A very long time ago, Plato said, “An unexamined life is not worth living.”
Those words couldn’t be any truer today.
Why Do We Do What We Do?
With that in mind, I think it’s important to understand why it is that we do the things we do. When I began thinking about creating The Dividend Growth Club platform, I had to mull such things over.
And now, roughly a year later, as I start a new journey as the newest Dividend King, I’ve decided to revisit an article I wrote back then which highlighted the need for a positive mindset when thinking about one’s financial future, achieving financial goals, and ultimately, reaching financial freedom and re-produce the content for subscribers here.
One of the biggest assets that The Dividend Kings service offers investors is the vast library of “evergreen” articles highlighting important investing topics, practices, and philosophies. Being that my old service is about to shut down as I transition over here to The Dividend Kings full-time, I wanted to take the time to start to transfer some of what I believe to be my greatest hits, into “How To Invest Better” Library.
I’ve edited the original piece that I wrote to reflect the year’s worth of time that has passed since it was originally published, yet the bare bones remain fairly unchanged. At the end of the day, I think managing expectations, maintaining a positive mindset, and refusing to give into fear are incredibly important building blocks to the type of mindset that is required to achieve long-term success in the markets.
The finished product ended up as a monologue of sorts, starring me, mumbling and stumbling and bumbling along, covering a variety of topics that all sort of get back to the common theme that is the importance of having a positive, long-term mindset when making financial decisions. I think this is important in the stock markets. I think it’s important in life. And, I think those two things go together hand in hand, oftentimes.
This piece is a critique of modern society and the short-comings of human nature. It’s an inspirational essay written to those who feel lost, who question their purpose, and of course, who’re in pursuit of their financial freedom.
I hope that these words serve as a mirror more so than a source of scorn or judgment. I hope it spawns questions and answers, alike. Like all of the content that I produce here, I hope that this piece is helpful, becoming yet another stepping stone towards our dreams and future goals.
So, where to start? Well, I think a good place is probably one of the most clichéd statements that you’ll hear about money/finances.
People say, “Money cannot buy happiness.”
Well, while I suppose that’s technically true, I generally beg to differ. To me, freedom and quality of life are generally closely associated with happiness. And you know what enables those things? Money.
I understand that true meaning in life is generally derived from bigger, more abstract ideas such as love and faith. I think it’s fair to say that money can’t buy these things. Furthermore, you can’t go to the store and buy a jug of happiness. You can’t eat a bliss sandwich. You can’t go to an ATM and withdraw pleasure. Yet, if utilized well, money can give you the freedom of choice. That choice can lead to happiness. So indirectly, money can lead to happiness, which is why I spend so much time thinking about my finances and planning my financial future.
Yet, I know that money can be a difficult or even hurtful topic for others. Finances can be stressful. When I was getting married, the preacher told my wife and I that there are two things that lead to the vast majority of divorces: money and sex. Over the years, I’ve learned how important being a responsible money manager is, whether you’re talking about in the stock market or simply the family’s checking account. Thankfully, I’m still married, so I suppose I must be doing something right.
With this piece, and in general, moving forward, I hope to share whatever useful information I have to offer with hopes of generating meaningful discussion here so that others might reach the same, secure, and relatively peaceful financial place where I find myself today.
Don’t Let Yourself Become Downtrodden
Statistics show that the majority of people are not satisfied with their work life. Add this to the fact that wage inflation has crept along at a snail’s pace for decades now, hurting the lower and middle classes, and even leading some to believe that the American Dream is dead and gone, and you realize that we’ve gotten ourselves into a real problem.
Finances play such a large part in our lives that when our relationship with money isn’t healthy, the negativity that it breeds seeps down into broader communities and society at large. Such widespread discouragement leads to a lack of passion. And this lack of passion leads to a lack of productivity. Lacking productivity is how economies fail. And, when economies fail, countries crumble.
I know I took a pretty large leap there. Honestly, I promise that this piece isn’t mean to be morbid. It’s supposed to be a pick-me-up for those feeling down hearted. But, before I can talk bout triumph, I must talk about defeat.
I think social/digital media has changed the world in drastic ways. This also plays a role in the lack of passion that I see. In this digital world where the social media spotlight is seemingly always upon us, people are oftentimes afraid to fail. This is a shame because without passion and the willingness to take bold risks to in pursuit of a better future for yourself, your family, your community, and so on, we end up letting fear grind us down to a halt. Oftentimes, it’s not a screeching halt. It’s barely noticeable to some. Yet, I know it’s real because I see it every day.
People complain about their situation, about their lives, about their jobs, about their spouses, about their children, their pets, their favorite sports teams, their hobbies, etc. For whatever reason, our society at large seems to have adopted a negative, cynical mindset that has led to a depressing cycle of frustration, excuses, doubt, failure, and jealousy.
