The Easy Way To Get Rich

Posted On October 7, 2016 2:04 am

Over the last 145 years the S&P 500 is up 518,856 fold, including dividend reinvestment. This staggering statistic clearly shows the incredible long-term, wealth building power of the stock market; the single greatest way for regular people to become wealthy and achieve financial independence.

BUT a major problem for many people is finding any amount of money to invest. After all, since the market is highly volatile, sometimes dropping as much as 50% in a year, you should only invest discretionary money. In other words, money you won’t need for at least five years.

That’s why living beneath your means, by practicing solid budgeting, is so essential. BUT what if you are currently living paycheck to paycheck, and or drowning in debt? Having just finalized a very painful, and messy divorce, one that left me under a mountain of debt that I’m still paying off, I can certainly relate to this. After all, knowing the basics of sound, buy, hold, add on dips, and reinvest the dividends investing is no use if you can’t scrape together enough money to actually build a quality dividend growth portfolio.

So here’s some helpful suggestions that show how a few minor lifestyle changes, about things many of us don’t even think about, can help you get rich.

Consider: A person who buys a $4.25 coffee at Starbucks each morning could save $128 per month by forgoing this luxury.

If you eat out once a week, you can easily spend $50 for dinner for two. That comes to another $200 in potential savings.

If you spend $12 per week ordering a pizza, that’s another $48.

An average soda at your local gas station can run you $1.20. While not much by itself, one soda a day comes to $38 per month.

The average eat out lunch runs about $8. Buying 30 of these a month is another $240.

By eliminating just these simple things, you can save $654/month. While that may be a surprisingly large number, consider this.

The S&P 500 has averaged 9.05% per year since 1871. Schwab now has an S&p 500 index ETF, which it will let you buy from it, commission free, with an expense ratio of just 0.03%.

So let’s take a look at what you could accomplish by just tightening your belt with just the 5 changes listed above, and doing nothing more complex than investing in the S&P 500 each month, and reinvesting the dividends.

After 10 years you would have: $130,187.21 paying $2,733.93 in annual dividends

20 years: $439,237.02 paying $9,223.98 in dividends

30 years: $1,172,886.50 paying $24,630.62 in dividends

40 years: $2,914,487.78 paying $61,204.24 in dividends

50 years: $7,048,853.14 paying $148,025.92 in dividends

And that’s just with the simplest index fund you can own. Something so simple as a slightly frugal lifestyle, and patient, simple index investing, via dollar cost averaging, and dividend reinvestment can turn you into a millionaire in 29 years.

BUT what if you knew how to build a high-quality, diversified dividend portfolio that yielded 5%, and generated 10% dividend growth? And used a broker such as Robinhood, which charges no commissions for unlimited trades?

Well academic studies indicate that over time you could expect to earn about 15% total returns. What would that $654 per month in simple savings come to? The shocking answer is why I have devoted my life to the study of dividend growth stocks, and spreading the word about this, the greatest wealth building engine ever created.

After 10 years: $183,245.12 paying $9,162.26 in dividends

20 years: $924,573.84 paying $46,228.69 in dividends

30 years: $3,923,661.99 paying $196,183.1 in dividends, equal to $16,348.59 per week

40 years: $16,056,646.20 paying $802,832.31 in dividends, $66,902.69 per month, $15,439.08 per week

50 years: $65,141,334.38 paying $3,257,066.72 in dividends, $271,422.23 per month, $62,635.90 per week, $8,943.27 PER DAY

That my friends is the power of long-term, dividend growth investing combined with simple frugality.

And keep in mind that the purpose of these examples isn’t to say that only the young have a chance to be rich. Far from it. After all, the second portfolio I showed could generate nealy $4,000 in monthly income in just 20 years, meaning that even if you started at 50 you could be rich by retirement.

AND let’s not forget that the 5 simple savings examples I gave are just light frugality. If you really go through your budget with a fine toothed comb, and get creative, then you can find ways to live COMFORTABLY but FRUGALLY, and generate even greater savings. That can allow you to save and invest $1,000 or even $1500 per month.

How long would it take to reach $1 million, and $50,000 in annual dividends with these stronger savings rates?

$1,000 per month: 18 years meaning to retire at 70 with this portfolio would mean starting as late as 52

$1,500 per month: 16 years, so you can start as late as 54

$2,000 per month: 14 years, start by 56

$2,500 per month: 12 years, start by 58

$3,000 per month: 11 years, start by 59

As you can see, there is hope for almost everyone. All you have to do is make a concerted effort to take charge of your finances, and you can win your financial future.

That’s what Dividendsensei.com is all about. Helping everyone, from age 5 to 55, to start learning about how dividend growth investing can change your life, and grant you the financial freedom you’ve always dreamed about.

About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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