If you can save money then you can become rich!

"The capitalist system does not guarantee that everybody will become rich, but it guarantees that anybody can become rich."

Raul R. de Sales

 

If you have ever read my blog post you will know that I really enjoy talking about bicycles and fun ways to create passive income so I can ride my bike in fun and exotic places. My favorite methods for creating passive income are network marketing and real estate. However, many people for some reason have many misconceptions about network marketing and are simply afraid to take their first steps into real estate investing.

A few weeks ago I came across a program produced by Nightingale Conant titled “How to Become Financially FREE on $50 a Month”, by Bill and Mary Staton. The program lays out a very simple method to start building wealth and earning cash flow (passive income) from your invested cash on a quarterly basis. The plan is so simple to understand and execute that if you have ever even thought about earning investment income you are left without any excuse for not taking action.

The key to success in using this program is to invest for cashflow by purchasing income producing stock shares in some of America’s finest companies. The goal is to acquire as many shares as you can by investing a set dollar amount each month in 5 to 10 quality companies that have paid a quarterly dividend for at least 10 years or more. It is also important that dividends are increasing on a regular basis.  So the ultimate goal of the program is to create an income stream from the dividends that each company pays out for the shares of stock that you own.   

A great place to start your search for companies that you want to invest in is a free resource from Standard and Poor’s. It is an index that they have created call S&P 500 Dividend Aristocrats. It measures the performance of S&P 500 companies that have increased dividends every year for the last 25 consecutive years. http://us.spindices.com/indices/strategy/sp-500-dividend-aristocrats  

Before make your stock acquisition you should understand what the company does. If you have no idea what the company does or how it makes it money then don’t invest in it.

Once you figure out what companies you want to invest in just go to the company’s websites and click on investor relations and see if the company offers a direct purchase program. A direct purchase program is a program where you the individual can purchase shares of stock directly from the company instead of using a broker or brokerage account. Some companies administer their program internally and some use a company to administer their program.

Once you find the plan details simply follow the instructions to start investing in the companies of your choice. Each quarter the company will pay a dividend and when this happens just reinvest the dividend and purchase more stock. This action will increase next quarter’s dividend income pay outs.  Your first dividends you earn will be small but if you exercise patience and keep purchasing stock each month and reinvesting your dividends then each quarter your earnings will grow larger and larger each quarter.

 For example one of the companies that I have started investing in pays a quarterly dividend of .42 cents per share of stock. The stock as of today cost around $35.50 per share. So if you owned one share of stock you would get paid 42 cents. Basically, that means that $35.50 will earn you 42 cents. You might be thinking that 42 cents is not really that great. It is important to keep in mind that the more shares you own the more income you will generate.

For example if you owned $5000 worth of the same stock at today’s price which would be about 141 shares then you would earn about $59 from your 141 shares of stock. ($5,000/35.50per shares = 141 share of stock. 141 shares x $.42 = $59). Monthly interest on a checking account with a balance of $9,000 will earn $.06 in interest each month or $.18 every quarter.  The numbers tell the whole story and I would rather earn .42 cents on $35 invested then .18 cents on a $9,000 checking account balance.  

The Stanton’s have published a free downloadable booklet titled, “The $50 A Month Millionaire,” that you can download from their website.  You can also purchase their audio program “How to Become Financially FREE on $50 a Month”, from the same website. http://www.statonfinancial.com/books-publications/

Summary:

1.      Build a portfolio of stocks that have been paying a quarterly dividend for 10 years or more that is also increasing.

2.      Go to the Standard and Poor’s S&P 500 Dividend Aristocrats website to find the companies that meet the investment criteria. http://us.spindices.com/indices/strategy/sp-500-dividend-aristocrats  

3.      Select 5 to 10 companies that you like and understand and start purchasing the company’s stock though the company’s direct purchase program and reinvesting the dividends.  

4.      And most important invest for cash flow i.e. the growing stream of dividend income that grow larger and larger with every new stock purchase you make.   

“Cash flow is realized when you purchase an investment and hold on to it, and every month, quarter, or year that investment returns money to you. Cash-flow investors, unlike capital-gains investors, typically do not want to sell their investments because they want to keep collecting the regular income of cash flow.

If you purchase a stock that pays a dividend, then, as long as you own that stock, it will generate money to you in the form of a dividend. That is called cash flow. To cash flow in real estate, you could purchase a single-family house and, instead of fixing it up and selling it, you rent it out. Every month you collect the rent and pay the expenses, including the mortgage. If you bought it at a good price and manage the property well, you will receive a profit or positive cash flow.

The cash-flow investor is not as concerned as the capital-gains investor whether the markets are up one day or down the next. The cash-flow investor is looking at long-term trends and is not affected by short-term market ups and downs.” (The Two Types of Investment Income By Kim Kiyosaki)

This plan that I have been talking about is simply a savings plan that pays you more interest then your checking or savings account. So, if you can save money then you can become Finnacially Free by investing monthly in some of America's best companies.

 

If you want to gain financial independence then now is the time to take action.