Getting Rich A/O Retiring: The Hidden Gem In Stocks (For The Little Guys Like Me)

If you haven't already, jump on over to my previous post about stocks here, especially if you're new to the stock market.

This one should be a quick post (I hope). I want to tell you how you can earn money doing NOTHING, literally nothing. This is the definition of passive income. This is how the rich people do it. Oh, and you don't need to hound people on social media, or have a blog/site/store/YouTube channel.

No way Mary, you say. If it sounds too good to be true, it probably is. Probably. But what if it's not? Hear me out. I have 2 words for you.

One: Dividends. Have you heard of this word? This is a payout made to shareholders based on the value of the business.

Two: Snowball. I'm not talking about winter here. I'm talking about the snowball effect.

There, now that you have an idea of where I'm going, let me lay out a map for you.

First off, Google search 'Dividend paying stocks'. The reason I'm having you Google it instead of posting here is because the stock market is constantly changing, and chances are I wont be updating this particular post to keep up.

Find a stock you like. Buy in. Get one, get seven, get twenty, get one hundred. I don't care, that will all depend on your budget, and ultimately, your goals.

That's it! Now watch the money come in. Try not to pay too much attention to the actual value of your stocks, as those can rise and fall all the time. Obviously you don't want your stocks to pit, but a 2% rise or drop shouldn't make you worry.

When your dividends have paid out enough to buy another stock, consider re-investing those profits to create a snowball effect and earn even more money, even faster.

A very basic example.

Let's say ABC Company has ETF's at $10 per share. And I buy 20 shares, for a total of $200.00 Now lets say each stock has a 5% yield (the app I mention in my other blog clearly displays this so you don't have to do any guess work). That means that each dividend will pay $0.50 per share. Let's make it easy and say they only pay out yearly (some pay monthly, some do quarterly, but in the end that doesn't matter too much). With 20 shares, I would earn $10 per year. That means after 1 year, I could buy another share with my dividend payouts. Now let's do some quick math.

First, I deposit $200.00 to buy 20 shares from ABC Company.

After a year, I now have my $200, plus I earned $10 in dividends from 20 shares. I also deposit another $200 that year. I buy more shares with my dividends and the new deposit. My total is now $410, with 41 shares.

Year 2= $410/41 shares + $20.50 dividend payouts + $200 deposit = $630.50 or 63 shares and $0.50 spare.

Year 3= $630.50/63 shares w/$0.50 + $31.50 dividend payouts + $200 deposit = $862.00 or 86 shares and $2.00 spare.

By Year 5, you would have a total of $1360, or 136 shares. $1,200 would have been from deposits, and $160 would have been earned through dividends.

Thats not much, but then again you did deposit less than $1.00 per day.

Lets say you did the same thing, except you deposited $100 per month. You probably pay that much for your cell phone, or internet, or some other bill already. And I'm willing to bet your phone and internet don't pay you (if only!).

Anyways, let's use this as a retirement example. Let's say you want to retire in 30 years. You initially deposit $200.00 when you open the account, and then $100 per month after that, for 30 years. By the time you retired, you would have put in $37,400 yourself, and earned $43,191 in dividend payouts. Your shares would be worth a total of $80,591 and pay out $4,029 per year without you investing any more. Plus you would still hold that $80K as well.

Obviously you would have to play around with numbers to suit your goals. For myself, with the shares I hold, I need to deposit $300 per month to be able to retire at age 61 alongside my spouse and have enough to cover all of our expenses as well as extra funds for vacations and emergencies up until the age of 90. Really that's only $150/month each. Not bad eh?

To easily calculate your profits/value over a time period, use this calculator. Once you've entered your numbers, scroll down for a chart that lays out all the details for you.

Happy investing and enjoy your passive income! If you have ANY questions, drop a comment, I promise I will respond. If I don't have an easy answer, I'll write a whole blog post dedicated to your question!