One of the things about being an amateur blogger and personal finance geek is that we don’t have to pretend to know everything. I really don’t know that much about investing but I don’t have to and I can still meet my goals by copying what others are doing. I’ve been reading financial blogs since the beginning, and in fact started another personal finance blog over 10 years ago before selling it a few years back. During the first few years of owning that blog I spent hundreds of hours reading and linking to other great PF bloggers and gained an incredible amount of “basic” knowledge about how to manage our money, increase our net worth and choose investments that didn’t require tons of research and risk (low cost index funds). We’ve been paying ourselves first for more than 20 years and the results have worked out pretty well. For most of those 20+ years I never really paid attention to the dividends we were earning and in fact some of our funds don’t actually distribute dividends but rather the value of a share in those funds just continues to increase so it’s really hard to notice that we were indeed earning a return on those funds.
In the last 5 years I’ve been paying more and more attention to dividends because I know they’ll be a variable in how our investments provide annual income for us once we stop working. At the end of 2016 I tallied up each and every dividend we earned and was pleased to see that we earned about $16,000. We earned (and reinvested) more money from dividends than most people contribute to their investment accounts each year. When you add that to all of the actual contributions we were making it’s not hard to see how we were able to increase our net worth by such a large amount. Our new goal is to try to get the dividends up over $20,000 per year. We’ll do that by buying a few individual stocks to go along with our index funds. We already have a few and have seen some nice gains and dividends from them. From a risk perspective we are not buying very many and are keeping individual stocks to less than 10% of our overall net worth.
Another data point I’ve been tracking is how much we’d have in investments if we were to sell our primary residence, invest those funds and move to our second home that’s paid for in a more rural area of our state. Right now we would have roughly $1,250,000 in investments if we did that. If I use the 4% rule that would give us about $48,000 a year before taxes with very minimal expenses. We could literally pull the trigger on retirement now but would have a few risks such as health care and a bear market weighing on our minds. We’ve decided that we need to try to squeeze about 5 more years out of our careers, which would put us at just over 50 years old. At the current rate, that means we’d be saving an additional $100,000 a year which could generate an extra $4000 per year in income when we retire. 5 more years of work for an extra $20,000 a year in retirement income seems like a good plan. Of course, lots of things could change between now and then but we’ll keep chugging along either way.