It’s the Most Wonderful Time of Year!

Anticipating that Special dividend from Main Street Capital (MAIN) !

That’s right – Anticipating that Special dividend from Main Street Capital (MAIN) !

Main Street Capital will pay a special dividend to owners of record as of 19 December 2017 (Ex Dividend December 18) on December 27th this year. The special dividend rate is $.275 per share.

Main Street Capital is a Business Development Company that pays monthly dividends of $.19 per share and in addition historically pays a Special Dividend twice a year once at mid year and once at the end of the year. This marks the 5th year of MAIN paying  special dividends of at least $.55 per share in addition to its normal monthly dividends.

MAIN is considered a top notch BDC among investors and is a great investment consideration for those that seek current investment income.

Main Street Capital is currently in two of my portfolios – Should it be in yours ?

Thoughts and comments re always welcome.



All Millionaires Are Not Equal !

Having accumulated just at a million dollars just before his retirement has left him feeling very good about his keen foresight of hiring Mr. Fancy Dancy of the “Fancy Dancy Brokerage Firm,

Not all Millionaires are Equal –

Some are Richer than Others !

Here’s Why !

Here’s a fictional story about three individuals. Mr Regular, Mr. Knowledgeable and Mr. Fancy Dancy. The story is entirely fictional yet I believe many will believe it is someone they know, perhaps even about themselves.

Let’s consider two Millionaires – A regular old Millionaire (Let’s call him “Mr Regular”) that has a Fancy Dancy Stock Broker at some Fancy Dancy Brokerage Firm making his Investment decisions for him ( Let’s call him “Mr. Fancy Dancy”) and a another millionaire who is a Dividend Income Investor ( Let’s call  him Mr. Knowledgeable).

Mr. Regular is a busy guy, He has done well in life and has set aside a portion of his income for retirement. Mr. Regular always thought of investing in the stock market a risky venture and decided early on that he best leave that the Mr. Fancy Dancy at the Fancy Dancy Brokerage firm to do that for him. After all, how could Mr. Regular ever expect to find the time to learn about investing, it is a really complicated venture and if done incorrectly he could end up losing all his money and have nothing to retire with.

Having accumulated just at a million dollars just before his retirement has left him feeling very good about his keen foresight of hiring Mr. Fancy Dancy of the “Fancy Dancy Brokerage Firm,  to handle his financial affairs. That is he was feeling very good about his decision until his latest visit with Mr. Fancy Dancy only a month before he officially retires.  The first thing his old buddy Mr. Fancy Dancy tells him is about the “4% rule”. Most studies come to the conclusion you will need to make your money last for at least 30 years and that the maximum you can withdraw each year to last the entire 30 years is 4% of your savings ( adjusted for inflation). So he is told his withdrawal will have to be limited to $40,000 per year in order to last for the expected 30 years of his remaining life. This comes out to $3,300 per month. Added to his $1,500 Social Security this comes out to about $4,800 per month. Not bad considering but Mr. Regular is not happy at all. He was bringing home over  $10,000 per month with his job (his salary was $125,000 per year) and now he finds out that he will have to live on half that amount in retirement. Mr. Fancy Dancy explains to Mr. Regular that this is just the way  it has to be. He has him in bonds and stocks (chances are 60% equities and 40% bonds) and they are returning about 2.5% in his investments.  Mr. Regular is now desperate and is trying to think of ways to reduce his cost of living in order to make ends meet. Possibly selling his beautiful home and moving to a lower cost area, cutting back on expensive hobbies like golf or cutting back on vacations. He is even thinking about working part time then he suddenly finds out that he will lose $1 of his social security for every two dollars he earns over a certain amount so that limits his prospects there also. So Mr. Regular has to make a decision, take a drastic cut in his lifestyle or continue working until he has much more than one Million saved for retirement. By holding off he can better retire and because he will have a shorter life expectancy at that point he can safely withdraw a little more than 4% , maybe as much as 5%.

