We've all heard that money can't buy happiness. That is only half-true. Money can't buy unlimited happiness, but a higher income does make us happier (on average) up to a point.
A famous study found that rising personal income does make us happier, but only up to an income of $75,000 a year.
Time & Money
One of the principles of finance is that money in the future is worth less than money today. This has been known since at least 620 B.C., when Aesop wrote that “a bird in the hand is worth two in the bush”.
Time is valuable. I argue that someone who spends 1 hour a week making $75,000 a year will likely be happier (all other things being equal) than someone who spends 80 hours a week to make $75,000 a year.
The reason is you get to spend time doing what you want, rather than what you have to. Of course, there are exceptions. If you absolutely love your job (like I do), then working is what you want to do.
The income goal for ‘happiness maximizers' – which should be all of us– is to generate $75,000 (or more) a year in passive income (or doing what you absolutely love).
How do you generate $75,000 a year in passive income? With dividend growth stocks.
How Long Does it Take?
A portfolio with a 3% dividend yield has to have a value of $2.5 million to generate $75,000 a year in passive income.
With a portfolio this size, you can comfortably live off of dividends alonewithout ever having to sell any stocks. Your portfolio of dividend growth stocks will very likely continue to pay rising dividends, so you actually receive more money every year.
With a portfolio this size, you create intergenerational wealth. Your children and children's children will be able to live off of the dividend income, just as you have (assuming no one sells any stocks).
$2.5 million is A LOT of money. The easiest way to gain $2.5 million is to inherit $5 million and blow half of it in Vegas. All joking aside, it typically takes a lifetime to generate this much wealth. Exact time calculations and estimates are below.
