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 the 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.