As it turns out Mr. Regular is friends with Mr. Knowledgeable. Mr. Regular shares his story with Mr. Knowledgeable. Mr. Knowledgeable tells Mr. Regular his thoughts about Mr. Fancy Dancy at the Fancy Dancy Brokerage Firm. He tell Mr. Regular while Mr Fancy Dancy is a nice guy that the reality is that he is there to make money for himself and that is understandably his primary focus. He further explains to Mr. Regular that he is a Dividend Income Investor (DII). As a Dividend Income Investor he controls his own portfolio and only buys individual stocks. In this manner he immediately earns more on his investments because he cuts out the middle man.

Mr. Knowledgeable continues to explain to Mr. Regular that he too has One Million dollars saved for his retirement, but he has no worries what so ever about maintaining his life style while in retirement and does not limit himself to the 4% rule, is not worried about running out of money even if he lives to be 115 years old. Okay, now Me. Regular is fascinated and asks him to please continue explaining more about his investment philosophy and about Dividend Income Investing.

Mr. Knowledgeable gladly offers to explain the Dividend Income Investing philosophy. First he explains that as previously stated he has one million dollars invested for his retirement. His current yield on cost is 9%, meaning that his returns from his dividend income is $90,000 per year. This equates to $7,500 per month. When he adds this to his Social Security of $1,500 per month his total income in retirement is $9,000 per month. This is only around one thousand dollars a month shy of what he was making at his full time job. Or in other words  he is only taking a 10% pay cut by retiring.  In addition some of his stocks will increase their dividends from time to time giving Mr. Knowledgeable a hedge against inflation. In the event of a a company announcing a dividend cut ( believe it or not this is a rare event ) Mr. Knowledgeable simply sells that stock and finds a similar yielding stock to replace it.

So what are the mechanics of the Dividend Income Investing?

  • First buy only Dividend paying stocks.
  • Never buy stocks below 4% dividend yields.
  • Try to buy stocks with yields in the 4-11 % yield range.
  • Identify stocks that are out of favor but are good solid companies that have sound financial fundamentals yet pay higher than usual dividend yields.
  • Don’t follow the “herd” – when everyone else is running to get out of a stock, that’s the time to start planning your purchase. Recent examples are oil stocks, Retail REITS, Coal stocks, Tobacco stocks. Just because they have become out of favor or socially unacceptable to many doesn’t mean the company will not continue to make money. Use logic and ask yourself basic questions – how many more years will this company be around? Is the market just overreacting to some bad news? Are things really that bad? – Quite often the answer is that everyone is just overreacting. This is when the great buying opportunities present themselves.
  • Don’t buy Speculative stocks – you know like the next great tech company that will make you rich. 99% of the time you will only get poorer – not rich.
  • Don’t buy ETFs and Mutual Funds – You are paying dearly for the middlemen.


So is really that easy ? The answer is yes. Of course you have to keep a close eye on your investments and it does take a little work to find stocks that will average a yield of greater than 9% but it is far from  impossible. In fact I have managed to do that with my personal portfolios for some time now. I, and many others like me are reaping the rewards of Dividend Income Investing. Follow the advice above, and keep focused on what is important, the Dividend Income!

Your comments are always welcome. Please comment below and also consider following me for more on Dividend Income Investing.

Multiple Income Streams

“Why should you actively cultivate multiple sources of income?”


Multiple Incomes- Exactly what is Multiple Income Streams ?  Developing multiple income streams is a way to enhance your present income, help save for the future and provide an “insurance policy” to make sure that if the unthinkable happens you will still have income coming in from various sources.

Why everyone should develop multiple sources of Income for personal Safety

Everyone at one point in their lives look for ways to earn a living. We have compiled an ever growing list of ways to make money, some you know, some will shock you.

The best ways I believe are the “Passive Income” Ways. Invest the money, the time or the expertise and for the most part put it on auto pilot and let the money flow in. Even if you are modestly successful you could potentially provide yourself a decent steady income for the rest of your life.

