 on the money map are where Dayton is a bit different than some of the other personal finance books and websites that I’ve read. Most of these other books emphasize paying off debt at the expense of savings. Your Money Map argues that people should build up a larger emergency fund (for one, and then three, months of expenses) while simultaneously paying down credit card debt and all other consumer debts. This blended approach is refreshing to me, because cash flow is important. Having more money available at any given time can help people avoid building up additional debt should an unexpected job loss or other catastrophe occur.

Earning money in pajamas can help you achieve financial freedom.

A possible destination after reaching Step 7on Your Money Map.

Step 4 relates to saving up funds for major outlays like a home or retirement (childrens’ education is optional here). Dayton recommends saving up a substantial down payment for a home so that a downturn in the local housing market does not get a buyer upside-down on his or her mortgage. This is generally sound advice (although I didn’t follow it personally because renting in the markets I’ve lived in has been more expensive than buying–I took advantage of loans with low down payment requirements).

Getting Closer To Financial Independence

Steps 5 and 6 deal with actually buying the house, paying it off early, and investing additional money outside of retirement accounts, working toward the multiple goals at the same time. Step 7 is financial freedom. The goal of financial freedom is retiring and actually having something to leave as a legacy, be it through an inheritance to your children or some nice gifts to organizations that you feel strongly about. Retirement also means that you have more time to give to endeavors that you feel really, really passionately about.

The story of Matt Mitchell, the car salesman that Dayton counsels, appears throughout the book. Dayton himself has basically donated his time as a personal finance coach for decades, so he discusses how he walked his pupil through the steps toward financial freedom. I liked how this book showed that you can focus upon more than one thing at a time because compounding is an important and powerful aspect of investing. This is actually not as common in personal finance advice as you might think. Those who start with just saving a few bucks regularly early in life will actually be better off than those who save up more of their income later in life.

Some Jobs Aren’t Worth It

I also liked the argument for having a single earner for many couples. After paying for child care and additional clothing, food, and transportation expenses, Dayton shows how one working wife earned an effective wage of $0.64 per hour on $18,000 of gross earnings over the course of a year. Many people don’t look at it this way, but it’s the rationale we used when my wife decided to stay at home with the kids. Low real earnings like this are also all too common. Overall, Your Money Map did a good job of showing how disciplined people can achieve financial independence over time.  If you’d like to check out this book and read it for yourself, I’d encourage you to scroll up and click the link near the top of the page

Disclaimer: If you decide to sign up for various programs or buy products from my referral links, I may receive compensation. You can get the same great benefits from just going to the websites themselves, but I definitely appreciate your support. It’s one of the ways I’m able to earn money in pajamas while helping others do the same. 

Emergency Fund Edited

October 2016 Passive Dividend Income

Well, another month is nearly in the books. We’re now at the end of October, and now less than two months from Christmas. The market has been up and down over the course of the year, but most people have been able to make money if they’ve stayed invested in dividend-paying stocks. This is the type of investment that I’ve decided upon, as these companies actually pay me to own a part of them.

October was a pretty good month for me, going well in excess of my dividend income from the same month last year.  My dividend income should go up over time, but in the short term, it will probably go down a bit, as I’ve decided to sell most of my taxable holdings. I’ll probably explain this further in another post at a future date. I’ve rolled over a tax-deferred account from a previous employ into a traditional IRA, and I will be putting more money toward that in the future year after reading some really good information on tax-deferral from the Mad Fientist’s web site.  You can look at some cool stuff from the Mad Fientist regarding taxes and super charging your retirement portfolio here and here.  Basically, the less that you pay in taxes means more capital for saving for retirement. Therefore, I’m going to shift my focus up a bit and use my taxable account as more of a (hopefully) growing emergency fund that pays out a growing stream of dividends while I wait to need the money while leaving my IRA (and possibly other tax-deferred accounts) to grow until retirement.

Overall, I had four great companies that paid me over the course of October. Three of these should continue to pay me into the future. I trimmed Coca-Cola, but I completely sold out of Bank of Nova Scotia, although it will be on my radar for future purchases in a tax-deferred account. I’ve decided to utilize Loyal3 for my taxable purchases because of the low (i.e., free) transaction costs. I will also up my average purchase through TradeKing, which charges only $4.95 per purchase, to between $500 and $1,000 per transaction to keep the fee below 1%. You can sign up for TradeKing here and possibly get a $50 bonus after meeting some funding and purchasing requirements. I use TradeKing for my non-Loyal3 purchases.

