Building Wealth with Stocks that Pay Dividends

Welcome! Here you’ll learn how to start building wealth with stocks that pay dividends.

Ok let’s get started...

Step 1 - Open an Online Brokerage Account

The first order of business is to open an online brokerage account. There are many to choose from and not all of them are created equally. So you’ll need to compare each and choose the best fit for your situation.  Look for the online broker with the lowest fees and best customer service because as a long term investor, these will be the most important things to you.

Click here for our recommended Online Stock Brokers for U.S. and Canadian long term dividend investors.

Step 2 - Automatically Save At Least 10% of Your Income

Next, set up pre-authorized payments with your bank so that they automatically transfer a percentage of your income to your new brokerage account.

The automatic transfer plan is very effective because the money will be gone before you can spend it! If you leave it up to yourself to transfer the money, there will be a good chance that you’ll compromise here and there.

You won’t be doing yourself any favours either!

The minimum amount you should save is 10% but if you really want to build wealth, you should save 15% to 20% or more! Many wealthy people got there by saving and investing a large percentage of their income. It takes discipline!

Now you may be thinking to yourself.... “I can’t afford to save that much, I have bills to pay!”

The key to building wealth is to live below your means and consistently invest your surplus income.

So if your current expenses are too high for you to save and invest at least 10% of your income into stocks that pay dividends, you are living above your means. You need to find ways to cut costs in your life and increase your income.

Live where you can afford to. Drive an inexpensive car or take public transportation. Shop frugally for groceries (but don’t compromise on your health!). Keep entertainment costs in check. Work harder and get a raise. Get a second job or start a side business.

BE FRUGAL AND WATCH EVERY PENNY YOU SPEND! DON’T WASTE MONEY!

This takes discipline but once you get into the habit of saving and investing a portion of your income, it will become addictive. Watching your wealth grow is a very a good feeling... trust me!

Remember, you are making short term sacrifices so that you can live in abundance later on.

Keeping up with the Jones’s and living above your means will not make you wealthy. It will keep you on the treadmill of having to work to pay the bills.

Freedom comes when your investment income from stock that pay dividends exceeds your living expenses....a much smarter path to choose!

Choose wealth over material goods for now and you will be able to afford them later in life.

Step 3 - Start Investing in Stocks that Pay Dividends

Now for the fun part. You have dollars accumulating in your brokerage account so it’s time to start investing for dividends.

As mentioned above, it’s important to keep your transaction costs when buying stocks to a minimum. This will have a huge impact on your future returns.

If you haven’t already, read through our criteria for selecting dividend paying stocks and our dividend investing strategy for success before you start investing. These guides will show you how we go about choosing the right stocks that pay dividends and our strategy for purchasing and managing them.  They should give you a good foundation of knowledge to build on.

Once you have educated yourself on how to invest in stocks that pay dividends and you feel that you're ready, start building your portfolio!

The name of the game is to....

Buy shares in high quality blue-chip companies that have long histories of paying out dividends to their shareholders and increasing those dividend payments every year.

Hold the shares long term for the rising income and reinvest all of the dividend payments into purchasing more shares that also pay an increasing stream of income.

Keep investing new money and reinvesting your dividend income. Do this until your dividend income stream exceeds your living expenses... at that point you are free!

It will take you many years to reach financial freedom but if you follow this process as a long term strategy, fortune will shine on you.

It takes discipline and commitment especially in the beginning because your income stream will be very small and seem like it’s growing very slowly. But have faith because the growth will be exponential. It will grow faster as it gets larger.

The compounding effect really begins to work for you once you have built up your portfolio to a certain size (over $100,000). The rapid growth occurs at the end of the wealth building cycle. Click here for a real life long term example of investing in dividend stocks.

Another effective way to build wealth with dividend stocks is through Dividend Reinvestment Plans. These plans allow investors to enrol with a sponsoring company and have their dividends automatically reinvested at no cost!

So there you have it... be committed to building wealth with stocks that pay dividends and you will one day enjoy the fruits of your discipline!

Here's to building wealth... good job!

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