A popular topic in personal finance is passive income.

Income that doesn’t require you to trade your time for money is “the dream” for many people.

There are many different forms of passive income, but the ultimate passive income is dividend income.

Dividend income comes from owning dividend-paying stocks. Not every company pays dividends. If a company is focused 100% on growth, they are going to use all their earnings to continue to grow their business.

With that being said there are many large companies that are focused on growth that pay a dividend. In fact it would almost be silly for a publicly traded company to not have a growth strategy.

Many of the large blue chip companies pay dividends, though their dividend yield (Amount paid out in dividends annually divided by current stock price) can vary. For example, Best Buy has a relatively high dividend yield of 4.18%, while Visa has a modest 0.80% dividend yield.

Even if you have other financial priorities that take precedence, learning and being aware of the opportunities that come with dividend income can motivate people to save more money, pay off debt faster, and make more money so that they can take advantage of all the benefits that come from dividend income.

With that in mind, let’s get to the real question here: how much can you make in dividend income?

How Much Can You Make in Dividend Income?

 
The first thing I need to say before answering this question is this: it’s not easy to make a sizable amount of dividend income. If it was easy no one would work and everyone would simply live off of their passive dividend income.

Using the spreadsheet I created, let’s look at what you would be able to make annually from dividends if you invested $5,000 in 3M stocks:

 
Okay so you’d only make $123 each year. Now that may not feel like much, but remember it’s also reasonable to expect 3M’s stock to appreciate over time. Also, don’t forget how great dividend income is: you are getting $123 by simply owning $5,000 worth of 3M stock! No effort required.

Let’s take a look at a higher investment amount: $100,000.

 
Nearly $2,500 a year – not too bad! You can see why dividend income is so attractive, especially to those looking to retire early or who don’t want to spend down their assets in retirement.

Quick math shows that owning $1 million of 3M stock would yield $25,000 a year in entirely passive income. Do you have $2 million to invest? double it up to $50,000 a year.

I don’t know about you, but this sort of scenario analysis is incredibly motivating to me.

I spend most of my free time working on side hustles to increase my income, and while paying off debt is the primary goal right now, long-term I would love to regularly funnel “extra” side hustle income into dividend-paying stocks.

If you are an entrepreneur or want to be an entrepreneur, dividend income just might give you the motivation needed to put in the long hours and hard work to build your business. After all, if you are able to sell for a couple million dollars – or more – you very well could live off of passive dividend income the rest of your life.

There are many ways to maximize your Health Savings Account, or HSA.

We list many of these in our Health Savings Account (HSA) Guide. This guide also provides a nice overview for those who are a newer to Health Savings Accounts.

They include things like:

• Shifting dollars from the savings portion of your HSA to the investment portion of your HSA, which allows your balance to grow tax-free (as long as you withdraw for elgibile medical expenses)

• Maxing out your HSA contributions each year

• Making sure you aren’t missing out on elibible expenses

While some of the more basic hacks to maximize your HSA are a good starting point, there are a couple of hacks that most people don’t know about.

And when I say hacks, let me be clear: these are all 100% legal ways to take full advantage of your Health Savings Account.

If you are ready to take your HSA game to the next level, here’s two things you can do:

Hack #1: Pay with a credit card, not with your HSA debit card

 
Similar to how a bank provides you a debit card that allows you to make purchases directly from your bank account, HSA providers also provide a debit card so that you can make purchases directly from your account.

The problem with an HSA debit card is that you miss out on credit card rewards, such as cash back and travel rewards.

There is no requirement to use an HSA debit card to use your HSA. You can use any form of payment, even cash, to make purchases. Then all you need to do is reimburse yourself.

It may feel like an extra step, but over time medical spend can really add up. Additionally, when you pay with a credit card it gets you in the practice of uploading a receipt when you go in and reimburse yourself. When you use an HSA debit card, it can be easy to not keep a copy of your receipt.