Without stringing you along, here are the great companies that paid me during the month of October. I’ve broken them down by taxable and retirement accounts.

Taxable Accounts

Coca-Cola (KO)                                       $4.19

Kraft-Heinz (KHC)                                $0.34

Bank of Nova Scotia (BNS)               $5.11

Retirement Plan Dividends

General Electric (GE)                            $4.60

TOTAL Dividends for October       $14.24

These dividends bring my total dividend income for 2016 up to $116.17, and my $14.24 for the current month showed a 144 percent growth rate on a year-over-year basis. I should be ahead of this next year at this point again, if all goes as planned and I am able to continue putting more capital to work over time. Because of the stock sales that I noted earlier, my estimated dividend income for the coming year dropped to $130.31, but again, this should go up and exceed where it was as I make periodic purchases within my IRA. I plan to purchase between $500 and $1,000 a month until my transfer amount runs out. If the market crashes and burns before that, I’ll accelerate the purchases, as the best time to purchase stocks is the same as most as just about any other purchase–when they are on sale.

How did your dividend income look in October? Let me know in the comments.

If you’d like to keep up with my dividend income over time, feel free to go to the top of the page and follow me. You’ll only get emails when I actually make a new post, which is usually around five times in a month. In other words, your inbox will not get inundated with random emails.

Disclosure: I am long all stocks mentioned with the exception of BNS, which I sold in October.

Disclaimer: I am not a licensed financial professional. Be sure to do due diligence before investing in securities. This article is not a recommendation to buy a specific company. It is only for educational/entertainment purposes.

 

 

Emergency Fund Edited

Avoid the Christmas Debt Trap With Online Earnings

Debt Is Not Cool

Debt is NOT cool. It can strangle the life out of people. It basically makes you a slave to your lender. Staying out of unnecessary debt is one of the most important steps to take toward financial freedom, because debt brings interest payments that hurt your cash flow. If you pay cash for the things you buy (or pay off the credit card bill in full each month), you’re automatically saving any interest you would have paid had you gone into debt.

Some debts are better than others. For example, a home mortgage can be a “good” debt because buying a home on credit with a mortgage can actually cost less on a monthly basis than renting in many markets. Every dollar that you pay toward the principle of the home loan will also build up your equity, which is a major component of net worth. Student loans can be a “not-quite-so-bad” debt, as long as it is manageable because a degree can lead to higher earnings over time. Most other debt is pretty crummy because it forces you to pay more than you would normally pay for the items you buy on credit.

The Christmas Debt Trap Is Super Not Cool

One of the absolute worst sources for major debt is Christmas debt. Christmas doesn’t really sneak up on people. It shows up at the same time every single year. It’s always on December 25, year in and year out. It should not be a shock. Americans (and people of other nationalities who celebrate Christmas) tend to spend lots and lots of money at this particular time of the year for just about anyone that they come into contact with.

Of course, this is a slight exaggeration, but the average person who goes into debt for Christmas presents takes until April until the debt is paid off. Instead of paying the retailer for the full price of these presents, lots of Americans tend to also pay a nice little chunk to a bank for the privilege of using the bank’s money for the presents.  The bad thing about the Christmas debt trap is the fact that many kids will play with the boxes and other wrapping for as long as they do the toys that are within the packages.

Avoiding the Christmas Debt Trap With Online Earnings

One of the major purposes of this site is to get people (AKA you) to think about ways to increase your earnings so that your financial situation will be a bit less constrained outside of self discipline. One of the benefits of earning more money is more flexibility. Earning extra money before Christmas should allow you to pay off the bill for presents before the credit card comes due, which is a good thing. If you have any left over after buying for everyone on your Christmas list who’s avoided getting on Santa’s naughty list, that’s a great thing.

