Some early retirement fans employ dividend investing as a big part of their exit strategy.

Dividend investing can be a great gift to yourself

Looking at Dividends

In case you’re not familiar with dividend invest, it’s  choosing to investing in companies that set aside a portion of their quarterly profits to pay stockholders.

Some reasons to invest in dividend paying stocks include:

• Passive Income Source: As long as you owe the stock, you receive quarterly dividend payments, which is another source of income. If you reinvest your dividend payments, over time you can build quite an income stream for yourself.
• Tax Advantages: Dividend payouts are typically taxed lower than interest income. Less taxes mean you keep more of your money.
• No Need to Constantly Trade: Usually stable companies pay dividends, which means you don’t have to panic and worry about the stocks fluctuating.

You may have other reasons for investing, but I think having another income source is a smart move, especially when you’re young.

Investing Options for Your Money

Where can you find dividend investments? If you’re looking for companies with a proven track record with dividends, consider the Dividend Aristocrats. These are companies on the S&P 500 Index that have consistently paid dividends (and increased them!) over the past 25 years.

You can either invest in the companies themselves (here’s a helpful list) or you can use an ETF (like the SPDR S&P Dividend ETF (SDY)) to grab them all. If you want to reduce the hassle even more, make sure you set up anautomatic investment contribution with your banking and investing company.

You still have to take care of your due diligence when it comes to investing in these companies, but the ability to offer dividends over two decades (through booms and recessions) can be attractive to many investors. When looking at possible investments, you may want to look at the following:

• Dividend yield & Dividend payout
• Dividend Growth
• Dividend Payout Ratio

Your goal is include solid and consistent dividend payers into your portfolio for long term growth. You also want to make sure you set up your dividends to be reinvested to increase your gains.

Thoughts on Investing

Investing isn’t just for the rich. If you’re willing to hustle now, it can pay off big in the long run.  How many of you are investing (not just for retirement)? What’s your investment strategy? If you’re just getting started, don’t forget to check out my previous posts:

• Investing Basics- Get Started!
• What’s Your Investment Strategy?
• What are Some Investing Risks Worth Taking?
• What are Some Investing Risks Not Worth Taking?
• A Personal Story of Risk Taken

Please share your tips in the comments!

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Good Morning Everyone. Today we are continuing on with another budget themed post.  Today we are discussing how to fit everything into our monthly budget.  Regardless of how much money we make we can always make room to fit all of our goals into our budget.

Some people don’t invest because they don’t know where to start.  Some people don’t save because they don’t think that they make enough money, and very often most people spend all of their monthly income.  It’s human nature; we can always find something to spend our money on. The key to sticking to our monthly budget is to spend what is left over only after we invest for the long term, save for the short term, and pay all of our monthly bills.

Saving and Spending with our Monthly Budget

As a general rule we should spend 70% of our salary and save 30% of our total net (after tax) monthly income.  I know some savvy savers who live on only 50% of their monthly income and they save one full pay check every month, however for many of us (especially if we are still in school) this is not possible.  Of course we want to have the least amount of expenses as possible each month, but we don’t want our lifestyle to suffer at the cost of trying to save money.

The key to smart budgeting is to make sure that when we spend money the cost is worth it.  If we overspend in one category of our budget then we have to save somewhere else.  It’s not important (and usually not efficient) to try and micro manage our monthly budget; we have to look at the big picture.  If we pay expensive monthly rent to live close to work or to live in a really nice neighbourhood for convenience then we may not need to have a car or to buy a monthly bus pass.

Our Budget Can Have Investing Too

The 30% of our net salary that should be saved can be divided between saving for the short term in case of an emergency, saving for our 5-10 year goals such as buying a home, as well as saving for retirement.  We should always be saving on a regular basis for the short, medium, and long term; however the percentages allocated to each time horizon depend on our personal goals as well as our age.

If we are very young we may not need to allocate a lot of money towards saving for our retirement, because over the long term even small amounts of savings can add up to large amounts of money over the long term.  We may want to focus on short term and medium term investing when we are younger because we probably have many other personal goals to achieve before retirement.

As we grow older and we start achieving our short term and medium term goals we can start to allocate more of our monthly savings towards retirement because for many of us retirement is our ultimate long term financial goal.

Photo by Borman

Good Morning Green Panda Friends and Happy First Monday of February.  It’s past the first of the month and that means that rent is due, and so are all of our regular monthly bills.  Today we are discussing why it’s important to pay our bills on time and how we can budget our income to make sure that we don’t miss any of our payments.

It’s important to pay our bills on time because our hydro, cable, and electricity bills are a form of credit.  If we miss a payment it can definitely affect our credit score in a negative way.  This past week I had a client come and see me who was retired and living on a fixed income.  He needed help with his budget because he doesn’t have enough income to cover all of his monthly expenses.

