Monday, March 17, 2014
A Penny Saved is a Fistfull of Dollars Earned
Hello again, it's been an extremely hectic week. Work has intensified immensely and I now find myself working 72+ hour weeks. While this is great for the pocket book (hello overtime!) my time available to manage Dividendasaur has suffered. I also recently made on offer on a house. This offer was accepted by the owners of the house but now awaits final acceptance by their bank (short sale). Even through all of this madness I have still found a way to increase my invest-able income in the long run.
When I consider monthly spending, one of my favorite things to do is convert that monthly bill into an equivalent lifetime dividend income to see how much the service is actually costing me. I use a simple conversion (no tax included) to see just how much money I would need to save in order to cover that bill for the rest of my life. One example of this is my monthly phone bill which I have recently attacked.
Currently I pay $54 per month for a Verizon service which provides me with 1000 texts, 400 minutes and extremely limited data. I have paid this bill monthly since 2008 and while I have no problem with the service, I know that I can do better. To analyze this monthly payment I make the assumption that the average dividend paying stock I purchase will provide me with a 3.5% return yearly. Here is the calculation:
12 months * 54 (dollars/month) / 0.035 = $18,514
This means that to cover my $54 phone bill for the rest of my life I would need to have $18,514 invested in my portfolio earning a yearly 3.5%. Well that just isn't very good when my goal is to cover my total monthly spending each month with just my dividend income.
To address this problem I went shopping. For the cost of ~300 dollars to buy a new smart phone I have decided to try out service with Republic Wireless. This will provide me with a smartphone for the first time in my life, unlimited talk and text, and data when I am within range of WiFi. Most importantly it should lower my monthly bill by ~ $44 each month. This savings requires me to invest $15,086 LESS money in my portfolio to cover my total phone bill. Now instead of having to earn that extra $44 monthly I have an extra $44 to help the dividend snowball grow.
While I do not recommend Republic Wireless at this time I will be evaluating the service over the next month or two to see if it is satisfactory. If I am impressed with the service I will likely write a followup post about them as I like to promote frugal services that I personally enjoy/use.