How many Income Streams should you develop? I recommend developing as many as you can until you are confident that no matter what is thrown at you in life you know that you can always provide for you and your family.

Recently I have turned my efforts to just this, discovering as many possible ways to make money as I can.  Recent events have shown me that single sources of incomes for almost anyone can spell gloom and doom. Most people in America although in the recent past felt as though they were secure financially if they had a good paying job, a nice house and a decent savings in an IRA or a 401K etc. But the “Great Recession” that started in 2008 and has lasted through the present has dispelled this myth. Many of us followed all the advice of the so called “Financial Experts” and where did that get us? For many it was disastrous, for others it has postponed or perhaps even cancelled our Retirement plans.

The answer – Well everyone might have a different answer but for me the answer is to have as many different sources of incomes as possible, especially from the “Passive Income” sources. Now one note on “Passive Income” as you read on you will see that some familiar types of investments are included in the “Passive Income” category but use extreme caution here, that’s not to say they are not good passive sources of income but as most know these sources can disappear quickly. A good example is CD’s, they were relatively safe and providing a great source of income for many Americans. As many discovered though the CD rates can go from a great return of say 10% to 1% almost overnight. When we discuss CD’s later on we will explore strategies to help mitigate this radical loss of income.

Why should you actively cultivate multiple sources of income? As explained previously there are many unexpected pitfalls that just beyond your control. Will you wake up one morning with the value of your home cut in half? Will the next economic bubble burst and take you with it? Will the bank or financial institution you entrusted your life savings to suddenly be declared a Ponzi scheme? Who knows but you owe it to yourself to be prepared. Not so much by saving your way to retirement but by ensuring that you have multiple incomes for life.  Does this mean you should stop saving for Retirement and personal goals?, absolutely not.  Everything the “financial Experts” have taught are true for the most part it’s just that they have left out one of the most important aspects of ensuring your personal financial welfare – your income. Traditional wisdom teaches us to get a good education or to obtain a skill that will get us a great job and provide the income we need. But, Traditional Wisdom is only half the equation in today’s environment. You must go beyond the traditional good job and savings route.

I saw my father work his whole life and save every penny he could only to see it all disappear when my mother fell ill. Now of course he did the right thing and so will the majority of us when face with tragic  circumstances  , but what if he had cultivated multiple sources of income so that when tragedy fell he not only had the savings to cover the tragedy but the income to keep up his lifestyle?

The whole goal is to never have to worry about the loss of a source of income. After all when it comes to investing all the experts say the key to safety is DIVERSITY and why shouldn’t the same hold true with the most important aspect of your life, your income sources? The idea  is to have MULTIPLE sources of income coming in at all times. Doesn’t it make sense to help insure the safety of your family by simply taking the time to set up easy sources of income? No one is asking you to quit your job or to radically change your life just to take a little energy now and devote it to setting up Multiple Income Sources!

I categorize income into three types

  • Active Income – Active income requires you to show up to work each day and actively participate to earn a salary or income.
  • Investment Income – Investment Income is a type of Passive Income with a few exceptions like that of Day Traders or active Stock Traders etc. Investment Income can require very little effort on your part but you can devote as little or as much effort into as you wish.
  • Passive Income – Passive Income requires very little effort on your part once you have set up your business or income system. Passive Income is the Holy Grail of the Multiple Income Sources. A great source of passive income has been made possible by the internet. There are a great number of people making thousands and even millions from things like Blogging, Niche Websites and posting how to or entertaining videos on You Tube. There is no reason why you can’t join in and be a part of it.

The Pitfalls of “ Financial Advisors”

First let me say there are a few great Financial Advisors. These are the exceptions however and while most talk a good talk for the most part they fail to deliver. Financial Advisors basically earn their money in one of two ways and even in both ways in most cases. The first way is they earn commissions from the Funds they steer you to invest in. Now usually they have some really good funds to invest in but I personally am not a big fan of Mutual Funds. Mutual Funds charge you to invest in their portfolios, there can be penalties for withdrawing money too soon, they have requirements that they must meet as directed by their charters such as they have to invest in certain percentages of a certain type of stock or have to hold so much in cash and so on. Mutual Funds rarely beat the overall market on a consistent basis.

