Easiest $100 passive income stream you can create

There are just so many ways to create streams of passive income, but my favorite way of passive income is still the good ‘ol dividend stock passive income.

Dividend stocks are public-listed company stocks that make regular distributions to their shareholders, usually in the form of cash payments.

How dividend-paying stocks work

  1. their share price is X dollars
  2. they pay a dividend per share you own

That’s it.

Example: Company ABC whose stocks pay out $0.25 per share, if you own 500 of their shares, you get paid $125. Usually dividends are paid twice a year (bi-annual) or four times a year (quarterly).

Beautifully simple passive income strategy

  1. buy and accumulate dividend stocks
  2. reinvest at least 50% of dividends
  3. keep buying and accumulating dividend stocks
  4. UNTIL your dividends per year are more than your living expenses

#1 problem of dividend stock investing

You need to have a big chunk of it to work (because the returns are 3-7%+ per year); so depends on how much you spend, you may need more. Say for example, if you spend $4000 a month, then if the returns of the dividend stock is 3% per year, the amount you need invested will be

($4000 x 12) / 3% = $1,600,000

No one has $1.6M lying around eh. It’d be nice, but most regular folks wont have that.

But if you only need $2000/month, that’d mean you “only” need $800,000, which is a lot more easy compared to $1.6M. Maybe you work part time to supplement the $2000/month, or you just spend much lesser.

4 ways to play the game if we dont have that big chunk of cash

Time.

Compounding interest works most magically with time, so the longer time you have, the more it can work its magic.

Example: Sally invests $1000/month for 30 years versus Adam who invests $2000/month for 15 years, will they yield the same amount? Assuming dividend yields are 5% and all dividends are reinvested:

  • After 30 years x $1000/month x 5% per year reinvested, Sally will have: $837,129.48
  • After 15 years x $2000/month x 5% per year reinvested, Adam will have: $543,779.80

Interesting right? It’s all compound interest magic…that runs on time. So invest as early as you can.

Earn more

You can invest more by earning more, and one of the low hanging fruits are to negotiate for a higher salary. If you’re underpaid, it’s easier. Or look for what your competitors are paying in the industry, and switch.

If not, the other options are starting a side hustle:

  • quick money can be done by app-powered hustles such as Uber, Lyft, DoorDash and similar offerings
  • starting a blogging business is highly recommended, but man, it does take time (at least 12-24 months) and consistent action for it to yield good returns.

Save more / spend less

Saving more is doable when you have a lot of unnecessary spending already, such as if you’re already paying $3000 for monthly car installment, and then yes, you can either refinance or sell the car for a cheaper second hand options or take public transport.

This approach unfortunately do not work with individuals who have just enough.

Another method, is to look for higher yield dividend stocks

Instead of 3% return per year, can I get 6% per year? Or 10%?

If Sally invests:

  • After 30 years x $1000/month x 7% per year reinvested, Sally will have: $1,212,876.50
  • After 30 years x $1000/month x 10% per year reinvested, Sally will have: $2,171,321.10

Big difference.

Then what?

Keep building more and more of that $100/month passive dividend income streams.

Yes, you can enjoy some of the dividends along the way (at least 50% of dividends should be reinvested, to grow your nest amount as well as counter inflation.

Keep going UNTIL you reach your passive dividend income goal.

Why this person earns $12500/month but is miserable and wanted to die

My friends shared this article and I wanted to discuss this case study with you.

So according to the article, he earns $12500/month and he says:

  1. he lives paycheck to paycheck as there are lots of things to pay for
  2. when compared to his school mates, he’s doing well but in the tech industry, he’s at the lower end
  3. he thinks most jobs are going to be the same: stressful and fast paced
  4. thought about dying but dont want to be irresponsible for aging parents

What I will do if I am in his shoes earning $12500/month

I’m gonna put myself in his shoes and make some assumptions (I am NOT a psychologist) and this is based on what I’d do from a personal finance standpoint:

Hardcap spending to max $5000/month

He said that he lives paycheck to paycheck because of

  • mortgage loans
  • insurance bills
  • medical expenses
  • rising cost of living eg food
  • etc

I will revise all the expenses, and cut down aggressively.

