What Happens When You Invest Half Your Income?
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Just a few days ago, I discussed our plan to bump up our savings to over 25% of our income. We didn’t do a good job at all this year so far … and are paying for it on our road to financial independence.
During the first 10 months of the year, we saved about 15.5% of our income. Not bad … but still not enough to accelerate our net worth.
And when I say “save” … I really mean “invest”.
As you can tell from many of our past net worth reports, we don’t carry a big cash balance. We have been putting most of our savings to work by purchasing dividend stocks.
I guess this is good and bad.
On one hand, we want our money working hard for us day and night … with little work on our part.
On the other hand, we should probably have more cash on hand in case of an emergency. Fortunately, we have a bunch of funds tied up in certificates of deposit that are starting to mature. Those funds basically act as our emergency fund.
Anyways … we are now focused over the next 14 months to invest about $20,000 into dividend stocks. This should raise our annual dividend income projections to about $3,000 per year.
Investing 50% of Our Income
Saving over 25% of our income and investing it in dividend stocks is a great start. But that got me thinking … what if we could do even better?
Now, first off let me just say that under our current lifestyle … it wouldn’t be possible to save 50% of our income. Eventually we could probably do it, but not without making drastic changes.
But let’s just explore the outcome of investing 50% of our income. So instead of investing $1,430 each month (which is about 26.5%), we would need to up our game.
Investing 50% of what we currently earn would require a monthly investment of $2,700.
Multiply that out over 14 months and we get $37,800 in new investments … compared to our current goal of $20,000.
That seems like a huge investment … and it is. But just think about the dividend growth we could see by investing almost $40,000!
I would estimate that if we could save or invest 50% of our income in the next 14 months, we would push our annual dividend income up to $3,900.
That is an increase of almost $900 from our current estimates. Crazy I know!
An extra $900 in dividend income, on top of what we are already planning for would be incredible.
We just need to find a way to hustle and sacrifice to hit a 50% savings rate!
I strongly believe that every family (or individual if you are single) should be saving at least 20% of their income.
My family has recently set a goal to save over 25% of our income. These savings will eventually trickle down into investments – dividend stocks.
Those extra investments along with our current portfolio of stocks should generate $3,000 in annual income!
And while $3,000 in passive income through dividends is great, wouldn’t it be even better to push that number to almost $4,000?
Taking the steps to save/invest 50% of our income would really accelerate our income potential.
How much of your income do you currently save each month? Do you have plans to push it to 50% or even higher to accelerate your income potential?