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.






How Not to Spend Your Money !

“The objective is to accumulate a sufficient amount of investments so that it provides you with a very comfortable income stream “

My philosophy is “The best way to make money is not to spend the money you have”. This concept seems a little difficult for some to understand, at least in my own immediate family. When I try to explain this concept to them I get blank stares or looks of total confusion. I firmly believe though once you grasp this fundamental concept you can be on your way to financial Independence and Freedom. Notice I did not use terms such as  “Millionaire” , “Rich”, “Wealthy” and similar terms or phrases because that is not what my objectives are. The objective is to accumulate a sufficient amount of investments so that it provides you with a very comfortable income stream and is continually growing in size. Of course there is usually many ways of accomplishing goals and objectives but one area that I believe most people seem to ignore is also what I believe on of the most simple ways.  Not spending you money in the first place! In this article I am trying to give you ideas of how not to spend your money. When you don’t spend it you have more to invest and you can produce more income for yourself.  In a previous article I explained how much money each $1,000 dollars would produce in potential future income.

So with the mindset of not spending money let’s see some potential ways to achieve our goals.

Areas to Save Money ( Apply the Golden Rule of Investing)

  • Alcohol – Drinking alcohol can cost you in many ways but just the basic cost is worth avoiding it. If you must drink, then try to buy it yourself and mix your own drinks, you will save 90% of the cost. Easily save $500 per year.
  • Cigarettes – I will not lecture anyone here but just pointing out not only are you hurting your health but you are hurting your future income. I was surprised to learn of cigarettes going for $5.00 a pack. If you smoke a pack a day that’s about $2,000 a year to invest.
  • Fancy Coffee – Did you realize you can make your own coffee at home for about $8 per month versus $120 – $150 per month for the coffee bar brands? Add on another $1,400 in savings !
  • Expensive Vacations – Vacations are important in my opinion but you should look at ways of vacationing that is more affordable. Instead a $5,000 vacation look for ways to cut it in half – Another $2,500 to invest !
  • Prestigious Automobiles – Do you really have to have an expensive or prestigious automobile? In today’s market there is little difference in the quality of cars. What you are really paying for is the honor of sporting a name. Is driving that name brand vehicle really worth the cost of your future income? I would say that only you can answer that question but for me, the answer is a resounding no! Purchase a car with a monthly payment of $300 per month versus $ 600 per month and you will have another $3,600 to invest !
  • Expensive Makeup – I’m certainly no expert on makeup but I have noticed that some of the department store makeup is 10 times the cost of the makeup in other stores. I have yet to see a pretty woman and say to myself “I bet she is wearing the more expensive makeup”. In other words ladies – I don’t believe men know the difference! Let’s cut back $20 per month for a yearly savings of $240
  • Expensive hair-styling – A haircut is a haircut – Why pay more for a product? Is a $100 haircut really better than a $`15 haircut? Probably not. Even at two cuts per year – $170 saved !
  • Fast Food and Expensive Restaurants – Eat out less often and you can easily save $50 per week which amounts to $2,500 per year saved.
  • Telephone – Why pay $ 800 for the privilege of owning an I-phone when you can get a nice phone free instead? Saving $800 would pay you $128 per month in retirement! $800 saved.
  • Cable TV – I remember when they first introduced cable TV – It was billed as Ad free – Not so much any longer, now you are paying to watch ads. Out of thirty minutes of programming they are squeezing in as much as 15 minutes of advertising! All trying to talk you into spending money on things you don’t need. Dumping cable could add as much as $16 per month in retirement income each month! $1,800
  • Designer Clothes and Shoes, Accessories. Many people justify the exuberant prices by saying that they represent higher quality – but in most cases, they don’t! You are paying for the “privilege” of sporting a popular name. The amount saved here varies widely with each individual but I know most could save $500 here and not even notice it.
  • Designer Bottled Water – Did you realize in many cases you are paying 3 times or more for water than gasoline? – Insanity! easily save $260 per year!

These are just a few of many possible areas to cut back or eliminate spending but it amounts to over $16,000 per year in savings ! This could be a big boost to your Income Portfolio !

The point I am trying to make here is that there are plenty of ways that we waste money that we could be investing for our future. Just by eliminating a couple of items from above could put you well on your way to investing for a more than comfortable retirement!  Take a moment and read them again. Now decide which ones you can eliminate and make a pledge to yourself to start investing that money each month instead. Your future self will be eternally grateful that you did!

You may also want to go back to review even necessary items like home and car insurance. I recently reviewed my own Home Owners policy and car Insurance policy. I found that they had slowly crept up in price over the years and after some investigation and a couple of quotes I was able to reduce my homeowners policy by $600 per year and my car insurance by $400 per year for a total sayings of $1,000 per year ! Amazing is the fact that I did not give up a single thing to save this money except for a few moments of my time.  It didn’t take one thing away from my lifestyle and certainly my friends could care less about what insurance company I have. I would recommend you make this part of an annual review of your expenses so that you can be sure you are not overpaying.

The choice is yours alone – I can’t talk you into making wise choices; only you can do that for yourself. Decide now to make this philosophy part of your life. Take action now for your future self, for your children and for your family.