One other thing to think about is the fact that medical expenses can sometimes be quite material. We had our first kid in 2023 and we knew that the bill would be in the thousands, since we have a high deductible health plan.

So what we did was we signed up for a new credit card that required a certain amount of spend to receive their sign-up bonus (e.g. $2,000 within the first four months to get 50,000 points, which translated to a $500 statement credit). We easily put the required amount on the card when we paid the hospital bill.

To recap: pay with a credit card for the rewards, save the receipt, and go into your HSA servicer’s portal to reimburse yourself.

Hack #2: Track your qualified medical expenses, then reimburse them years down the road from investment gains

 
This second hack builds off of the first one.

Something that most people don’t realize with a Health Savings Account is that there is not a time limit for when you can reimburse yourself for a qualified medical expense.

Practically speaking, you could have a hospital bill of $1,500 in 2023 that you paid for with a credit card. As long as you save the receipt and keep a record of the expense, you can reimburse yourself 5, 10, 15, or even 40 years later.

One thing to keep in mind is that the eligible expense does need to occur when you have a high deductible health plan and an HSA. So if you had a bill in 2021 but didn’t have an HSA until 2023, you can’t go back and reimburse that 2021 bill.

This is a huge benefit for a few different reasons:

• You keep more cash in your HSA
   
  With an HSA you can put money in pre-tax and take money out pre-tax (as long as it’s for an eligible medical expense). While that cash is in your HSA, you can also invest it.
   
  What this means specifically for our example of a $1,500 hospital bill in 2023 is that you don’t have to take out $1,500 in 2023. You can let that $1,500 you would have taken out and let it grow via mutual fund investments in your HSA until 2023, in which case you can withdraw it. So instead of paying $1,500 with little investment gains in 2023, you can potentially take out $1,500 ten years later totally from investment gains.

• You Build up a Secondary Cash Emergency Fund
   
  If you take this approach you can, at any time, reimburse yourself for your expenses. You don’t have to wait until years down the road.
   
  Let’s say over the course of a couple years you have $2,000 of eligible medical expenses. That means any day you could log into your HSA servicer’s portal and reimburse yourself for $2,000 worth of expenses.
   
  I often talk about an HSA being a medical emergency fund, which it is, but if you are able to hold off reimbursing yourself you can build up a cash reserve that can be tapped, tax-free, at any given time in the future. The longer you hold off on reimbursing yourself, the larger this fund will be.

• Future Medical Expenses May Be Massive
   
  In general, I think the annual contribution limits for Health Savings ACcounts are relatively low.
   
  For example, in 2023 the limits are $3,850 for an individual or $7,750 for a family. To be clear, I am not saying this is a small amount of money and there is certainly an argument to be made that there is an increasing divide of those who have well-funded HSAs and those who do not. But what I am saying is that health care expenses are becoming more and more material, especially for seniors. If you let your HSA grow while you are in your 20s, 30s, and 40s, you will have more tax-free assets to use later in life for expensive medical care such as long-term care in a facility or in-home care.
   
  With this in mind, the more money you can keep within your HSA the more you can invest within your HSA and the larger your nest egg will be for future expenses.
   
  And remember: in a pinch, as long as you tracked your expenses you can always get reimbursed from your HSA. Which is why this hack works so well.

Tracking Your Medical Expenses

 
The best way to track your medical expenses is in a spreadsheet. What I do is this:

• Create a folder to store your receipts. Include the date and some sort of unique descriptor (e.g. 2022_12_15 Chiropractic Block of Care Robert).

• Add the expense to a tracking spreadsheet. In the first column, include the name of the receipt (e.g. 2022_12_15 Chiropractic Block of Care Robert). That way you can easily locate the receipt that aligns to the row. Remember, if you use the strategy of reimbursing yourself later on, you may need to go back years later – make it easy on yourself. Include other details in the spreadsheet such as what payment was used, the servicer/company you paid, cost, etc.