The first step in avoiding the Christmas debt trap through online earnings is setting up some goals for actually earning the money.  This will require investigating some of the leading places for making money online. If you’re just a few weeks from Christmas, sites that allow for instant or near-instant redemption of funds would be preferable. If you have longer, you can also start looking into sites that pay once a month to maximize your earnings. Here are some of the top options that can allow you to earn some money for Christmas (and all year ’round, for that matter).

Online earnings can help you avoid the Christmas debt trap.
Here’s a check that I earned from CashCrate

The second step in avoiding the Christmas debt trap because of Christmas gifts is actually signing up for some sites that allow you to make some money pretty easily. Here are some sites that I’ve used to some success over the past few years. I’ve even earned more than $1,000 on a couple of them in my free time, much of it while I’m watching TV in my recliner.

Sign Up For Swagbucks

My favorite site is Swagbucks. There are several options to earn money pretty quickly here, and you can cash out when you get up to 500 SBs (the digital currency on Swagbucks) for a $5 Amazon.com gift card.  I usually save up for a $25 redemption in PayPal cash. You can read my review of Swagbucks here.  I’ve earned more than $1,300 from this site.  Kids as young as 13 can start earning money on Swagbucks.

View Webpages For Money On Clixsense

I’ve also been using a site by the name of Clixsense recently. I’ve already redeemed three times, and you can earn money pretty quickly by just clicking on links and viewing the website for 15 or 30 seconds. I actually view the TV while I’m clicking. I’ve not reviewed the site on this blog yet, but I can say that it definitely pays.  The first payout has to be by check and reach $10, but subsequent payments can go on PayPal after reaching $8 and take only 2-5 business days to go through. You can sign up for Clixsense here.  You have to be 16 years of age to set up a Clixsense account.

Try CashCrate

I’ve earned more than $1,000 from CashCrate. This is one of the oldest websites that allows users to complete various tasks. This one only pays out once at the beginning of the month and requires $20 in earnings. I’ve done a more in-depth review of CashCrate here.  One guy that I’ve seen on another site has earned nearly $160,000 from CashCrate, but that would take lots and lots of referral income. A few bucks here and there each month is more likely.

If you’re looking for more ways to earn money online, you might like my list of Thirteen Ways to Make Money Online Without Spending a Penny, but the three listed above are likely to earn money pretty quickly.

Online Earnings Can Pay As Well As A “Real” Job

Some people will complain that it takes quite a bit of time to earn much money. However, it’s important to remember that there are costs associated with going to a day (or evening job) that quickly cut down on your actual income per hour of work, especially if you’re a mom or dad who only makes minimum wage or slightly higher. I recently read a personal finance book** that showed that a wife with kids who worked at an $18,000 per year job only pulled down $0.64/hour when accounting for additional clothing, transportation, and child care costs.

That’s hardly worth going to an office for 8 hours a day. You can make that much or more online pretty easily without even having to leave the house. That’s why I’ve been into earning money in pajamas for the past few years. It’s definitely been very beneficial to improving my standard of living, and by making a few hundred dollars over the course of the year, you can avoid the problem of getting into the Christmas debt trap from buying presents altogether.

*Disclaimer–I may earn a referral commission if you sign up for some of the programs that I cover on this site. I’ve actually used all of them and have gotten paid. You can still earn from the sites without using my link, but I definitely appreciate any support that you give.

**Howard Dayton, Your Money Map: A Proven 7-Step Guide to True Financial Freedom (Chicago: Moody Publishers, 2006), 95-96.

***If you’ve enjoyed this post, be sure to sign up to receive future articles in your inbox. You can sign up near the top of the page with a box on the left toolbar. You can also follow me on Twitter.

 

Emergency Fund Edited

Sweepstakes for 100,000 United Miles and $2,500

This offer is no longer available.

I frequently read travel blogs to keep up with the latest offers to earn points and miles that can supersize my frequent flyer accounts and hotel loyalty programs. This morning, I checked out the Mommy Points blog to see if there was any good information. Apparently, there is an opportunity to earn 20 points per dollar of spending at some 20 or so impressive retailers like Nike. The offer is available at the United Airlines shopping portal.

The Eiffel Tower in France
The Eiffel Tower in France–It’s possible to get here with United Airlines miles.