The second way is that they charge a fee or percentage of your portfolio for actively managing your account.  This can be good as the more your account grows the more money they make.  But they can also earn a percentage of your portfolio even when your money drops, so either way they are making money off of yours.

Another way of Investing in Mutual Funds is to buy them directly from a Fund Company like Fidelity. Cut out the middle man so to speak. This can be good for those that don’t mind doing a little homework.

My favorite way to invest in the Stock Market is to buy the funds directly through a company like Charles Schwab. I only buy Dividend paying name brand stocks, that is they must pay a dividend and they must be  a company that has a long history of dividends and must be a name I recognize. Examples are Coca Cola, IBM, 3-M, Exxon Mobile, Proctor & Gamble etc.

I buy these stocks ( I recommend at least 15 to start and a goal of 30 stocks in differing sectors like Tech, Communications, Energy, Utilities, etc  for safe diversity ) and except for a quarterly review hold them forever. The only way I sell is if I believe that something major will negatively affect the company for a long time or if the products they sell are no longer relevant. An example of a company that has failed to adapt to modern technology for example would be Kodak – once a dominate force in cameras – that has now become obsolete and failed to quickly adapt.


 Some potential  Income Sources :

  1. Internet Store Sales
  2. Internet revenue from blogs of informational websites
  3. Dividend Stock Income
  4. Investing in Real Estate
  5. Part Time Jobs
  6. Consulting
  7. Turn your hobby into an income
  8. Trading Stocks
  9. Become a “Wheeler & Dealer” bargain, trade and sell for profit
  10. Open a business on the side of your regular job, example : a food or service  Franchise ( I do Not recommend retail businesses )
  11. Become a Real Estate agent on the side.
  12. Flip Houses
  13. Weekly or  monthly yard sales
  14. open an Ebay or Etsy business
  15. Become a Handyman
  16. Write and sell books/e-books
  17. Teach others how to do what you are an expert at.


 As you can see there are many ways to earn extra income but the important thing here is to develop the income sources now before you actually need them. By doing this now you give yourself peace of mind, it will serve as an insurance policy for you and you family and can help you save more money for your future through the extra income generated.


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Three Types of High Yield Stocks

“So what are you waiting for ? Put some high yield into your portfolio and boost your income performance today.”

Some people are so afraid of High Yield Stocks that they shy away from them. The end result being that they have cost themselves thousands of dollars in potential income.

The thinking goes because most of the blue chips only pay 2-3% in dividend yields and the average for the S&P 500 is around 2.5% that anything beyond that is “High Risk.”

Being prudent and cautious in the investing world is a good trait but come on folks, use a little bit of common sense also ! Why don’t “Blue Chip” stocks pay higher dividends then? The main reason is because these stocks are highly desirable and the demand for the stock drives up the stock price and the higher the stock price, well it cause the yield to decline. Another factor is that these behemoths are for the most part very mature and as such grow slower that the younger, smaller and more nimble companies. There really is no comparison.

There are basically three types of high yielding stocks:

  1. They are in naturally higher yielding sectors. Example of these are REITs, MLPs, or BDCs. All sectors known for paying out higher yields. Other examples are Tobacco stocks, and communication stocks, think Phillip Morris, AT&T, and Verizon.
  2. Stocks that are in sectors that for no reason of their fundamentals have found themselves in an “out of favor” scenario with investors. Now admittedly you may want to take a very close look at these stocks first, but this is where you can usually pick up some bargains and buy stocks at higher yields than normal. An example is when a whole sector of stocks are out of favor for one reason or another. An example is tobacco  stocks. At one point everyone thought for sure tobacco was going away but the brave souls that stepped up and purchased the stocks are much wealthier for having the guts to buy them. Another are was the coal stocks, I myself saw 50 to 150% gains on these stocks because everyone convinced themselves that coal stocks were doomed. (And they might be in the very long run, but short term I knew coal could not go away over night) Just a little common sense and you could see how impossible and impracticable it would be to replace coal plants. Things like this takes years and decades to play out.
  3. The third type of high yielding stocks are the ones that are out of favor because of their poor company fundamentals. These of course are the stocks you want to avoid at all costs if you can. Leave the purchasing of these stocks to speculators and gamblers because you will not receive warning before they go bankrupt and rest assure the bigger players will always get out ahead of you and you will be left with nothing but memories.