When I asked where his money was going each month he said that it was being spent on utilities and maintenance fees to keep his home in the suburbs up and running each month.  I don’t understand why one person who lives alone needs a big house with a pool and a double garage.  Extra space just means extra expenses for heating, cleaning, and up keep.  When I asked him if he wanted to sell his house and downgrade to a more affordable home he said no, he was very happy and did not want to move.

Keeping his home was putting him in debt, and borrowing to make ends meet is never a smart financial strategy.  If we can’t even afford to pay our monthly bills we are never going to be able to afford to pay our monthly bills and repay a loan at the same time. Budgeting is about making sure that we always have more income coming in than we have going out to pay our monthly bills and expenses.

3 Helpful Tips to Make Sure Your Bills Are Paid On Time

1. Make Payments Every 14 days. It is a lot easier to divide our bills into two smaller amounts than it is to make one large payment each month.  It is a lot easier for record keeping purposes to set up automatic payments each month and have our bills directly debited from our bank accounts. However it may not be what is best for our budget.  If we don’t have the money in our bank account to pay the monthly bill in full then our payment will be returned due to non sufficient funds (NSF) and that is very harmful to our credit score.

2. Check The Total Amount Due. Before we make any monthly bill payments we should always double check our last statement.  Even if we miss our payment by $0.03 our bill company will mark our payment as being late; and this will show as a missed payment on our credit bureau.

3. If We Can’t Afford It Then Make Cuts.  If we can’t afford our bills every month there are only two ways that we can fix this problem….earn more income each month or make cuts to our monthly expenses.

Photo by Camera Eye

1. Will Actively Managed Mutual Funds Ever Go Away? @ Canadian Finance Blog.

2. Carnival of Personal Finance 346 @ The Jenny Pincher.

3. How-to Overcome The Fear of Getting Rich Slowly @ TFB.

4. Quit Your Job And Die Alone @ Untemplater.

5. Dividend Investing Will Make You Rich @ IS.

6. How To Set Up A DRIP @ Boomer and Echo.

7. Is It Time To Rethink Weddings? @ Financial Uproar.

8. Are Target Date Mutual Funds Right for You? @ Lazy Man and Money.

9. Can I Get a Mortgage @ Studenomics.

10. The IRS Goes Where The Money Is @ Budgets Are Sexy.

11. Why Does Everyone Want to Buy a Home Instead of Renting? @ PIN.

12. The 16 Best Part-Time Jobs With Benefits – Updated for 2012 @ PT Money.

13. Top Ten Personal Finance Start-Ups @ Consumerism Commentary.

14. How to Have a Good Income-to-Debt Ratio Fast @ Wealth Pilgrim.

15. More Ways To Increase Your Free Dropbox Storage @ My Money Blog.

I wanted to kick it old school today and write about a topic that I used to cover when I first became a personal finance blogger in 2008. I wanted to look at the biggest ways that we waste money in our 20s. I want you guys to save more money and keep more money in your pockets. I don’t want you to have nothing to show for your hard work in your 20s.

What are some of the biggest wallet busters in your 20s?

Buying a car before you can afford it.

A new car is an absolute killer in your 20s. We all want a sexy car that impresses our peers. We don’t care about getting from point A to point B. We want to get to every point in style. Is it worth it? I don’t think so. Do you realize how expensive owning a car is? Between insurance, gas, maintenance, and everything else, a car can end up costing you a fortune. Are you ready to spend all of that money on transportation alone?

On the flip side, you can buy an average car or take the bus. Obviously taking the bus is an extreme option and would only work in some areas. Either way, you can keep so much more of your cash in your wallet by watching what you drive.

Financing all of your education with student loans.

There’s no shame in using student loans to cover your education. Most students will likely use loans to pay for their education. That’s totally normal. The problem lies in ONLY relying on loans to pay for college. That’s a big problem. This is an issue because we assume that we’re going to be making the big bucks as soon as we finish with college. This isn’t always the case. Most college grads will struggle to even get a job, let alone make big money, and then deal with paying off student debt.

By the time you start making money in your 20s you’re not going to want to deal with paying off all of those loans. Imagine half of your pay check going towards your loans. Imagine not being able to enjoy the money that you work so hard for.

This is the reality of financing all of your education with student loans. You don’t have to rely on loans. You can work in college, apply for free money, and even delay college to save some money.

Risky investments.

Most young people starting venturing into risky investments before they even exactly how the stock market works. While I do support taking risks and chances in your 20s, it doesn’t make sense to take uneducated risks. Imagine losing your savings to some big gamble. Is it worth the risk?

At the end of the day these are three of the biggest ways that we waste money in our 20s. I wanted to focus on three so that you go after the big wins instead of focusing on small expenses.