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What’s up guys! Welcome back for another installment of your favourite Frugal Samurai!
There’s a general sense of optimism in the Frugal Samurai household recently because we’ve been attending a number of weddings in these last few weeks – Kev/Di, Viv/Juju, Cosi/Nick, Spencer/Jess – all whirlwind romances.
You know how it is at weddings – where the weather is glorious, the venue is amazing, people look beautiful and where, the bride and groom are radiating perfection.
All that good vibes can’t help but rub off on ya right?
Every time we attend one it reminds me of that magical day in April when MrsFrugalSamurai and I tied the knot – something special for sure (read here about it)!
Funnily enough, at one of the weddings I managed to get myself into a long chat with one of the older Aunties.
I’m not entirely sure how the conversation turned to a discussion about money and personal finance but eventually it meandered towards there:
“I’m retired at the moment, life is great!”
“Nice auntie, how long ago was this?”
“About 3 years ago, you see (she leans in and looks at me conspiringly) I’ve got passive income.”
“Wow, that’s really inspiring, can I ask how you did it?” (I help myself to another serving of the creamed potato and Spring vegetables).
“Simple young man, I’ve been working in the IT industry for over 40 years. Every-time I had spare cash, I would buy shares. And not just any shares, have you heard of dividends? (I nod) well I would buy the high dividend paying ones. And not just any either”. (She pauses, presumably to take a bite of the Confit Duck with Jerusalem Artichokes in front of her).
“Which ones Auntie?” (She places the fork back down).
“I only buy the most stable and safe ones, but the real trick is (she winks) is to buy the ones which have a dividend reinvestment plan.”
“Oh? What’s that?” (this time, I am eyeing off what’s on MrsFrugalSamurai’s plate – 2/3 left of slow-cooked pork belly with roasted baby potatoes).
“You don’t know about it? It’s what’s called a DRP – basically you know how dividends can come in the form of cash? You can also elect to reinvest it. In other words (she puts a piece of duck in her mouth), using the dividends to buy more shares of the same company! Then you can go again, and again, buying more and more shares – eventually…”
(A waiter comes to top up our glasses).
“…eventually you end up in a situation where you hold so many shares that you can elect to take the dividends in cash… (she takes a hearty swig of Moet & Chandon)… so now every year I’ve got about $60k in dividends coming in. That’s it young man, that’s my secret”.
Whoa, $60k in passive income every year, how impres… DAMN MRSFRUGALSAMURAI, LEAVE SOME OF YOUR FOOD FOR ME – was my first thought.
My second thought was that this older lady had every right to be well satisfied with the financial choices she made in life.
After all, she has reached a point where she could retire on her own terms – in Oz, $60k post-tax equates to around a $80k job, very nice!
And so during one of the groomsmen speeches my mind drifted towards what brought her down this road.
She held a normal job. Check.
She had a simple financial game plan to execute. Check.
She bought shares when she could. Check.
She didn’t try to time the market. Check.
She kept on reinvesting her dividends. Check.
She let time do it’s thing. Check.
She can now reap the benefits of her efforts. Check.
She could eat and drink. Boy could she eat and drink. Check.
Throughout that night, I kept on thinking how amazing it is that the smallest actions we take now contribute to such enormous results later on in our lives.
This snowballing effect is well and truly alive everywhere we look, not just financially – but in EVERY facet.
Take weddings for example.
Presumably it started with two strangers meeting, developing and affirming their interest and commitment to each other, culminating in the most special of events. That takes time.
The same goes with learning a new skill, losing weight, building a successful stock portfolio – it all takes time.
But time alone ain’t gonna help if we don’t take any action!
I’m always reminded of the quote “someone is sitting in the shade today because someone planted a tree a long time ago”.
And if a little old lady with an enormous appetite can realize this simple fact, the question is:
Why can’t we?
So go on, if you’ve got a plan but yet to do anything about it – take that first actionable step!
It could lead to something marvelous down the track.
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