So in my  opinion it is not only okay to seek out higher yields it is highly desirable. Even when I am purchasing “Foundation Stocks” and all things are equal I ALWAYS pick the stock that has the higher yield. Even a quarter or a half a percent can make the world of difference over a long period of time.

When purchasing stocks keep in mind your desired total yield for your portfolio. If you desire a 10% overall yield for your portfolio then seek out stocks that are at or near that yield. But when doing doing keep in mind why is it at that high of a yield. Is it simply because of a sector selloff  because there is a temporary factor that is causing the sell off? Is the stock in a normally higher yielding sector such as a BDC (Business Development Company) or a REIT (Real Estate Investment Trust ) ? Or the one you  have to be concerned with – because of the companies underlying fundamentals.

So bottom line – I don’t have any qualms about investing in higher yielding stocks but I am very careful and selective about it. It takes a little patience and a little more effort but the reward is certainly worth it. For an example say you have a portfolio producing 3% in income and you can push that up to 6% – well, look at the results:

$100,000 x 3% = $3,000 per year or $250 per month.

If you double that

$100,000 x6% = $6,000 per year or $500 per month.

And triple :

$100,000 x9% = $9,000 per year or $750 per month.

Now which one would serve you better? Personally I would choose the $750 per month in income ! Yet, very few do, because they have the misguided illusion that they will lose their money if they even attempt to invest in higher yielding stocks. In reality it is costing them big time not to invest at least a portion of their portfolios in higher yielding stocks.

I also want to briefly touch on one of the arguments against high yields. Many will argue that the stock cannot possibly sustain that high of a dividend. Well I have been doing this for many years now, and I can attest that most of the stocks I pick do in fact sustain their yields. One of my reasoning’s was that even if a particular stock cut it’s dividend 50% say from 9% to 4.5% it is  still a higher yield than the 3% stock ! Sure I have had a few disappointments with my methods but I am not married to the stocks. When a stock disappoints me I simply sell it and replace it with another stocks that has my desired yield. In many cases they are replaced with a yield that is even better than the original stock.

If this seems like something you would like to try for yourself but you are scared then what I would suggest is that you open a brand new brokerage account and use it to experiment  with. In this way you can limit your risk and it will give you a clear indication as to whether or not you can make it work for you. I would suggest picking maybe 5 stocks at most in a couple different sectors.

A sample pick of stocks might be:

  1. Whitestone REIT (WSR) – 10% – REIT
  2. Newtek Business Services (NEWT) – 9.1% – BDC
  3. Omega Healthcare Investors (OHI) -7.3% – REIT Senior and Assited Living
  4. Starwood Property Trust (STWD) – 8.88% –  REIT Diversified
  5. Vector Group (VGR) – – 7.64% – Tobacco & Real Estate

Note: Yields effective – May, 2017

So what are you waiting for ? Put some high yield into your portfolio and boost your income performance today.




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Sell or Rent Your Property ?

“He is now earning $10,332 per year or $861 per month in additional income !”

This was an actual question from my son seeking my advice on what he should do. He is in the Navy and has to move to Oklahoma for his next duty assignment. The Navy in Oklahoma ? He is actually being assigned to a Joint Services assignment where he will work on an Air Force Base. He owns his house at his present assignment and has determined that can rent it for a small profit of $265 per month. If he were to sell it he should realize a gain of about $65,000 when all is said and done.  Should he rent it or should he just sell it? There is a ton of variables to consider but in this particular case this was my advice.