I dutifully checked out the United Shopping portal to see what retailers were really going to benefit shoppers, and I was hit with a pop-up immediately. It was an opportunity to enter a sweepstakes for 100,000 United Airlines miles and $2,500. Of course, I decided to enter the sweepstakes and clicked on the link. From there, I was asked for my Mileage Plus account number and my password. After entering this information, I got a message that said that I was entered.

Of course, it’s not terribly likely that I’ll win the sweepstakes, but it only took a few seconds to look up my account number and fill out the form. If I do happen to be the lucky winner, I’ll be sure to let you know. The possible pay-off was definitely worth it, as some travel bloggers value UA miles at around 1.7 cents apiece. When added to the cash payout, this could really be a big payoff. I don’t know how long the sweepstakes will be available, so it might be a good idea to head over the the United shopping portal to get your entry in.

If you’re wondering what 100,000 United Miles could get for you, there are several options that include:

4 round-trip tickets in the continental US

1 off-peak round-trip ticket to just about anywhere in the world–as long as you’re OK in economy.

There are also several options for a one-way business-class seat that you could get with 100,000 United Miles

I’m all about earning extra income where possible, preferably while sitting in the comfort of my recliner, and I also like to travel. This is where building up a nice stash of miles and points can come in handy. As I’ve pointed out before, just this year, I’ve been able to take my family of four to a couple of European capitals and Mexico with frequent flyer miles and hotel points.  I’d not be able to travel nearly as much without these great benefits, so I’m all about maximizing them when possible.

 

Emergency Fund Edited

Taking the Long View of Personal Finance

Do you want the bad news first, or would you rather have the good news? I’ll start with the bad news. Most people in the United States live for today. The average American is deep in debt, and this debt can really lead to many difficulties in life.  A person’s savings rate is the leading indicator for future wealth. This indicator reached an all-time high of 17 percent of income back in 1975, but by July 2005, the rate was at an all-time low of less than 2 percent. Today, the savings rate for the average American has reached 5.7 percent, which is three times what it was just a decade ago.  The good news is that there are some pretty easy steps to take to improve your personal savings rate and shore up your finances.

The reason for this increase is probably related to what happened between 2005 and today–the Great Recession.  People were shaken by the sudden crash of the economy. While a savings rate of between 5 and 10 percent might seem impressive given where it’s come from just a few years ago, it’s still not all that great. The popular site Mr. Money Mustache has a pretty amazing article on “The Shockingly Simple Math Behind Early Retirement” that looks at how the savings rate can determine how long a person has to work.  A person who saves 5 percent a year will have to work about 66 years to be able to retire comfortably. Fewer teenagers are working today, so this means that a 20-something who starts to work today will need to work until about age 90 before they can let someone else take over their job.

This math presupposes that there is no pension waiting on a worker and that the doomsday scenarios of Social Security that claim it will pay nothing at sometime in the not-too-distant future will come frighteningly to fruition.  This means that the savings rate of American workers is woefully short of what it needs to be. Even the record savings rate in the post-1959 world that was noted above will require quite a bit of work. A 17 percent savings rate means that a worker can retire right around the “traditional” retirement age after working approximately 40 years, again assuming that there is no pension or Social Security payment coming. Needless to say, this is not a terribly comforting situation.

These numbers are why it’s important to take a long view when it comes to personal finance.  Those who fail to plan actually plan to fail, so getting some goals together is a good idea. I don’t know about you, but having to work until 90 would mean that I’d probably be dead before I can afford to quit working on a full-time basis.  That does not seem like a terribly enjoyable path to take. The time to start planning for retirement was 10 years ago. However, if you didn’t put in the effort to plan 10 years ago, the second best time is now.

This is where earning money in pajamas proves to be a great idea. If your main gig barely pays the bills, there are exactly two ways to save money (outside of having a long, lost extremely rich uncle give you a massive inheritance or hitting the lottery, which is a losing proposition because the house always has to win). These first of these two realistic methods is cutting expenses. With the number of high-paying jobs not being what most Americans might wish, keeping expenses down is definitely an important step to take to ensure that you can build wealth over time.