Many of these complaints are made on social media. Social media is also the place where we witness the lives that others wish us to perceive. We see pictures of bleached beaches and lagoons, bikinis, sports cars, yachts, martini glasses, tailored suits, all presented with the perfect, reality altering filters. I think people get discouraged when they see these images. They begin to wonder why their own lives aren’t like that. They begin to ask themselves, where did I go wrong?
People put up defenses to protect themselves from these mental demons. These defenses fence them in, stopping their growth and progress. Oftentimes, instead of attempting to rationalize the images they see and set realistic expectations for themselves, they take the easy way out, saying things like, “Well, I’ve done everything right, everything I possibly could, and yet, I’m still in this unfortunate situation…so, the success that continues to elude me must simply not be possible.”
“Yeah, that’s it,” some think, “I simply wasn’t born into it. Fate wasn’t on my side. I didn’t catch a break. It wasn’t meant to be. Yada yada yada.”
These feelings of disappointment oftentimes lead to resentment. Yet, I don’t think it makes much sense to harbor negative emotions towards successful people, whether they’re the outliers or not. Success should never be demonized.
The jealousy and resentment bubbling up in society today is leading towards a broader community that not believes wealth and success are bad. Evil even. That’s simply not true. The 1% aren’t inherently evil. Silicon Valley is not inherently evil. Capitalism is not inherently evil. Maybe a little resentment is fine. It can serve as the fuel for the fire that drives your own success. But the fact that demonization of success seems to be permeating throughout our society is worrisome. Once again, it’s sad. And it’s wrong. Success should be celebrated.
I understand that there are many people out there who feel disenfranchised. We’re seeing politicians on the left and the ring attempt to capitalize on these negative emotions. People feel lost. People feel hopeless. They begin to see the successful people in ivory towers with all of the riches and play things as inherently different from them. However, let me be the first to say that while there are certainly trust-fund babies who were born with a silver spoon in their mouths, there are many, many more individuals who became successful simply didn’t box themselves in by these invisible walls of despair. They made a series of choices that led to their present position. When they came up against a difficult hurdle they accepted the challenge and worked hard to overcome it. And now, they’re reaping the rewards of their labor.
Don’t get me wrong, I understand people’s cynical frustration and I’ll be the first to say that life is definitely easier once you break through certain financial thresholds. To a certain extent, financial success becomes a simple math problem. Making that ten thousand, hundred thousand, that first million is incredibly difficult. Not everyone will become a millionaire and most that do take a very long time to do so. However, it’s easier to make the second million than the first. And it’s even easier to turn $2 million into $3 million. And it’s even easier than that to turn $3m into $4m, then $4m into $5m, and so on and so forth.
Rely On The Power of Long-Term Compounding
Why? Because of compounding. Yet, compounding takes time. And although it begins to speed up as we move along the X-axis that is time, enabling individuals to reach levels of financial success that they might never even have dreamed of when they were getting started, some people simply don’t have the right mindset to allow this to happen.
Nothing in life is free. Get rich quick schemes are generally fraudulent. The way I see it, getting rich is fairly simple, but that doesn’t mean it’s easy. It requires hard work, patience, perseverance, and perspective, and sacrifice. It requires discipline when it comes to living below one’s means. If we’re constantly dipping into our savings, rather than adding to them over time, how can we expect them to grow? It requires confidence and the ability no tune out the Joneses instead of trying to keep up with them.
It’s difficult to live below one’s means while you’re trying to live a glamorous Instagram type of life. But, a focus on what really matters in the long-term can go a long way towards maintaining discipline in the present. The self assurance that comes along with having a plan and conviction in the means to achieve it plays a big role in being able to maintain a rational, level headed state of mind when negative issues occur. Giving into fear (or greed, on the other, more exuberant end of the spectrum) is rarely a good thing.
Yet, that doesn’t mean that ignoring fear is the answer, either. It’s important to embrace fear and prepare for it, all without becoming scared, glib, cynical, discouraged, or depressed. Pursuing one’s passions helps to keep the light on in the attic. It’s much easier to roll with the punches, to adapt and to evolve, to think things through, to plan to the future, when you have realistic goals in mind. Excellence if never accidental. It takes hard work, yet that isn’t necessarily a bad thing.
One of the worst aspects of American society today (and it could easily be a world wide problem too, I just don’t have any international travel under my belt to give me that perspective) is the fact that so many people want instant satisfaction.
Don’t get me wrong, I think living in the moment is great. However, that’s different from focusing too much on meaningless short-term trophies like “likes” on social media, re-tweets, hashtags, left swipes, emoji’s, etc. Being present is important, but only if you’re well grounded in the pursuit of what is truly important; only if you’re focused on positive experiences and building up something meaningful and worthwhile, whether it be a relationship, a project, a process, or a passive income stream.
Focusing on the wrong things that oftentimes lead to resentment, fear, or hatred, cause people to lose sight of the important things that have the ability to help them get where they want to go. And, after awhile, I think they sort of forget where they wanted to go in the first place, becoming content to live in the negativity quagmire. It’s sad.