I advised him to sell the property. He knows that I am not adverse to rental property, in fact I have owned many rental properties and have made great returns from them but in this case I just had to say sell. My reasoning was based on several factors.

The first thing to consider is the shear distance between where his property is located and where he will be stationed. It is hard enough to manage rental property but just like relationships long distance rentals are a bad idea. Even with a good property manager there is still a need for your participation in the property. Property managers typically charge 10% of the rent collected which also drains your positive cash flow – for example if you rented your home for $2,500 a month the property manager takes $250 per month in fees. This is expensive ! You also need to factor in property taxes, Insurance, maintenance costs , tenants not paying rent or leaving after the lease and having an empty home that collects no rent at all. Even minor events can become expensive when you have to rely on others to do the work for you.

If he choose to sell the property then he will net about $65,000 after closing costs, Real Estate agent commissions and taxes …….. and of course there are several things he could do with that ………. use it as a down payment on a new home, pay off other debts but I advised him to invest it. Keeping in theme with that of a Dividend Income Investor one of my priories is when you earn money or come into money from what ever source the first thing you should think about is putting that money to work earning income for you.If you spend the money it cannot earn money for you. If you spend it you can never have it back. Sure, there are lots of circumstances where spending money can save you money, say paying off a high interest loan for example but when you invest that money so that it produces an income for you it does that forever! In fact if you do it correctly it will not only produce income for you for the rest of your life (and your children’s lives should you choose) it will actually grow and make sure you get constant raises in your income.

So if he takes the $65,000 and invests it in Dividend Stocks earning 9% per year ( My own portfolios exceed this yield) then it will immediately produce $5,850 in the first year which equals about $487 per month in income! He will be in Oklahoma for a total of six years. So if he lets the investment t continue to compound at the end of 6 years his account will have a value of almost $111,000 as the original $65,000 would have paid him $45,874 in Dividends (Income) over that six years.

He is now earning $10,332 per year or $861 per month in additional income ! All from not spending the $65,000 !  At this point you could withdraw $500 a month for expenses and still have your investment continue to grow and best of all you still have the cash because you did not spend it.

Rule # 1 – Never, Never spend money you do not have to !

Will he take my advice ? I doubt it as young people seem to not be able to see tomorrow for all the clutter today but I really hope he does because it will make his life easier later for doing just a little bit of planning now. Regardless of what he does though if you find yourself in a similar situation please stop and consider what I have laid out here for you.


Any thoughts or comments? We would love to hear them!

Fads and One Hit Wonders – Make for Poor Investments

“People can and always will make good money off these types of stocks but they will never make good income from them”

Fads and One Hit Wonders.

Not a viable place to Invest, at least for the long term investor.

Some stocks that come to mind currently are :

Gymboree – Gamestop- Fitbit – Go Pro – Groupon – Soda Stream- Telsa?-  Just to name a few. Of course I have to admit – I have been wrong in the past – I thought for sure Facebook would be another MySpace by now.  And it is entirely possible that some of these companies may expand into other businesses or product lines to sustain themselves but most will die and become nothing more than distant memories.

Whatever your point of view with these companies the point is that they have no place in the Portfolio of a Dividend Income Investor. These type of stocks are best left to traders and speculators. No matter how great a product is unless it is something consumers need or require on a regular basis it will eventually go into a steep decline. Let’s consider Go-Pro. There’s no doubt that Go-Pro makes some great camera’s but the truth is their market is saturated. Only certain people need or desire these cameras and the vast majority of us will never own one because we really do not have use for them. Out of those that do own one many of them have received them as gifts ( usually a one time thing) and many others will only buy the product once or at most every few years. Now certainly Go-Pro can survive with this model but in all probability unless they can come with more everyday products they will not thrive enough for investors and certainly not for Dividend Income Investors.