The second option for saving more money involves finding other avenues to make money. With the advent of the Interwebs, the opportunities for making more money are quite extensive. Here are 11 such options that I’ve shared before for making extra moolah online .  Few jobs require employees to work every waking hour, so most workers will have several hours each week to earn more money. The best part about utilizing the Internet means of making money is that you don’t have to leave the house. You can literally sit around in your pajamas on a Saturday afternoon and make a bit of money while watching football. If you have a connection to the Internet, there is absolutely no reason why you shouldn’t attempt to make more money. The link above has some great ways that I’ve been able to make money. I’ve used a few to make more than $1,000.

It’s important to take the long view of personal finance when thinking about making money online because it’s easy to get discouraged. A few hundred dollars a year might not seem like much, but your future self will appreciate that your current self decided to save some money for the future. I’ve noted before that saving just a dollar a day between the ages of 16 and the “normal” retirement age of 65 will yield an account of around $286,000 if an 8 percent return can be realized.  The power of a simple dollar can be quite amazing.  If you can raise this amount to $2 a day in additional income that you can save, you’ll have around half a million by retirement. Only $4 a day will lead to a cool million by 65 if you can start at 16. Discipline is important through all of this, and it’s important to stay in the market.

Those who are able to engage in both of the strategies listed above can super-charge their trek toward retirement. Cutting $4 in spending each day and then making just $4 extra per day and then saving the $8 would lead to nearly $3000 in savings after just a year and nearly $2 million over a 50-year period if you were able to earn an 8-percent return. Those who do not have 50 years to play with can still make some major progress with just a few small tweaks. Even if you’re only looking at 20 years until needing the money, you’ll still be way ahead of what you would have should you never have started to begin with. The time to start making some money in pajamas is now. The sooner you do, the sooner you can start saving and taking advantage of the compounding process.  Thinking of the long terms is the only way to make this happen, however, so be sure to get started today.

Disclaimer: I can receive compensation if you sign up for some of the programs that I’ve reviewed using one of my referral links. I definitely appreciate the support, but in the interest of full disclosure, you can still get the the same benefits without using my link. 

If you’ve appreciated or otherwise enjoyed this post, be sure to sign up to get updates when I post any new articles.

Emergency Fund Edited

September 2016 Passive Dividend Income

Yesterday was September 30, which means that today is a new month. Now that it’s October, I can review the month that was and calculate the dividend income that I earned over the course of the month. This is usually my favorite post of the month, because it keeps me accountable and motivated to see a growing stream of passive income going into the future. As I’ve said many times, passive income is the best income. The third month of the quarter tends to be heavy on the dividend side for most investors who focus on income. This has to do with when the companies that pay out the dividends decide to reward their shareholders.

I put $156 of additional capital to work in my Loyal3 account during the month of September. $145 of this was new capital, while $11 was a deployment of accumulated dividend income into Unilever (UL) stock. I noted this small purchase in my post about using dividend income to buy more dividend income. I did not add any new capital to my TradeKing account, but there was a reinvestment, which I’ll get into below.  I did make a purchase in an IRA, and I’ll be discussing this new account I’ve opened in future months.

Without further ado, here are the companies that paid me during the month of September:

Wal-Mart (WMT):                                         $3.65

Unilever (UL):                                                  $0.17

Kellogg’s (K):                                                    $0.75

McDonald’s (MCD):                                    $3.96

Royal Dutch Shell (RDS.B):                      $10.34

TOTAL for September 2016:               $18.87

This total was a new monthly record, albeit, it was only $0.05 more than the amount I received in June. Part of the reason for this was a strange method that TradeKing used to pay out the RDS.B dividend in June. They paid out in RDS.A shares, but it then seemed that they cashed those out because they went up in value. I earned more than $11.00 in June, when I expected only $10.34.  I’m not complaining by any stretch, but it does explain why there was only a small increase.  My most recent dividend from RDS.B bought me an additional 0.206 shares in RDS.A through the dividend reinvestment.

With my September dividends, I am now up to $101.93 in dividend income for the year.  My forward dividend income for the next 12 months should be right around $228.79, which is nearly $20 per month.  That means that I’m just about to the point where I could replace one hour of work each month from my dividend income alone. In the year-to-year comparison, I earned $16.89 more than I did during the same month last year. This was an increase of 853 percent over just one year, not quite as high as my year-over-year increase for August, but I must say that I’m thrilled with this increase. Hopefully by this time next year, I’ll be way ahead of where I currently am in terms of passive dividend income. How was your dividend income over the past year?

