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Living Off Dividends: Is It Your Dream?

Updated on February 15, 2012

There are many different types of residual income one of the best ones I have found is through investments into stocks that pay dividends. Living off dividends can become a reality if you research and learn about each investment before putting your money into them. There are no shortcuts to investing, so doing the proper research is essential to make the best return. The goal we are going for here is to generate enough income in dividends to replace our monthly income from those options through investing.

Before, we can replace out monthly income through dividend investing we first must understand what dividends are. Basically, you purchase a stake in a company called a share. Then after each month, quarter, or year that the company will pay a percentage of the profits earned on that share to you. This percentage is called the dividend.

There are three basics types of dividends you can invest in.

1. Stock Dividends

2. Cash Dividends

3. liquidating dividends

You can have a combination of these types of dividends or you can have just one. But, it is better to diversify the type of dividend income you are using. This obviously is going to take some time and not everyone has the money right off to put into dividend paying companies and start living off the income. So, the best way to start is by something called “dripping” You can take as little as 25 dollars a month and have it automatically invested for you in a dividend paying stock. This small amount over time will grow significantly. If, you want to as well the ones that you already own will continue to grow so take the dividends and reinvest them into more shares of the same stock.

Do not to for get to include dividends of money you put away into savings accounts or money market funds. It is up to you on this particular income but if you can afford it and can do without the money for awhile then putting it away into those other dividend stocks will earn a lot more for your return. So, when you are ready to start living on off these dividends on the time frame you have set then there will be more for you to live off.

If, your goal is to live off dividends then getting there is half the fun. But, it takes hard work and commitment to get to the potion you need. This may mean going without that extra soda every day or that cup of coffee. You can take that money and put it into dividends. That is how I started I took the money I was using to buy cigarettes and put it into my investment account to invest in dividend stocks. Not, only was I more motivated to quit smoking I was increasing my growth and income from dividends. No, matter how you want to try and get the most out of those income stocks.

The main benefit of living off dividends is that, it gives you freedom to enjoy fruits of other's work. It is that you don't have to work for others but instead they work for you. By this, you are earning passive income. Some people may say that, it is risky to live like this. Yes, it is true but every business carries a risk. If you do not want the risk, then you can go for other means of dividends.

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