• MoneyMaster

How to Create Gifted Income to Replace Earned Income

Updated: Sep 5, 2019

The concept of gifted income is using passive income to replace earned income in pursuing financial independence. You decide how much gifted income is needed to support your lifestyle each month.

Despite headlines of record low unemployment and a booming economy, just 43% of Americans are certain they could come up with $2,000 for an unexpected expense. That finding comes from new research by the FINRA Investor Education Foundation, which has been documenting Americans’ financial knowledge and perceptions for years.

We have a plan to move beyond emergency funds into living the dream!

We want to create a diverse portfolio of monthly dividend stocks using various types of stocks in varying industry. This portfolio will stand the test of time and all economic conditions. These stocks tend to be diversified in their holdings where they are not susceptible to market swings or single stock risk. We don’t want to monitor the market each day or worry if our stock misses earnings. We want consistent monthly mailbox checks.

We will share a list of recommend monthly dividend stocks in various posts. For now, let’s discuss what I call the gifted income approach. This serves as a mechanism to help determine how much income you want to replace your current earnings. The definition suggests that each hour of your current working income can be replaced with monthly dividend income.

The gifted hour income works like this. For example, you may earn $25 per hour at your job. For each $25 of monthly income, you have replaced an hour of work. If you replace 40 hours of income, then you have a free week of pay. Obviously, you can earn 52 weeks of income to replace your current job. In case you are wondering, this would be $52,000 per year. You can select how much per hour you want to make in retirement. This will depend on your expenses and lifestyle. This method definitely help you relate to replacing your job without having to change your living standards.

You can take this concept as far you want to explore. You can create a monthly income stock for each month, each week or more. This method allows you to calculate how to match your replacement income to your current lifestyle. You can also calculate how close you are to meeting your goal. Of course, you can calculate in a higher hourly rate if you would like a better retirement plan for travel and other expenses. I think this is a cool way to simplify creating multiple streams of passive income.

You can use that pot of money in your IRA or company 401K to invest in monthly dividend stocks. This will let you compound the returns tax free. Then, you will be only taxed on what you withdraw. This also works within a Roth account with a brokerage. These monthly dividend investments are so simple, you don’t need a professional to manage your account.

You can get started on a smaller scale by using the investing apps listed below that offer no commission trades to better build an account each week. You can add a few dollars such as $25 per week to purchase the monthly dividend stocks. If you do this consistently over time, you will create a growing passive income. There will be a time when the dividends can be used to purchase more shares each month so the account becomes self sustaining and growing passive income each month.

You can look at these monthly dividend stocks to get started.

One stock we are talking about is Vermilion Energy (VET) trading at $14.00 and its rather extraordinary 14.7% plus dividend yield. VET has pulled back over 55% over the past 12 months due to negative investor sentiment on the energy sector, opening the door for a unique buying opportunity. VET is a globally diversified energy producer with assets in North America, Europe, and Australia.

Dynex Capital (DX) trades at $14 per share with a 12.7% dividend yield. Dynex Capital is an internally managed mortgage real estate investment trust, which invests in residential and commercial mortgage-backed securities on a leveraged basis. REITs are required to return 90% or more of their dividends to shareholders.

OPEN A BROKERAGE ACCOUNT WITH ONE OF THESE APPS - Robin Hood – Open an account for $5 to get a free stock. Then, refer friends so you each get a free stock. Invest in stocks, ETFs, options, and cryptocurrencies, all commission-free, right from your phone or desktop. WeBull - Free shares are valued anywhere between $8 and $1,000, depending on market activity. This is an app-based brokerage on your phone. You can refer friends for additional stock.

Saving money is the key to building a substantial portfolio. One secret to being a good saver: have something worthwhile to save for as you contribute to your account each week. It should be something spectacular like early financial independence with gifted income.

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