  • If I live in a condo that takes a big chunk of my pay, I’ll downgrade. A HDB is fine. If I live by myself, co-living is not bad too.
  • If I have insurance that I dont need, I’ll cut back and downgrade
  • Medical expenses may need to be refinanced
  • If I eat out $2000/month, surely I can cut back to $1000/month?

I dont know the details, but that’s some rough idea.

The budget will be $5000 all in so that…

$7500/month to be invested into dividend paying stocks

Assuming

  • invest $7500/month
  • dividend stocks pay 8% per year
  • reinvest every single dollar

In 5 short years, I will have $570,233.61. At 8% dividend yield, that’s $45,618.68 in dividends a year, or $3,800 a month of decent dividend passive income. I can live comfortably in a cheaper country such as Malaysia or live a bit more frugally in SG.

In 10 short-ish years, I will have $1,408,093.87. 8% per year is $112,647.51 which is $9,387.29. Based on hardcap $5000/month spending, I can retire on $6000/month and still have $3,387 “spare” to reinvest.

Note: it is likely when we stop working, we spend significantly lesser because we spend lesser on conveniences and transportation. Think about it.

Food in town hawker is about $8-10 a meal, with drinks; cafes around $20 and restaurants between $30-50. Watching a movie $15+. If we work part time or are retired, we’d likely be lessed stressed, which means less inclined to spend on conveniences like paying for food outside.

  • We may cook more at home.
  • Go for long walks or enjoy activities in an unrushed manner that doesn’t cost much.
  • We may even watch shows on computers.
  • We wont need to rush around in taxis or paying to rush food delivery.

I’m not saying to be a recluse when we retire, but I anticipate our costs just goes down significantly, and we may need less than we currently spend.

Burnout, stress and mental health

He probably

  • is stressed from the fast paced work and pressure
  • comparing to others down and up of him
  • feels stuck

Like I said earlier, I’m no psychologist or mental health therapist.

I’m also not going to say the cliche thing of “ah, you just gotta stop comparing” – it’s not so easy to stop that. It’s human nature.

I do think that he feels lost and that “it’d be like this forever”…because he doesnt have a personal finance and early retirement plan. That’s why , I’m pushing for you and me to do something that we can do:

  1. save more (flat amount OR percentage) of income including bonuses
  2. chuck all those into dividend passive income stocks
  3. spend some dividends BUT reinvest most of those delicious dividends until your yearly dividends is significant enough to retire on

The reasons why I focus on this

Happiness not included in office/work

I dont assume that work or being in office will make me happy. If it does, great. But I assume work may never make me happy (who dies thinking of “I should have worked more…?” anyway). So I will not link happiness to work.

Optimize for dividend passive income

I assume happiness and contentment may be outside of work, so what I will need to do is to build a passive income portfolio that will pay me continuously, so I can choose to not work and instead, pursue projects and people that may be of interest to me.

Will it bring me happiness? I dont know. I can just explore and find out.

Regardless, once my dividends are more than my living expenses, I can then choose to work less, retire, change job or pursue other stuff that I may be interested in. Maybe draw, travel, marry, who knows? Maybe even when I’m financially independent and free, I’ll still be working, just that I’ll be more selective of the people and projects I want to be involved in and with much less stress.

The key here is I want you to take the steps to continue building streams and streams of passive dividend income from your salary. And reinvest all the dividends until the dividends are good enough for you to have more life options.

PS: dont consider or commit suicide, ever. That’s like choosing a permanent solution to a temporary problem…plus there’s so much things to do, places to go, people to visit…or even things to discover in life.

What do you think? Share you ideas in the comment below.