Instead of starting from scratch you can grab a copy of our free medical expense tracking spreadsheet. I included a couple examples in it to give you an idea of the type of details you may want to record. You can grab this spreadsheet for free by entering your email in the below form:

 
To recap:

Get yourself a solid rewards credit card instead of using the HSA servicer’s debit card.
 
Start tracking your medical expenses and saving your receipts.
 

Or, perhaps you may have had an HSA for years but haven’t used it.

It sounds weird, but I love writing and talking about Health Savings Accounts. I don’t think enough people know about the benefits of Health Savings Accounts.

An HSA comes with a number of benefits. It creates a (much-needed) medical emergency fund, has a “triple tax advantage,” and is a retirement account on steroids.

We’ll go through all the details of an HSA in this Health Savings Account guide so you have all the info you need to take full advantage of the benefits. Let’s start by talking about High Deductible Health Plans, or HDHPs. Why start there? Because you need to have an HDHP to contribute to an HSA.

High Deductible Health Plans – What Are They?

 
HDHPs are health insurance plans that have a relatively high deductible before your insurance kicks in. For example, you may need to spend $3,000 of your own money towards medical costs before your health insurance pays anything. Even though your insurance doesn’t pay anything until you hit your deductible, you would still reap the benefits of having health insurance because you would get their negotiated pricing, which knocks off some of the cost of provider visits, pharmacy drugs, and other costs.

The IRS sets the parameters for what is and isn’t an HDHP. For 2023, the IRS defines an HDHP as any plan with a deductible of at least $1,500 for an individual or $3,000 for a family. As long as your coverage hits those minimums you have an HDHP and are eligible to contribute to an HSA.

$1,500 is actually a pretty low deductible. Many plans will have a deductible of $3,000+ for an individual and $6,000+ for a family. Typically the higher the deductible the lower the monthly premium. The good news is that HDHPs total yearly out-of-pocket expenses are capped by IRS guidelines. These out-of-pocket costs can’t be more than $7,500 for an individual or $15,000 for a family, though this limit doesn’t apply to out-of-network services which could have a cap as high as $10,000+ for an individual or $20,000+ for a family.

You may be wondering how the out-of-pocket max comes into play, since insurance kicks in once you hit your deductible. Well, just because you hit your deductible doesn’t mean that you are done owing money; it just means your insurance will cover most of the costs. You may see something like an 80/20 cost share once you hit your deductible, meaning for a $1,000 bill you would owe $200 and your insurance would cover $800. The out-of-pocket max is the absolute maximum you will pay. If you need an expensive surgery, a hospital stay spanning a few days, or some other expensive event you will likely hit not only your deductible but also your out-of-pocket max.

HDHPs are becoming more popular

Many employees today have no choice but to sign up for an HDHP because it’s the only option that their employer offers. According to a data brief from the Center for Disease Control and Prevention, the percentage of adults aged 18–64 with employment-based coverage that had HDHPs increased from 14.8% in 2007 to 43.4% in 2017. Keep in mind this doesn’t include the millions who get their insurance through the exchanges, which virtually only offer HDHPs.

HDHPs are both good and bad. They are good because they allow for lower monthly premiums. They also can, in some situations, give an incentive for the consumer to shop around. For example, when I got a CT scan a few years ago I would have paid $1,000 if I went to the place my doctor referred me to. Instead I shopped around and paid $300.

The elephant in the room is the large amount of costs it puts on a consumer before their insurance kicks in. I wasn’t surprised in the least when Presidential candidate Kamala Harris in a debate about health care, painted the picture of the mother with a sick infant who was parked outside the emergency room, hoping she wouldn’t have to go in because she knew she could afford a bill of $1,000+.

HDHPs can serve as a “medical emergency fund”

That’s where a Health Savings Account comes into play. An emergency fund is great, but we’ve gotten to a point where even if you have insurance you are exposed to a potential for a big surprise medical bill. This is why the cost of health care is my biggest concern for millennials. Too many don’t have an emergency fund, let alone a separate medical emergency fund. I fully recognize that some are in a position where cash flow is tight and it’s extremely difficult to save money in an emergency fund.

