Never spend your money – At least if you don’t have to. Part of the Dividend Income Investor philosophy is not spending money in the first place. If you don’t spend it you don’t have to worry about saving. (See Golden Rule of Investing) And of course any money you do not spend starts generating income for you immediately because you invest it in Dividend Stocks. Sounds simple to me !
What I mean in the Title though is just a little different, same concept but let me give you an example. I recently took out a mortgage on an investment property. You will hear many people speak ill about debt. I hear this all the time involving potential stock purchases. Debt in itself is not a necessarily bad thing though. There is “bad” debt and then there is “good” debt. I would consider “bad” debt spending on anything that does not produce additional income for you. But I believe the mortgage I took out to buy the investment property is “good” debt. Why? Well in this particular case I took out debt and I am paying 5% interest on the debt but because I was currently earning over 9% on my money I felt it was better to leave my money in the investments and as a result I am still earning 4% more than I would have just for the privilege of not having debt. I also consider the fact that the property I mortgaged would also earning a return making my “debt” even more beneficial. Beside the fact of earning more by leaving it in the investments let’s look at it another way. Say I only earning 5% and the loan was 5% in that case I wasn’t making any money on the investments. In this case I would still choose to to pay cash for the investment property. If I were to pay cash for my investment property I would own the property without debt but I would have given up a significant amount of cash to accomplish things with or to invest in another investment with a higher rate of return.
Now of course I realize you can’t do this with all your purchases but it usually makes sense to do it with most major purchases like automobiles, homes, investment properties and the like. Every penny I invest is there to stay if I can do anything about it. I no longer look at cash in the same way. I use to see it as a spending instrument but not any longer. I now see it as an INCOME PRODUCING INSTRUMENT ! Once you start looking and thinking about your money in this manner you be a changed person because its then that you realize just how much potential income you are giving away but spending your money needlessly.
Start thinking before you spend money. Think about what your options are and the benefits of having your money in Investments that are producing income. If you do you will be rewarded many times over especially with the power of compounding on your side.
What do you think? Can you stop spending your money ?
Let us know your thoughts. Feel free to comment below.