When considering stocks to add into your Dividend Income Portfolio you you consider:

  • does it pay a dividend( As a Dividend Income Investor it has to pay a higher yield ) and is it sustainable
  • Is it a product that people will want continuously – not just as a novelty or a gift.
  • Is it more than a Fad – something that will be wildly popular until the novelty wears off.
  • Can its products be protected or will other companies soon be copying them

People can and always will make good money off these types of stocks but they will never make good income from them. For Dividend Income Investors, stay focused !

Thoughts or comments?


My Daughter Did Not use her College Funds for College!

“what if you took the Dividend Income Investor philosophy and applied it to paying for college?”

Many people take the student loans and use them to live on , pay for college expenses and quite frankly, to party for four years. What they end up with is hopefully a degree that they may or may not be able to use towards finding a job and tons of personal debt.  But what if you took the Dividend Income Investor philosophy and applied it to paying for college? You know the “Golden Rule of Investing” which basically says don’t spend your money. As a Dividend Income Investor we know that the best use of money is to produce income.

I have convinced her the best way to start college is at the community college level. It is much cheaper, she can live at home and is spared the expenses of living somewhere else. So her first two years will be much cheaper than going off to some far away college. The second thing we talked about is going to school to develop a career opportunity not to just go to college without direction. Fortunately she has it narrowed down to two choices, both of which can be completed in two years and pay well. Her choices are Dental Hygienist and Registered Nurse. Both are offered as two year programs at out local community college. This way after two years she has a great income coming in and should she decide to pursue a 4 year degree she has a way to support herself while doing so. I know a lot of people think it is impossible to pay your way through college and I say they don’t know what they are talking about. I had one person tell me I did not understand how expensive college was now days and I could not do so if I were getting a degree in today’s world. First, I will admit , College has become more expensive than it should ever be but saying it cannot be done is just an excuse by someone who is misinformed or maybe just a little lazy. (I’ll let them judge themselves as to which one applies) .

Here’s my daughter’s plan. She has 23,000 saved for college and has another $2,000 in a separate account. In addition her grandfather is giving her $10,000 each year to help fund her college. I have talked to her and we will put the entire amount into a brokerage account with Dividend paying stocks. Her yield will average 9%.

So the first year – $35,000 in stocks are purchased – This will produce $3,150 per year in Dividend Income. Her tuition will be $160 per semester hour and her degree requires 69 semester hours so the total amount for tuition is $11,040. Of course there will be other expenses like books and lab fees. She has to attend 5 semesters so the average amount of tuition is $2,200 per semester or $4,400 per year. Just $1,250 shy per year but she will also get a part time job. If she works 20 hours per week at $10 she can earn about $200 per week or $800 per month, and in just three months she has earned the rest of the required tuition.

When she starts her second year of college she will get another $10,000 from her grandfather – So now she has $45,000 invested and bringing in $4,050 per year in income or $337 per month. Add this to her part time job and she has finished her first two years of college, has a degree in Dental hygiene or Nursing and Can go to work earning much more money. She not only owes nothing to anyone but she still has her $45,000 invested and is earning income from it. Also her grandfather will give her $10,000 for the third and fourth year of college so it will grow to $55,000 and the start of the forth year to $65,000. At this point her Dividend Income is $5,850 per year or $487 per month ! At this point she has – A 2 year degree, A great Career, No debt , a great start on her Investments, and a very good start on Dividend Income.

Okay so you say “but my daughter does not have a grandfather giving her $10,000 per year for college”. I thought you would never ask. The same scenario applies but using various types of student loans both private and federal.  Because of the interest rates on the loans and you have to pay them back you will not have as much left at the end of school but you can still come out ahead by investing the money and only paying for college out of Dividend income. Another way is to work more hours during school breaks and summer vacations. Or try and save more towards college before she starts to have an advantage in that respect.

There are tons of ways to eliminate college debt or reduce it substantially but one thing is certain you have to be an active participant in the finances of your education. To allow your child to make the mistake of accruing massive debt from his or her education is irresponsible parenting in my opinion. There is no need to start ones life off struggling to pay bills.

Thoughts or comments ? I would love to hear from you.