Here at Millionaire Dojo, being a black belt in finance means to have a net worth of a million dollars.
Just like a martial arts dojo, I want Millionaire Dojo to be a place where we can learn about personal finance and eventually become financial black belts ourselves. In this series, we get to hear the stories of actual millionaires and see what it took for them to get to that level.
Today’s guest is an anonymous blogger who writes over at DividendEarner.com. Dividend Earner is 45, married, and lives in Vancouver Canada.
Now for the interview:
What degree black belt are you? (e.g. one million = first degree, two million = second degree).
My net worth is a second degree belt whereas my retirement portfolio is at the first degree.
Give us the break down on your current net worth. What is it invested in and do you have any debt?
My portfolio vs home ratio value is about 55 / 45. My investing strategy is based on dividend growth investing and focuses on high-quality blue-chip stocks that pay a growing dividend. I focus on finding companies that can sustain increasing their dividends at a 10% growth rate average over a 10 year period.
The dividend yield is often low but the stock appreciation tends to beat the index. As I approach financial independence, my minimum number is $1,777,777, I will adjust my portfolio to provide a higher yield for more dividend income. On the debt front, I have a small mortgage at a low rate and not in a rush to pay due to the performance of my portfolio.
How was your childhood? Was your family wealthy, middle class or low-income?
I would have to say my childhood was in the upper-class segment. I was not spoiled but there was no money problem. I started thinking about money early on with my newspaper route.
Did you go to college?
I attended university and I have a bachelor’s degree in computer science.
What is your fighting style? (Career path from first dollar ever made to present).
Same career since I graduated but I’m a diligent saver with a focus on not increasing our lifestyle with salary increases. In short, I practice stealth wealth.
Would you recommend people to pursue the same career path? Would you choose a different job if you could go back?
The career path In the computer science industry can provide a solid income and I would recommend it. If not the actual job, working for a company in that industry that is fast pace can be fulfilling.
Have you had any side hustles?
I do. I started the blog as a way to share my experience and learnings with investing and it led to a dividend stock data service for DIY investors like me.
If you have a spouse, how have they contributed to your net worth?
The contribution from my spouse has been with raising our kids.
How old were you when you became a financial black belt?
I don’t recall the date but it would have been around 2010 or 2011. The black belt was mostly due to Vancouver real estate growth and it made me realize that I needed to focus on my portfolio since my home was not going to help pay the bills. I doubled down on formalizing my investing strategy.
At what age did you start seriously saving money?
I started at a young age with my first newspaper route. Once I had a steady job after university, I quickly started investing a percentage of my income and always did so since I started working.
What has been your investment strategy?
I currently am using a dividend growth investing strategy after focusing on dividend income too early. Prior to that, I was investing in mutual funds through a financial advisor. My formal approach now is dividend growth investing during the accumulation years and as I near retirement, I will switch to dividend income with the hope that my portfolio generates the income I need without depleting it.
Who was your financial sensei? (Most influential person/source of information in your financial life).
My parents. They have been successful and I have learned a lot from them.
Are you pursuing FIRE (financial independence/retire early)? If so, how much money do you plan to retire on and are you going to quit working for money altogether?
Yes to financial independence and no to retire early. Financial independence while still working really means that I can spend more on luxury which also implies taking time off when I want. To achieve my financial independence, my number is $1,777,777. That amount would provide me with the dividend income I need to retire comfortably.
Mind over matter
Do you think psychology plays a more important role than math with finances?
Yes, emotions can be very damaging for a portfolio. Decisions must be strategic and fit into a “game” plan. It’s ok for the game plan to change over time but make your decisions based on that and not how you feel.
What was your toughest mental opponent on the path to your black belt?
Moving away from what I cannot calculate with math. It’s easy with dividend income to fall back and only see the dividend yield but capital appreciation is where you can have the biggest growth but forecasting (mathematically) is really difficult. I ended up estimating it through dividend growth and that’s how I settle on dividend growth investing.
There are a lot more financial white belts than black belts out there. How do you think differently than the average person when it comes to money?
Risk is perceived differently. The fear of seeing a portfolio value going down is not processed the same way. I see opportunity while the white belts see despair and panic.
What does wealth mean to you? Should everyone pursue it?
Wealth goes beyond financial independence. Once you reach FI, you don’t have money problems and you are in a very safe zone. With it comes independence and you get a lot of time back. Everyone should pursue financial independence but wealth is not necessary. It all depends on what fulfills you. What’s on your bucket list? Writing a novel or touring the world?
What is your weapon of choice? (favorite money tool/app)
I would have to say that it’s the spreadsheet for investing scenarios and analytics on my portfolio. I also use yCharts to get access to a lot of data points.
What has been your favorite way to earn money?
Well, I like my job and it pays well. No complaining on that front. The other source of income is the blog business I built from a hobby. It allows me to keep on learning and that’s important in everything I do – it keeps the brain active.
What’s your favorite way to use money?
Convenience, entertainment, and comfort. Generally speaking, we are trying to travel while we are healthy. Another topic not often discussed is that we invest in our health and we spend money on trainers.
What’s your one piece of money advice to us financial underbelts?
Money advice is broad and I stopped focusing on helping with money management since it’s all about spending less than you make. Investing is another story. People have fears that need to be overcome by truly understanding what investments are and how they work in order to really understand risks.
I see investors in their 30s with bonds and REITs which can give you a fixed income but you miss on the real performance of the stock market in your early years. This implies too much fear of seeing your portfolio fluctuate and not enough understanding of stocks and how companies actually work to generate revenue and money.