Drive to 5

United-States-Five-Hundred-Dollar-Federal-Reserve-Note

 

I have a goal for 2014 to increase my annual dividend income in my taxable accounts to $500/year.  This is my “Drive to 5” goal.  I measure my progress by looking at the forward projections for my dividend income, rather than the money I have actually received.  If I meet or exceed my Drive to 5 goal, at the end of 2015, I will have received more than $500 in dividend income.

Why $500?  I don’t know.  I probably should have chosen $600, because my average monthly dividend would be $50/month, which is easier to remember than $41.66/month.  I couldn’t think of a good rhyme for “_______ to 6”.

How do I plan to achieve my goal?  Any ‘windfall’ income that I receive will be invested in my Drive to 5; each month, I invest approximately $200 in a few dividend paying stocks.  Lastly, I will simply have to dedicate some of my regular income to the Drive.

To figure out how much money I will need for all of 2014, I assume an average dividend of 5%,  which means I will need to invest approximately $8230 for the year.  That is a really good chunk of change and a lofty goal, but with careful planning and smart purchases, I think it’s a doable goal.  Most of my dividend paying stocks are in DRIP type accounts, meaning all dividends get reinvested into the stock, generally at no cost to me.  This helps reduce (slightly) how much I need to invest.

I entered 2014 with forward dividend income of $82.55/year.  By the end of January 2014, that figure had grown to $88.54 through the purchase of some additional Intel stock.  I still have to make up $411.46 to hit my 5.

My current Drive portfolio includes: GE, INTC, HSY, KMI, O, ARCP.

Please note: I am long all positions mentioned in this post.

The New Cell Phone Plan

Moto X

 

As my wife and I continue on our path to Financial Freedom, we wanted find some ways to increase our available income for saving/investing.  To find ways to increase available income for saving/investing, we could focus on either increasing income or reducing expenses.

The easy answer is focus on ‘income’ rather than expenses.  How many times do you ask yourself “How can I make more money!”?  Asking yourself that question misses the obvious question “Why do I need that much more money?”  You should only need money to pay for expenses, not for ‘luxuries’.  Most people forget that expenses are generally flexible and are dictated by our choices while our income is usually outside our personal control.

Yesterday I stumbled across “Choosing the Cheapest Cell Phone Plan is a Headache” on CNN.  The article discusses the big four carriers: Verizon, AT&T, T-Mobile and Sprint.  The article describes the tactics each of the carriers is using to lure clients to use their services.  Verizon lets you get discounted smart phones; AT&T allows all minutes, texts and data to be shared within the family; T-Mobile doesn’t require a signed contract; and Sprint has a Framily Plan, which allows Friends/Family to split a bill and have separate bills mailed to different addresses.

At first, these choices seem great.  Who wouldn’t want to choose lower cost smart phones vs. sharing 10GB of data with your family?  The article assumes you need to have 10GB of data or unlimited texts.  Do we really need all that data?  If you could order a 10lb cheeseburger, is it worth it?

We were paying $140/month for 250 texts, unlimited data and 700 cell phone minutes on Verizon’s network.  That was for two smart phones with upgrades every two years.  I checked my email every 10 minutes, every time I heard a ‘ding’ from my phone.  I knew it was rude to check email while at lunch in Portland, Maine with my wife, but I did it anyway.  The ‘ding’ was addictive.  I never stopped to ask myself if I really needed to get email 24/7.

In late 2013, we decided to go on an aggressive campaign to reduce our expenses in order to increase our income available for saving/investing.  One really expensive item we decided we could change was our phone service.  Did we need to check email while driving at 65mph down the highway to or from work?  When watching an episode of The Office, did I need to know how my investments faired?  Honestly, was my life better because of 24/7 email contact?  (Hint: actually I was a lot more depressed)

After reading this article on Mr. Money Mustache, I decided to pay for the Moto X smart phone on Republic Wireless’s network.  Republic Wireless operates it’s network through free wifi access points when available.  When I’m at home and I make a phone call, my call gets routed for free through my internet.  When I’m at work, the same thing (through my work’s wifi network).  For those times I’m away from wireless networks, Republic Wireless partnered with Sprint and rents space from Sprint’s cell towers.

Sprint coverage isn’t as great as Verizon’s, but does everyone really need to drive an Aston Martin?  I decided that while Verizon’s coverage and network were awesome, I didn’t need to spend $140/month for that service.

My new service gives me data while I’m on a wifi network (there are a TON of free networks around, just look for them…Home Depot, Starbucks, Barnes and Noble, local coffee shops, etc).  I get unlimited talk minutes and unlimited texts on cell networks.  The best part of the new plan: the cost.  Now, instead of having to set aside almost 10% of one of my paychecks, I set aside $12.50 per paycheck (that’s not a typo).  Yes, my wife and I now spend $25/month for our smart phones rather than $140/month.  That’s a savings of $115/month.

I do sacrifice some call quality with the Republic plan, but honestly, for $115/month, or  $1,380/year, the small cut to quality is worth it.  My current investments are returning between 15-20%, so at the low end, that $1,380 will be worth $1,587 next year.  Over 10 years, that $1,380 will become $28,019.  That’s almost 8 months of work for me.  (I do invest in the stock market, however I’m saving for real estate investments right now).  If you were to invest that $1,380 in the stock market, over 10 years, at 7% gain per year, you would have almost $19,000.

Is all that data worth 8 months of work?  I’d rather be home asking my daughter “What noise does the chicken make?”  (Her reply: “bock bock bock”…not bad for a 1 year old, but then again, I’m her dad).

Chicken

Life of a Landlord – Part 1

Frozen Pipe

 

You never really know how residents will react when something goes awry in one of your properties.  This morning, I received a panicked phone call from a resident in one of my duplexes.  A pipe had frozen and there was no water in their unit.

There is not too much to do to fix a frozen pipe except to either try to thaw the pipe or wait for the pipe to thaw.  Obviously once the pipe has thawed, you need to be ready in case there is a pipe burst.  I advised my residents to move a space heater into the basement and call if there is a problem as it warms up.  Well, about two hours after that phone call, I got another phone call: “Hey, uhh, I got a swimming pool in my basement.”

The first thought through my head was: man, that didn’t take long to thaw.  Thought number 2: this is going to cost a TON; thought 3: I’m going to have to run down and fix the pipes this evening…there goes my Friday night call a local plumber and get this taken care of immediately.  I also asked a contractor friend of mine to take 12 gallons of water (six gallons per unit) to the duplex until this got resolved.

I called RotoRooter to see if they handled burst pipes.  Luckily, they do handle these issues and they try to ensure a less than 24-hour turn around.  The pipe burst at about 3pm, RotoRooter was called at about 3.45 and by 5.30pm they were on site working on the pipe.  By 7pm I had received a phone call that the problem had been addressed.

There were three bursts, two in a pipe and one that broke the back side of the water meter.  I now have a new water meter, some new pipe and (hopefully) a happy resident.

Through the course of this, I learned that the water had actually been frozen for a full 24 hours before anyone decided to call me.  No idea why no one decided to call.  I asked what they had been doing for water for the previous 24 hours (figuring they had purchased bottled water).  The reply: Melting snow on the stove.  I told both residents to call as soon as there is a problem like this in the future and not wait 24 hours.

Anyway, for 18 months as a landlord and one issue like this, not too bad.