Now that we have a solid background on HDHPs and why it is beneficial to sock away money in an HSA, let’s talk about the specifics of HSAs.

Health Savings Accounts – How They Work and How to Maximize Them

 
For 2023 the IRS has set contribution limits for HSAs to $3,850 for an individual or $7,750 for a family. For those over the age of 55 there is an opportunity to contribute an additional $1,000.

Most HDHPs will already have an HSA provider set up that you can leverage with your health insurance. If you don’t have one, though, a few of the major providers are Fidelity, Lively, The HSA Authority, and Optum. When picking one you will want to understand any fees they charge as well as the minimum balance required to invest (more on that in a moment).

One important distinction to keep in mind is that an HSA is not a Flexible Spending Account (FSA). FSAs have a silly “use it or lose it” policy where you lose any money that is left in the account at year-end. HSAs stay with you forever. You can switch employers, move to another state, change medical coverage, get married or divorced, or any other number of life changes and your HSA stays with you.

Now let’s get to the tax advantages that come with HSAs, specifically the “triple tax advantage”:

• Put Money in Pre-Tax – Contributions put into an HSA are not taxed. Meaning, your adjusted gross income on your taxes will decrease by the amount you deposit.

• Interest and Investment Gains are Not Taxed – Once your cash balance hits a certain threshold (i.e. $1,000, $2,000, etc.) you can shift any money above the threshold into an investment account. The investment gains are not taxed.

• Withdraw Money Tax-Free – When you withdraw money to cover a qualified medical expense you are not taxed on the withdrawal. You can consult a tax expert on exactly what is and isn’t a qualified medical expense, but in general an IRS-qualified medical expense is defined as an expense that pays for healthcare services, medications, or equipment. Clear-cut examples include a prescription you get at a pharmacy or a bill from a doctor visit.

One reason I call HSAs a “retirement fund on steroids” (no pun intended) is because after the age of 65 you can withdraw money from your HSA for non-medical expenses without incurring a 20% penalty. You will still have to pay taxes on the withdrawal, as this withdrawal would be treated similar to a withdrawal from an IRA. But you also have the option of withdrawing funds for qualified medical expenses and pay no taxes at all, regardless of your age. Meaning, an HSA acts similar to a standard IRA retirement account with the (huge) added benefit of potentially taking out the funds tax-free if you have medical expenses. With the way health care costs are going and with people living longer, there’s a very good chance you will have many qualified medical expenses when you are 65+.

A final benefit I want to point out is that you can use it for anyone in your household. What I like about this is that if you are caring for and covering the medical bills of a parent, sibling, or child, you can leverage your HSA to pay the bills tax-free. This could be invaluable if you have a sibling or child with a disability who you anticipate caring for long-term.

Health Savings Accounts – Strategies to Maximize

 
Whether or not you contribute to an HSA – and how much you contribute – depends entirely on your individual financial situation. You can talk this over with a financial advisor or money coach. With that being said, here are a few strategies to maximize HSAs:

• Deposit as much as possible, as early as possible. While I don’t have research or a robust data set, what I’ve seen is that people tend to only contribute to an HSA if they have medical issues. If someone is relatively healthy they don’t contribute. I will admit my wife and I didn’t max out our HSA until after we had a pair of surgeries and realized how important it was to have money set aside ahead of time.

• Shift your money out of cash and into investments as soon as possible. The HSA I have has a threshold of $2,000. I log in every two weeks and if my balance is above $2,000 I shift every dollar I can to investments. Now that I have some traction my ultimate goal is to get my HSA to $100k.

