Investing takes sacrifice and hard work. I have made it a goal to build a sustainable income stream from dividends paid out by stocks. In order to reach my goals, I need to make personal financial sacrifices to get there.
As a small investor, one of the hardest parts of building a portfolio of dividend stocks is funding it. Most of us don’t have thousands and thousands of dollars lying around waiting to be invested. If you are like me, you probably have to rely on making small investments throughout the year.
We are a single income family that lives within their means. However, we don’t have a ton of money left over every month to invest. So how to I find the money to invest?
Here are 5 ways that I find extra money to invest throughout the year that may help you as well!
1 – Take Another Look at Your Budget
I am not going to tell you to cut your cable bill or sell your car and start walking to work. However, it is a good idea to look at your monthly budget again. You may be surprised of ways to get a little extra out of it each month.
For example, I recently found a few recurring expenses for services we no longer use. I would have liked to say I cancelled them when I should have – but I honestly forgot. After cancelling them and adding them up – it came out to about $40 per month in savings. Since I had been use to paying for these in our budget in the past – I simply routed that money into helping to fund my dividend stock portfolio.
Maybe you won’t find any savings in your budget – but it never hurts to look again!
2 – Earn Some Side Income
Probably easier said than done if you are trying to balance a full-time job and a family. Nobody wants to spend more hours working. However, if you want to see the long term benefits of building a dividend income portfolio, then you need to make some sacrifices.
Side income could really be anything other than your full-time job. Back several years ago I was earning a couple hundred dollars in ad income from my blog (Passive Family Income). Every month I had a plan to use at least half of these earnings to fuel my portfolio. I actually built a sizeable position in one stock from all of these earnings. Today, that stock accounts for $115+ per year in dividends.
Most of those earnings from my site have long dried up but I have branched out into other ways to earn some extra income.
3 – Treat Your Investment Like a Monthly Bill
Cable bill, mortgage, car payments, grocery bill, utilities, etc. Those are common expenses that you are probably use to by now. Why not add another bill to your list that can actually benefit you in the future. Consider creating a new monthly bill for yourself to fund your dividend account.
It could be as small as $25 or $50 a month to get started. Any little amount will do. All you need to do is set up an online savings account if you don’t have one already and add a small recurring deduction into this account every month. Before you know it, you will have a couple hundred (or thousand) dollars saved up to invest.
When I first started building my dividend income portfolio, I did just that. I started with a deduction of $50 every month into my account. When I had a couple hundred dollars in the account, I transferred it to my brokerage account. It was great because the money was sitting there waiting to be invested.
At first I missed that $50 because it meant making a sacrifice (one less night out). Over the past 4 years I have actually expanded that amount and try to make a payment to myself of just under $500! Small sacrifices overtime really can add up.
4 – Tax Return Money
Every year it seems like our family gets a large tax return back. Eventually, I should probably adjust our withholdings coming out of our paychecks to have this money sooner in the year. For now though, I just prefer getting the lump sum every spring.
What do we use this money for? My wife and I decided long ago that we would help pay for our children (now 3 of them) to go to college sometime. So every year when we get our tax refund, we use the money to help fund our children’s 529 plans.
One alternative to investing in these 529 plans would be to invest it in dividend paying stocks instead.
What about you? If you get a tax refund back this year – what are you going to spend it on? One option that could pay off big-time in the future would be to invest it in some dividend stocks or other investments.
5 – Interest from Other Investment Accounts
Do you have any high yielding interest accounts? If so, you could potentially use your interest earned to help fund your stock purchases. Interest on savings accounts, certificates of deposit, or even capital gains earned from the sale of investment could be used to help fund stock purchases.
For example, my wife and I have our long term emergency fund set-up in low-risk certificates of deposit. Each year, we earn about $1,000 in interest from these accounts and had been rolling the income back into additional accounts. If interest rates remain low, then investing in the stock market with this money could be a better option this coming year.
Even if you are earning $100 (or less) a year in interest, you may want to consider using this as “seed” money to add to your dividend income portfolio.
There really is no excuse for not being able to invest – unless you are totally in debt. The best thing for you then is to pay off your debt first before thinking of investing. However, if you are not in debt, then there are plenty of ways to start setting aside money to invest. You just need to be a little creative is all and make some personal sacrifices along the way!
You don’t need a ton of money to start investing. The key is to start and get some momentum going in your favor – even if it is investing $10 a month. Just starting out? Here are some tips to help you start investing.
What other ways do you find money to use for investing? I would like to learn what works for you.