If you do decide to take action on making cuts to your everyday expenses please consider:

  • Keep a diary and write down every penny you spend for a couple of months to become aware of just where you are spending ( Especially pay attention to the discretionary spending)
  • Set a goal – (IE I will cut $200 per month in spending)
  • Take action at cutting expenses
  • Dedicate those savings to your Investing account
  • Review your spending on a periodic basis – say annually in the same month every year so you remember – A suggestion is to perform the review each year when you do your taxes.

My message – It is easier to not spend money than it is to save money.

have your own ways to save money ? How about sharing them with us. We love to hear your comments !



The Golden Rule of Investing

What is the “Golden Rule of Investing”?

What is the “Golden Rule of Investing”?


 “Think of all money you earn as a Potential source of Future Income”  

Don’t think in terms of how much money you have or have saved but rather how much money you can generate from what you have.

In other words, when you receive your pay check, of course you have to pay your bills. And some bills you will always have – electric, water, gas, phone, mortgage but those that you don’t is where you can get the money to finance your future.  A great example is your car. A lot of people buy a car – and of course they buy into the marketing that owning that luxury or high priced sports car is more fulfilling somehow. But what you need to consider how much future income did you give up for that little bit of prestige you got from the fancy car? That extra $ 10,000 or $20,000 you spent just stole from your future income source.  When you make purchases, no matter how small or large you should think about the true cost.  Now if you had kept in mind my Golden Rule you hopefully would have come to the conclusion that you were better off with the lower cost car and saved yourself that $20,000 dollars. If you had then let us see what it would have done for you.

Each one thousand dollars if invested at 8 % yielding stocks would provide you with $80.00 per year in income or $6.66 per month for the rest of your life.  It may not sound like much but consider that was just the one thousand. Now, let’s multiply those thousand dollars by twenty. That creates an income stream of $1,600 per year or $133.33 dollars per month! Could you use that extra $133.33 per month for the rest of your life? But wait, it doesn’t stop there! Because of “Compounding” your income stream will be constantly growing also! Most stocks pay their Dividends on a quarterly basis so we will see what happens over time to your income based on quarterly payments of Dividends.  Even though I like to express Dividend Income in Monthly Income because I believe most of us can relate to that better, the reality is that most companies pay their Dividends on a quarterly basis. So we invested in this company (we will call “Company A”) and it is paying its dividend each quarter of $.40 per share (I will explain how dividends work in more detail in a later chapter) we would earn $400 the first quarter. If you used that money to buy more shares,  your shares would increase by 20 shares so in the next quarter your dividend income would be $408.00, 2nd quarter it would be $416.16, 3rd quarter it would be $424.32 and the 4th quarter it would be $432.80! On an annual basis your income would now be $1,729.73 per year or $ 144.14 per month. This is a monthly increase of $10.81 per month!  So as you can see not only will the money you saved provide you with a monthly income for the rest of your life it will also grow and provide you increases in income for the rest of your life ! Don’t worry if you don’t understand how dividends work or the how the math works as we will be discussing that later on. The important thing for now is to understand that by investing money correctly (and not spending it unwisely) your money can grow to provide you with an income stream so that you will never have to worry about money again and insure a bright future for you and your family.

“Don’t ever spend a Cent if you are not forced to”!  – If you spend it – you lose it, but if you save it, it will pay you for the rest of your life!

Investing by not spending money is a Mind set. Place signage everywhere for you to remember if you have to – Place a sign in your office, put notes on your computer, or even in your purse or wallet if you have to , to remind yourself your goal of not spending money unnecessarily.

Think in terms of accomplishing small goals to work towards your main goal.  If you want to save $50,000 to invest – well that seems like a task that is very hard to accomplish for most of us. But if you think smaller it becomes much easier. I like to save $1000 at a time. When I reach that $1000 goal I invest it. Do that 50 times and you have reached your goal.

Another way of thinking about this is every dollar you spend unnecessarily now will cost you a lifetime of income. Spending $100 today will cost you about $16 per month in income at retirement or will reduce your income by $200 per year in retirement! That might not sound like a lot, but how many hundreds of dollars do you spend unnecessarily each year? Smokers or expensive coffee drinkers can easily spend $4 a day or $1,500 a year on their habit – that equates to 15x$100 or $240 per month in retirement income or $2,800 per year in income – Your habit for 10 years could cost you $2,400 per month or $28,000 per year in potential retirement income.  As you can see, your choices today can have “Compounded” effects on your future! This is just one small item that I used for an example, take a moment and try to reflect on your habits and determine just where you are potentially spending your future unnecessarily. Most of us will be surprised as to just how much money we are spending on things we really don’t even need.


So, in summary we should all think in terms of any money we have as being a vessel to earn future income. When you spend it ( yes, I realize sometimes it is absolutely necessary) we lose the ability for our money to generate income. Always remember the “Golden Rule of Investing” prior to making a purchase and realize what you are really giving up to buy that sill fad or knickknack that will probably add little or no value to your life.

Thanks for reading and be sure to share your thoughts and comments with us.