• Never use the debit card the HSA provider sends you. Instead, use a rewards credit card and then simply reimburse yourself through your HSA. HSA providers are making money each time you swipe their card, but they aren’t sharing the wealth with you. There is no requirement to use their debit card, so you should be using a solid rewards credit card instead.

Not taking full advantage of an HSA – or Health Savings Account – can be a costly mistake for those who are in the financial position to contribute to one.

There is a general lack of information about the advantages that HSAs offer. I often hear financial “gurus” give people advice such as “invest in an IRA” or “contribute more to your 401(k).”

While this in and of itself is not bad advice, I think it’s tragic how few are being advised to max out their HSA contributions. It’s a practical thing people can potentially drastically improve their finances over time.

Understanding what an HSA Is

 
Many people do not even know what an HSA is or how it works. Health insurance plans that have an HSA component allow individuals to contribute money pre-tax into their HSA. In 2023 the HSA contribution limit is $3,850 for an individual and $7,750 for a family.

Once you have deposited money into your HSA account you can use it tax-free for qualified medical expenses. Qualified medical expenses are listed in IRS publication 502, at a high level they include practically any doctor visit, medical bill, or prescription. Recently eligible expenses have been expanded further to include things such as a carpal tunnel glove and sudafed. Many vision and dental expenses fall under this category as well. As you can see, HSAs have huge tax advantages when used for medical costs.

Besides lowering your taxable income, depositing money into an HSA has the dual advantage of creating a medical emergency fund. As long as you are regularly contributing to your fund, you will never have to worry about whether you have the money to cover health expenses.

Why an HSA is the Absolute Best Retirement Account

 
Now that we’ve established the benefits of contributing to an HSA – that you can pay for eligible medical expenses tax free – I want to focus on why I think it’s the best retirement account out there.

First it’s important to realize that you will never lose the money in your HSA for not spending it within a certain time frame. This is an important difference between HSAs and FSAs (Flexible Spending Accounts). With an FSA there is a “use it or lose it” aspect to it, where you lose whatever you don’t spend within a calendar year.

Not the case with HSAs. Once you contribute dollars towards your HSA, they are available for you until you use them, even if you use them decades later.

With that in mind, it’s important to think of an HSA as a retirement account.

• Invest your Funds
   
  Once an HSA exceeds $2,000 (or whatever the HSA administrator allows – in some cases the threshold is as low as $0) the owner of the HSA can invest whatever is above the $2,000 floor. That means if your balance is at $5,000 you can invest $3,000 in mutual funds. I just did this recently and told a number of people about it. None of them knew you can invest your HSA funds.
   
  Even better, the gains on investments are not taxed if withdrawn and used for a qualified medical expense. This is why an HSA is often referred to as having a triple tax advantage.

• Like a traditional IRA, but Better
   
  An HSA is like a traditional IRA in almost every way. The biggest difference is that people are able to withdraw the money tax-free for qualified medical expenses.
   
  When you think about it, would you rather have money in a retirement account that does not allow you to withdraw for any reason without a tax penalty or would you rather have your money in an identical account that allows you to withdraw money tax-free for medical purposes?

• Employer Match
   
  Many employers will encourage employees to contribute to their HSA account by offering a matching contribution amount. Typically this will be in the $500 range for individuals and $1,000 for families.

• You can Still Contribute to other Retirement Accounts
   
  Another perk of an HSA is that it gives you another opportunity to take advantage of the tax benefits that other retirement accounts take advantage of. IRAs and 401(k)s have contribution limits, but in no way does HSA contributions count against those limits. Instead, an HSA is just one more way that people can save for retirement.

 
The many advantages that come with contributing to an HSA, including advantages that even traditional retirement accounts lack, it’s clear to see why an HSA is the absolute best retirement account.
 

But SoFi has since expanded their offerings. Not only can you refinance your student loans with SoFi, you can also open a bank account and even invest in stocks and ETFs.

SoFi Invest is their brokerage product, and there is a lot to like about it.

