It was a wild ride towards the end of 2018. We briefly entered a bear market and roared back over the last two weeks. Because of all this volatility it was hard to focus on my goals for the new year. Overall, the fundamentals of my strategy haven’t changed much. I began this blog by discussing how I plan to invest $2000 a month into the market. This one-time monthly amount minimizes commission costs but still averages out my purchases. For instance, investing in $100 or $500 increments dramatically increases commission costs. Also, investing in a larger $2000 position forces me to do adequate research on the company in question.
I mentioned in the previous few posts how I’d like to potentially accelerate my stock purchases. My living expenses are under control, giving me more flexibility. However, the goal is $2,000/month or $24,000/year. Exceeding my goal and investing more assumes I have an adequate emergency fund. Also, the market must be offering a tremendous bargain. For example, on Christmas Eve, the Dow hit 21,700. I should have made an additional purchase that day given all the discounts. Traders saw the value afterwards and the market has rallied since. Essentially, I don’t want to be tied to my goal so tightly that I miss out on an amazing opportunity. The traders that bought on December 24th were already up 5% by the end of the 26th.
Furthermore, all dividends will continue to be reinvested. In 2018 my portfolio earned $2675 in dividends, or just over $200/month. This $2675 bought more shares, providing additional income in 2019. With reinvestments, dividend increases, and new stock purchases the portfolio should generate around $3900 in 2019. When I project these returns out, basic living expenses should be covered by 2023. Therefore, if we’re being conservative, I will achieve basic financial independence at age 31. This means being able to pay for food, housing, utilities, internet, insurance, gas, with a bit left over. Obviously, this isn’t enough to completely stop working. However, covering basic expenses allows one to leave a stressful job, change careers, or take some time off.
Financial independence requires three things. The first is to set clear and realistic goals. Second, one must keep expenses down. And finally, the individual must take the savings from keeping expenses down and get that money working passively. My goal is to be financially independent at age 31 and be financially abundant (retired) by age 40. In doing so I have to be creative in the way I minimize expenses. For instance, I spend a lot of time focusing on my health and reducing stress levels. This helps me minimize costly healthcare expenses in the future. Most importantly, I save over $2000/month and invest it in dividend paying stocks. With that in mind, what are your goals in 2019 and when do you plan to reach financial freedom?