If you’d like to keep up with my dividend income over time, feel free to go to the top of the page and follow me. You’ll only get emails when I actually make a new post, which is usually less than five times in a month. In other words, your inbox will not get inundated with random emails.

Disclosure: I am long all stocks mentioned.

Disclaimer: I am not a licensed financial professional. Be sure to do due diligence before investing in securities. This article is not a recommendation to buy a specific company. It is only for educational/entertainment purposes.

Emergency Fund Edited

Using Dividends to Buy More Dividends

One of my long-term goals is to build up a decent amount of wealth that can produce a nice level of passive income over the long haul. While I’m not likely to get to the $1 million per year in passive income, I believe that several thousand, if not tens of thousands in annual income, is definitely doable over the next couple of decades. When trying to earn money in pajamas, one of the best ways to make this happen is through dividend income. This is passive income that accumulates as a return on capital from allowing great companies to use said capital to operate and grow their businesses.  As I’ve said before, passive income is the best income.

Earning more money is always a good thing. The bad thing about earning more money is the time that it usually takes to do so. There are, however, some strategies that can be used to make more money without putting in any additional effort. Investing for dividends is one such strategy. Here is an article that lists three great reasons for investing in dividend paying stocks. The final reason is key. Even stable dividends pay out more over time. “How can this be?” you might be wondering. The answer is simple–COMPOUNDING.

There is one step and one step alone that is required to compound the your gains, provided that the dividend is left stable by the company paying it out. This one step is reinvesting. There are a couple of different avenues that can accomplish the reinvestment of dividends. The first is through a DRIP program. The DRIP stands for Dividend ReInvestment Program, and in this situation, an investor automatically reinvests the dividend into additional shares of the company that originally paid out the dividend. This will basically increase the dividend payout by the annual yield. A dividend yield of 3 percent that gets reinvested will see the annual dividend payment raise by about 3 percent over the course of a year because the number of shares that our hypothetical investor has should increase by about 3 percent. This is an increase in income that’s more than inflation has been over the past few years–all without lifting a finger.

Several brokerages, such as TradeKing, allow you to automatically DRIP your dividends into companies that permit dividend reinvestment. TradeKing is currently offering a $50 bonus for new signups under my referral link listed above.  You would get $50 for meeting the requirements, and I would also get $50. You don’t have to sign up with my link to invest through TradeKing, but I greatly appreciate any support you might feel like giving. This bonus could be used to buy a share or two of many great dividend-paying stocks.

Automatic reinvestment is one strategy, but there is another. I use the DRIP in my Tradeking account, but I have to use the other strategy in my Loyal3 account because DRIPing is not an option. This involves stocking up on dividend payments until a certain minimum amount of cash is reached. The minimum investment through Loyal3 is $10, and I pay no fees for my investments on this site. You can check out my review of Loyal3 here.  Those who invest through a TradeKing, Scwhab, or any other investment account can also pool dividends to diversify. It’s probably best to pool until a decent amount of money is available so that you can keep the transaction cost to a minimum. For example, a share of AT & T costs around $40 a share right now. Through TradeKing, if you were to purchase only one share, you’d pay $4.95 in transaction fees, which effectively adds about 12 percent to your purchase price.  It would also eat up more than the $1.92 in dividend income you’d get in the first year. It would be year three before dividend income would exceed your transaction cost. If you were to hold off until you could buy 10 shares, the transaction fee would drop to slightly more than 1 percent of the purchase price, which will definitely help long-term returns.

loyal3-logo

I decided in January to use my dividends from my Loyal3 account to diversify. Any additional purchases would come from new funds, while dividend income would just sit until I reached $10 in the account. During the first week of April, I reached the requisite level to make my first purchase from my dividend income stash. I decided that I would buy shares of Unilever (UL), which is a massive international consumer goods company that produces everything from butter to deodorant. I again started to pool the dividends after making this small $10 purchase, except now, I would be adding the small dividend from Unilever into the equation. My first payment came in June, and added $0.08 to my account.  Admittedly, this was a very small amount of money, but it allowed me to inch toward another purchase a little bit more quickly.

