October 2020 Dividend Income Update
Welcome to my latest dividend income update.
For those of you new to these posts on my site, for a few years now, every month I discuss our approach to investing using Canadian dividend paying stocks and how that approach is helping us realize financial independence.
To recap our investing journey in the nutshell, we take a hybrid-approach to investing.
- Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. These monthly updates specifically focus on that progress and the performance of our TFSAs and non-registered accounts to support any semi-retirement dreams.
- Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. I believe owning more U.S. ETF units (over time) is a great complement to our Canadian dividend income machine, beyond the handful of U.S. stocks we own as well.
For any future reference you can see some of my current holdings on this Dividends page here.
Financial Independence (FI) is getting closer…
Dedicated readers will continue to read on this site I’m not a huge fan of the Retire Early (RE) part of the #FIRE movement but I am a huge advocate of (and diligent investor striving towards) FI.
I’m passionate about FI because I feel this mindset and approach to investing will give us the freedom to continue working at jobs we enjoy today – even if we don’t need that money for retirement purposes.
I fully believe even in semi-retirement, you need to have purpose. It will keep your body and mind engaged and active.
It is my intention to work full-time in the coming years and transition to part-time work in hopefully another 4-5 years should my employer continue to have me!
FI income goals
Based on the math I continue to do every year, including in this very first edition of my Financial Independence Plan, I continue to believe earning ~$30,000 per year from our Canadian dividend paying stocks should cover most of our basic expenses, for life.
Ottawa, Canada is an expensive city to live in (compared to other parts of the country (Toronto $$$ and Vancouver $$$$$ excluded)), so based on this choice so we’ll need a decent retirement portfolio to cover the following in current dollars:
- food/groceries, basic household supplies = $8,000 per year or $667/mo.
- condo utilities (heat, hydro, water, internet, cell phone bills) = upwards of $6,000 per year or $500/mo.
- condo property taxes in Ottawa = $6,000 per year or $500/mo.
- condo fees = $6,000 per year or $500/mo.
That’s $26,000 per year without any auto expenses or healthcare expenses.
Throw in some car expenses from time to time (our car is paid off) and then a healthcare plan when our workplace benefits end and it doesn’t take much to need $30,000 per year after-tax to live where we do.
Get your tax-free money!
Thankfully, to help us with our semi-retirement dreams my wife and I have long understood the powerful merits behind our Tax Free Savings Accounts. So should you!
We’ve essentially considered our TFSAs as another retirement account from Day 1 – and because we have – we’re getting much closer to realizing some of our semi-retirement dreams since a good portion of our income will be tax-free – to spend as we please or it can continue to compound away as we work part-time.
This time last year, our taxable and non-registered portfolio was churning out about $19,300 per calendar year. We actually ended 2019 earning $19,558.
With just another two months left to report on this year, we’re now estimating we’ll earn $20,790 in income.
In fact, we might reach our target of $21,000 should a dividend raise occur between now and New Year’s Eve and/or thanks to dividends compounding away without any effort via dividend reinvestment plans.
- That’s like earning $2.37 per hour of every hour of every day (even in my sleep).
- In terms of an hourly wage, that’s like earning almost 10 bucks per hour assuming I work a 40-hour work week. Then again, some of that income is 100% tax-free (thanks TFSA)!!
Even without any new money added in 2020 since our TFSAs were maxed out in January, and after surviving a few dividend cuts this year, we’re still doing rather well.
My take home message is, whether it’s stocks or ETFs for a hybrid of the two I hope you can see the power that staying investing and reinvesting your dividends or distributions can deliver year-over-year.
I look forward to sharing another update soon. Thanks for reading and sharing.
Rebounding in September after some dividend cuts – this is my September 2020 Dividend Income Update including what 80,000 personal finance books say.
Got a comment about our investing approach? Got a question for me? Fire away. Happy to answer and provide any insights I can to help you tailor your own path.