Replacing Work Days To Achieve Financial Independence

Recently I have been thinking a lot about dividends. I have just bought a stock that will pay me about $50 every year as long as I hold it (and most likely increase). I was thinking about how much I like that, how it got financial independence closer. Then I thought about how dividends get me closer to financial freedom, as replacing work days.

I have mostly seen dividends measured against the expenses the person has. So if I reached my goal of $200 in dividends this year and my expenses were $50,000 I would be covering 0.4% of my annual expenses. This is a little disheartening.

I wanted a way to make this seem better in my own I use theĀ  mind. When I think about it I think that living on $50,000 would be more than I could need, I could live pretty well on that. There are 260 work days in a calendar year so that means someone with a $50,000 income (after tax) brings home $192.31 each day they go into work . Now my goal of $200 in dividends this year buys me one work day of freedom. In my first year investing I have replaced one work day.

And you can take it further even. This summer I am working 7:30-4. I am used to longer hours so this is a nice change. I used to work 7-6 every day. I am going to use that as the typical day. I would wake up at 5:30 and get home around 6:30. Work cost me 13 hours of every week day. I am investing money, and all my dividends are working at replacing work days. Thirteen hours of my day were not spent the way I would choose to spend my days. Thirteen hours multiplied by 260 work days means 3380 hours every year I am not in control. While my true wage would be higher, the total time (waking up, preparing, commute, lunch, etc.) I spend that revolves around employment is higher than my paid time, so my “true” wage would be $14.80/hour.

Now my $200 of dividends buys me back 13 hours and 30 minutes.

Any way you spin it, it is still 0.4% of what I need (assuming $50,000 expenses). I need 250 times that to achieve financial independence. But thinking of it in terms of replacing work days or hours makes the effort seem much more tangible.



Comments

Replacing Work Days To Achieve Financial Independence — 20 Comments

    • I thought so. It came to me with about two hours of cutting grass left on a beautiful day. I couldn’t wait to get home to relax and got to thinking how long it would be until that would be possible.

  1. Awesome thinking. I wish everyone thinks same way. I worked for Johnson and Johnson long time ago. I left the company in 1999. I have around 3000 shares. J & J pays $2 per share a year. That gives me little over 6K in income.

    It takes long time to build a nice nest egg, but you can build your financial Independence one day at a time. I love the idea.

  2. I agree with Shilpan and PB, this is a cool new take on the road to FI. You could also move the yard stick in the other direction as well and think “Well if I can also reduce my yearly expenses by say $2,000 to $48,000 that will mean that $200 in annual dividends are now buying me X number of days.”

    • You are right of course. I have no intention of anything close to $50K a year. I think reducing your expenses can be as fun of a challenge as increasing your income. And doing both simultaneously in turn increases your saving rate and your future days of freedom.

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  4. Hi Poor Student.

    I really like your take on dividends as well, and I certainly never thought about it like that. Through the years as your dividends climb, it will be a lot of fun to see yourself pass a week, 2 weeks, a month of work days replaced!

    I need to read more through you blog, but do you DRIP your companies, if available? Each company is different, but DRIPS (dividend reinvestment plans) can help buy you more shares, often at a discount from market price, by reinvesting the dividends into more shares, which in turn generate more dividends. It’s a great way to help your portfolio grow faster with less fees. When you’re ready to retire you simply “turn off” the drips and collect the cash dividends instead of buying more shares.

    • I really can’t wait until I figure out I have replaced another day, and then another, and then another.

      At the moment I am not able to DRIP any holdings except for a mutual fund I have because it can buy partial shares. I just figured it out that I would need about 80 or 90 more shares to be able to DRIP my favourite holding. As soon as I can I will be DRIPing everything I can. As soon as I began looking into dividends I realized they were fantastic. I love buying stocks and ETFs but the fees always hurt. I am really looking forward to having enough shares to DRIP a stock or two so that I can avoid trade commissions.

      Thanks for stopping by and commenting.

      • An FYI: If you have a brokerage account with Schwab or Sharebuilder, they will reinvest any dividends or distributions at $0 cost. I’m sure there’s more firms that offer the same service, but those are the 2 I use!

        • I believe all brokerage accounts will reinvest dividends without commission. I just can’t do so yet because none of my dividends payment are high enough to afford a single share. Thanks for the comment and info though.

  5. Hey, I just found your site – I started uni this year and want to get through debt free. And I’m doing physiotherapy, which is pretty similar too!
    I get a government allowance but I’m saving some of it for the uni fees, also going to find a job when I get back from holidays… and I live in a caravan, which is great at the moment, but can be more expensive than renting a room unless you find some friends who will let you move into their back yard (which it took me about 6 weeks to do) – I still pay rent, but much less.
    Anyway, I really like what you’re writing about, especially with the investing and dividends bits – seems like a fun way of counting.
    Good luck.

    • That is awesome. I have met so many people who want to become physiotherapists. It makes me think I may have a hard time getting a job.

      I have never thought about living in a van. I don’t think it is for me but it must be a cool thing to tell people and is a lot more interesting than saying you live in student housing. Make sure you keep putting a little bit of your allowance away for school and even extra for other things as long as you can. Debt will really weight you down and saving anything you can will help.

      Good luck to you too, thanks for commenting.

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  7. I think you made a mistake.
    8060 divided by 13 is 620. You work 260 days a year, not 620. So it’s 260 day * 13 hours = 3380 hours a year you can’t do as you please. That might give you a slightly higher wage per hour.

    • Well that’s embarrassing. I insist that I am a university student though. You are right, and it makes my true wage $14.80, which is not half as bad as I made it seem. Thank you for pointing it out, but I am going to fix it so I do not look so mathematically challenged.

  8. Interesting way to look at it. I do not have dividend stocks yet, but do have a rental. So far it pays for 13% of my expenses ($30,000 with health insurance), but once we move and get a property manager it will cover much less. Once I am out of school I plan to start investing in dividend stocks.
    Side note, do you mind if I add you to my blog roll?

    • I wish I could afford a rental unit. It is a goal of mine to someday own a house or something to rent out for income. Dividends have a much lower initial cost and I thought it would be best to try and get the compounding effect started as soon as possible.

      I would love to be on your blog roll and be considered a valuable reference for students by a fellow blogger.

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