My five step plan will help you obtain living off dividends in 20 years. They are aggressive, but this would allow me to achieve a six-figure income and a millionaire dollar portfolio at the end of 20 years.

Just follow these five steps to living off dividends:

1. Contribute $200 per month to your dividend portfolio your first year
Set up an automatic contribution of $200 per month to your dividend growth portfolio. That should be an easy start. If you want to contribute more, even better! Make your contributions automated as much as possible. We want to save our time for other sources of passive income.

2. Increase your monthly contributions by 25% per year
This sounds like a lot but can be done so long as you increase your income from other sources along the way. As long as you are a good saver, you should be able to do this for the first 10 years. After that, the annual increases get much more difficult, but they are certainly attainable. I’ve been saving at least 30% of my after-tax income each year.

3. Any dividend income you receive should be reinvested into your dividend growth portfolio
Once you receive dividend income, use this to buy more stock in your portfolio. Rather than a dividend reinvestment plan, I like to invest at my own discretion. A dividend reinvestment plan will automatically buy shares in that specific stock. Without the dividend reinvestment plan, I can invest in a stock when it declines in value or I can invest in a different dividend stock in my portfolio.

4. Invest in quality stocks that enable you to achieve a 6% growth rate in your equity value
This point shouldn’t be hard to do. You will have some winners and some losers, but just make sure you have 6-8 winners out of every 10 stocks.

5. Repeat steps 1-4 as you go over time
Continue with your plan and it will all work out. I like building a hand selected version of dividend stocks as opposed to index investing. This allows me to focus on specific yields and invest in companies at attractive valuations.

Develop your own plan

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