Sit back and enjoy the ride

Especially around this time of year, I often think back to how slow the December month passed by when I was kid. It took so long from beginning of the month until it was finally the moment that Santa had come to our house.Now, it also seems to fly by and you know what, I still have not bought all presents I need for my friends and family. So, if I could I would even slow time down a little bit, just to make sure I have everything on time. At the same time, I can’t wait for 2017 to start so that I can work on achieving my goals for the year. Funny isn’t it. Either way, I am sure you can think of instances and periods in your life where time just flew by or when it seemed to stand still.

So, what does that tell you about waiting for dividends and planning for them? Relating it to my little Santa example above, I wanted Santa to be there right then and there when December started. I think one of the big difference between adults and kids is patience. Kids, or at least my kids want everything here and now. Adults are typically better at waiting. Adult or not, it obviously depends on the person but also what you are waiting for and how much you want it. Do you know the marshmallow test for example? Kids that were left alone in a room with one marshmallow were told that if they don’t eat it, you will get a second marshmallow on top of the one in front of them as a reward. While there are a many conclusions that can supposedly be drawn from the test, it is funny to see that some kids avoided eating the marshmallow by distracting themselves with something else like singing or so. I find this a very interesting angle. Could it be that financial independence were to come by itself if I simply distract myself? I don’t think so and reading a lot of posts from my fellow bloggers, I tend to think they would agree with me. Financial independence is something you have to work at to achieve it. At the same time, it does not come overnight (unless you win the lottery). What does help me to stay motivated on the financial independence goal are fellow personal finance, dividend income and financial independence blogs. I love to read about other members of the fellowship that we have and about what is going on in their lives and portfolios. So, I try to contribute my bit for others when I write this blog. At the same time, this blog makes me consider my actions more thoroughly as I have to justify them to you, my readers. So, you actually help me not cutting corners and thinking about for instance costs of ETFs more actively, especially when you post comments. So this is a big thank you to you, bloggers, readers and commentators!

Also, I like to read about individuals who are popstars in the world of investing like Warren Buffett, Seth Klarman and others. I try to learn what I can from their experiences and their mindset. To be clear, I do not try to emulate what ever trade they did last quarter or what they might do next. I would much rather try to understand why they are doing the one thing and not the other. I think it also helps in terms of mindset. Buffet for example talks about owning and not about buying and selling (marrying not dating is how he puts it). Charles Munger mentions a lot of things in his unfortunately less frequent speeches. When he talks, he does however mention that the reduction of material needs is one way to happiness. At the same time he says things like “Envy is a really stupid sin because it’s the only one you could never possibly have any fun at.” But, I realize I am drifting off topic a little.

Anyways, at one point I want to have a dividend income of EUR 2.000 per month. Now, I am not even at 2.000 a year. Given a dividend yield of 3%, I would need a portfolio worth 800.000 to achieve this. Using a financial calculator and given my current portfolio, monthly contributions of EUR 500 and an annual return of 6%, I have arrived at a period of 500 months or about 42 years to arrive at this target. So, Santa clause will come around about 42 more times before I can achieve this. Try to explain that to a kid! It requires some serious patience and commitment. Alternatively, it means getting better at what I already do. I have to get better at saving and deposit more into my portfolio, achieve higher returns or a higher dividend yield at the target date. To be honest, I do not know what is easiest of the three. However, I do know that I get inspired and motivated by other bloggers, from commenting on other posts and writing my own posts. So, get involved in the financial independence community. It helps . Time will fly by, we will enjoy the ride and in the end we will achieve financial independence.

 

Disclaimer: None of the content of this site is to be considered investment advice. Readers have to form their own opinion about which investments are right for them and take full responsibility for their own actions.

 

5 thoughts on “Sit back and enjoy the ride

  1. Just a note on the last paragraph, don’t forget taxes! These will force you to have to add some additional wealth to make sure you actually have €2000 each month to spend. Or do you assume 3% yield after taxes and inflation?
    I actually always want December to last longer. I like the month for some sentimental reasons. When we hit January, there is just spring to look forward to, which usually takes 3 months…..

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    • Hi TeamCF,
      Thank you for your comment. Good point about taxes. However, I don’t know what level yields will be at in 42 years or what the then prevailing tax rate will be. The main point I tried to make was that it is going to be a long journey for me and that I should start saving more.
      Glad to hear you’ld like December to last longer. But there are many things to look forward to in any new year, too. Filing your taxes and getting that dividend reclaim from Dutch companies/funds for example. Or new salary levels when you got a raise. Plus three months to wait for spring is very short if you compare it to my 42 year horizon πŸ™‚
      Thanks for stopping by.

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      • A safe approach would be to assume a minimum taxation at current levels, potentially a bit higher. As a rough indication, you probably should assume about 25% overall taxation. E.g. if you want an net income of €25.000 per year, assume your investments need to generate about €31.250 (or something in this order of magnitude). It may seem to be far away, but with continuous investments and frugal living, it may come sooner then you think! Good luck.

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  2. “At the same time, this blog makes me consider my actions more thoroughly as I have to justify them to you, my readers.”

    I really like that statement. It was also one of the reasons I started my own blog just a few weeks ago (I’m also a Dutch dividend growth invester by the way).

    When I just started out with investing early this year, I made one buy that I couldn’t really justify. I bought it because someone told me it was a bargain (he was actually right as the stock doubled in price since then).

    But I’m now always asking myself the question ‘Can I justify this decision to the readers of my blog?’.

    It’s just one more barrier to prevent stupid investing decisions πŸ™‚

    Thanks for the inspring post!

    Like

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