I coach sports at the local high school and I see this sort of negative mindset all of the time. I talk to the kids I coach about the “reset generation”. I’m talking about all of the people who grew up playing video games and could simply hit the reset button, erasing mistakes, and restarting fresh whenever things went wrong. In short, they aren’t worried about the consequences of their actions, nor their impact on others. This is perpetuated by social media, which has given way too many people the idea that they are the center of the universe. While the real-world is capable of forgiveness and an individual can find redemption, there is no reset button. It’s not that simple.
I see it in the stock market too. People blindly chase momentum trades, hoping to make a quick buck. They follow the herd, for fear of missing out. Heck, not long ago people were buying digital cartoon cat avatars, for goodness’ sake, thinking they would retain (and grow) value. It was madness. I tried to tell them that. I try to warn people all of the time of the risks they’re taking in certain highly speculative names, but, they don’t want to hear it. They have dollar signs in their eyes. They were not interested in the time tested method of slowly, but surely, building wealth by partnering with mature, blue chip names with strong cash flow generation prospects. And now that so many of the fancy crypto-currencies have gone bust, I see so many of these people making excuses for their financial situations and investing mistakes (oftentimes blaming others or the entire system as a whole), rather than taking responsibility for their actions.
I’ve had similar conversations with people about lottery tickets. Sure, when the Mega-Millions rises up above $1 billion dollars, I’ll go buy a ticket. I know the odds aren’t in my favor, but I’ll risk $2.00 for the chance to become a billionaire. Yet I know there are people out there who throw good money away on a weekly or even daily basis on lottery tickets, hoping to hitch a fast ride to a better financial situation.
They don’t want to hear the odds. They don’t listen to the fact that the reason the lottery is so high in the first place is because no one has won. They’re different than the rest, somehow. For whatever reason, some think luck is on their side. Well, let’s just say that after all of these conversations, I still don’t know a single person who won the jackpot. In other words, this isn’t a reasonable strategy.
Hope isn’t a strategy. Neither is luck. I think hope is important. I think motivation leads to hard work and that hard work has a funny way of creating luck over time. But, hard work isn’t easy. People like the idea of the easy way. Unfortunately, the easy way rarely leads you towards your goals. The path of least resistance is downhill, while achieving goals requires upward growth. And, with regard to the stock market, I think the regular and reliable compounding of dividends provides the best stair case to climb when thinking about ascending towards our goals.
Dividend Growth Investing Provides A Peaceful Path Towards Financial Freedom
So, with all of that being said, I’ll leave you with this: one of the easiest ways to fail is to give up and not try. It was Wayne Gretzky who said, you miss 100% of the shots you don’t take. It’s a cliché now, but it’s true. And now, sticking with another sports metaphor, the best thing about dividend growth investing is that investors don’t have to take outsized risks to become wealthy. They don’t have to swing for the fences, per say…instead, they can be content with buying shares of high quality companies when they’re trading at (or better yet, below) fair value and reasonably expect to reach their financial goals, with time, with the forces of compound interest playing out in their favor.
As I’ve said many times before, being a dividend growth investor can be pretty boring at times. The strategy can be incredibly simple. Simply dollar-cost-averaging into high quality dividend growth names and re-investing the growing dividends they produce over time will essentially get the job done.
Given enough time and enough capital to invest, anyone can build a passive income stream large enough to meet his or her needs in retirement. When you’re first starting out, this doesn’t seem possible. When you’re only buying a few shares per month, and seeing the purchasing power of your income stream compound from say, $20 to $22 in a given month, you may question the viability of the strategy. But, speaking from personal experience, I can say, with assurance: be patient…stick to the plan. I can also assure you that eventually, compounding will get exciting.
It’s so satisfying to sit back and watch the dividend growth strategy work over time. I remember the day when I was so happy that my passive income stream exceeded my cell phone bill on a monthly basis. And then, it grew to be large enough to potentially cover my phone bill and my monthly electric bill. Obviously I wasn’t using it to pay these bills because I was re-investing those dividends back into the dividend income machine that I was building, but knowing that I now had a passive income stream that could help me meet my lifestyle’s expenses was peaceful.
Over time I’ve watched as the purchasing power of my passive income stream has began to cover more and more of my monthly expenses. Right now, it covers all of my monthly utility bills and my wife’s car payment. The next big milestone I’m looking to hit is my monthly dividend stream being larger than my mortgage payment. I am likely to hit that figure in sometime in 2021.
Warren Buffett said, “If you’re not making money while you sleep, you will work until you die.”
Well, frankly put, I don’t believe that I was put onto this Earth to work until I die. I have plans and passions that lie outside of my chosen profession. It’s taken me 8 years to get to where I am today and I know that I have another decades or two to go before I can comfortably retire, but the dividend growth investing strategy that I’ve adopted as my means towards eventual financial freedom has given me a real and tangible vehicle to arrive at that goal.
I think it can do the same for you and moving forward, I hope to help others realize their dreams as well.