I hit $13 worth of dividends in my account by the first week of July, as my payment from Coca-Cola pushed me across the necessary $10 threshold. Again, I put the accumulated dividends toward more UL. Last week, I got my second payment from Unilever, and it was up to $0.17 over the course of a quarter, still not a huge amount, but an increase over the course of three months that allows me to edge ever closer to another purchase. This morning, I awoke to find that a dividend payment of nearly $4 from McDonald’s had posted into my account. This brought my account total $11.49, and I made my third purchase of Unilever stock for $11. If all goes according to plan, I will see a payment of around $0.25 for the fourth quarter in December.

I admit that I’ve put more capital toward my account with Loyal3 over the past nine months, but it’s been great to see that my dividends are growing and allowing me to purchase additional dividends. Even if I never added any additional capital to my account, I should be able to grow my dividends as companies decide to give dividend increases and I reinvest my dividends. This is the power of compounding. Of course, I’m hoping to have enough capital available to pay my bills and to invest each and every month going into the future, but seeing additional dividend income come in without doing more than making a few clicks and keystrokes is positive reinforcement. It’s exciting to see my dividend payments going higher and higher over time.

Disclaimer: I am not a financial advisor. This article is not a recommendation to buy any security. It is intended only for educational/entertainment purposes.

I am long all stock listed in this article.

If you’ve found this article interesting, be sure to sign up to receive updates to the site at the top of the page. You can also follow me on Twitter.

Emergency Fund Edited

August 2016 Passive Dividend Income

Another month has come and gone, and again, it’s time to look over the past month and figure up the passive income that I’ve earned from owning great companies that are willing to return some of the capital that I’ve invested into their success.

I’ve decided to invest in companies that pay dividends, as those companies that are able to increase revenues and earnings over time are also able to increase the amount of their dividends. This is an example of my having my money working for me. This was the first month that I’ve been able to compare my dividend income on a year-over-year basis, as I “earned” my first dividend payment in August 2015. I have earned in quotes because I earned the money that initially went toward the  investment, but I did not have to put in any additional effort to get this passive income. My dollars are working for me, and over time, they should be able to earn even more, hopefully to the point that my money makes more than I can.

I received dividend payments from four companies in August. I received a payment from one new company, as well. Without further ado, here is my dividend income from the month of August 2016:

Starbucks (SBUX):                           $0.18

Apple (AAPL):                                    $2.57

AT & T (T):                                             $6.94

Omega Healthcare Inv. (OHI): $3.60

TOTAL for August 2016:           $13.29

This dividend income brings my total for the year up to $83.40 for the year, which is more than $10 a month. Furthermore, this dividend income for the month was $4.11 more than the dividend income I received in May. This equaled out to nearly a 45 percent increase in just one quarter.  When looking at my dividend income on a year-over-year basis, I went from $0.64 in August 2015 to $13.29 in August 2016. This equals out to a 1976 percent increase in just one year. Obviously, this will not be likely for every year in the future, but it is a nice increase to say the least.

Another point that I’d like to make regarding the dividend income I received in August. I am able to DRIP my dividends in my TradeKing account. This allowed me to purchase 0.097 additional shares of OHI and 0.160 shares of T. My additional fractional share of OHI will add $0.23 to my annual dividend income, and my additional fractional share of T will add $0.31 additional dividend income. These are not huge increases, but over time as they add up, they will make a difference in my dividend income.

My current anticipated annualized dividend income $204.64 after having purchased some additional OHI in an IRA that I rolled a former employer-sponsored retirement plan into. That’s about $17.05 a month on average. I’m getting closer to being able to take an hour off each month (figuring that I need $20 per hour to replace working income after noting that I won’t be paying out nearly so much in taxes at that point).

My dividend income is definitely an example of earning money in my pajamas. The companies that I invest in are making money around the world at any given time of the day. How was your dividend income in August?

Disclaimer: I am not a financial advisor. This article is not a recommendation to buy any security. It is intended only for educational/entertainment purposes.

If you’ve found this article interesting, be sure to sign up to receive updates to the site.