You may be one of many folks in the daily grind of nine to five jobs. You get a pay check biweekly or monthly, pay your bills and pack all that is left into a checking account or savings account.
Yes, it is a good thing to be able to have some savings after paying your bills. This could mean you have a job that provides income higher than your expenses. This could also mean you live frugally and are disciplined enough to keep your expenses under control in such a way that the size of your checking and savings accounts keep growing. That is very good and important. Congratulations!
What is more important however, is what you do with a portion of your savings. You want to grow your net worth. You want to be receiving money from other sources not your pay check. I mean money you don’t have to trade your time to earn, money you earn while you sleep. You want passive income. And one way to earn a stream of passive income is through dividends.
To earn dividends means you have to invest in dividend paying assets. These could be stocks, bonds (Bonds pay dividends called interest), Real Estate Investment Trusts (REITS) or alternative assets like stocks of private equity firms. When you own a stock of a company or any business, you own a part of that company or business. You can own single stocks of dividend paying companies or you can own a bunch of many such stocks or bonds by investing in a Mutual Fund or an Exchange Traded Fund (ETF). There are ETFs that hold a bunch of many real estate stocks if you want to invest in real estate for dividend income. There are also ETFs that hold other types of stocks, and there are ETFs that hold a collection of bonds. ETFs that contain a number of other ETFs also exist.
Be sure to set up an appointment with a qualified financial advisor to discuss your investment goals, access your risk tolerance, and for assistance with selecting assets and investment vehicles right for you.
You want to put some of that money sitting in your checking and savings accounts to work. One dollar invested this year is worth more than one dollar to be invested next year. You should be supplementing your pay check with dividend income.