We’ve been testing out SoFi review for the past couple months and here are a few highlights:

• Sign up entirely online

• Sleek and simple mobile app

• Purchase fractional shares, or “bits” of a stock

• $1 minimum balance requirement

• Zero stock and ETF trading fees

Let’s go over the benefits and drawbacks of using SoFi Invest.

Sign Up Entirely Online

 
The process for signing up for SoFi Invest is simple and entirely online. This is how it should be, in my opinion, and COVID has definitely started to weed out the businesses that make it anything but simple to get started.

To sign up and get started on SoFi Invest you can use this link.

If you plan on depositing $1,000 or more in your initial deposit, use this link instead so you can receive a $50 bonus.

Sleek and Simple Mobile App

 
As SoFi has expanded beyond simply being a student loan refinancing company, they’ve built an app that is a one-stop-shop for all their products. Here is a screenshot of a Watchlist on SoFi Invest. The Watchlist is where you can add stocks and ETFs you want to keep track of but haven’t invested in yet (if you have invested in a stock or ETF you will see it above the Watchlist in the Invest Holdings section).

If you look closely at the bottom of that screenshot, you can see that you can navigate quickly and easily to your loans or bank account within the app, if you are using those services from SoFi.

Below is an example of what an ETF looks like when you click on it for more detail:

Purchase fractional shares, or “bits” of a stock

 
One benefit that SoFi Invest offers is “Stock Bits.” You can essentially invest any amount of money in a stock, regardless of whether it is equal to one share or not.

For example, CVS Health is trading for around $65. I can invest just $5 into that stock. Or $10. Or $100. It doesn’t matter whether it equals the price of a full stock or not.

This is a nice feature because sometimes it seems like people don’t start investing because they don’t have much to invest. That is a totally legit concern. But with stock bits you can invest small amounts consistently over time. $20 here, $50 there…the most important part of investing – and most things in life – is just getting started.

Reminder: SoFi Invest is currently running a short-term promotion where you can receive $50 if your opening deposit is $1,000 or more. Don’t have $1,000 to deposit on the app? Use this link to sign up instead.

$1 Minimum Balance Requirement

 
Big benefit of this app: you can get started with SoFi Invest for just $1.

The cost to SoFi to set up, vet, and maintain your account is certainly more than $1 a year, but by offering the extremely low $1 minimum required balance they don’t shut out smaller investors or people who may be using SoFi as a secondary brokerage account (myself included).

Zero Stock and ETF Trading Fees

 
There has been a trend the past year in the financial space of offering zero fees for most stock, ETF, and mutual fund trades. SoFi is no exception: they don’t charge you for stock and ETF trades.

This is where we get to a drawback of SoFi: they don’t offer mutual fund trades.

If you want to buy and sell mutual funds, you will have to pick another platform.

I personally don’t see this as too big of a drawback. People will debate to the end of time which is better, mutual funds or ETFs, but the reality is that there is a massive selection of ETFs. For the average investor there are certainly more ETF options than they could possibly need, so missing out on mutual funds isn’t a huge deal. Plus, you can always open an account at Fidelity or another brokerage if you really want to be exposed to mutual funds instead of ETFs.

Additional Features

 
There are a few things that are worth mentioning that I haven’t hit on yet:

• Cryptocurrency Trading – Crypto isn’t the craze it was a couple years ago, but Bitcoin is up over 65% year-to-date at the time of this writing. If you are interested in trading crypto, SoFi makes it easy for you. Prior to a product like SoFi Invest, it could be quite difficult and confusing to figure out how exactly you can invest in crypto. For example, a couple years ago you had to create a CoinBase account, convert USD to Bitcoin, and then transfer to another app to actually trade in non-Bitcoin cryptocurrencies.
   
  It’s worth noting that unlike stocks and ETFs, crypto trades do come with fees. Crypto trades require a $10 minimum value per trade and a 1.25% fee per trade.

• Retirement Accounts – You can open an IRA with SoFi, which would be a (somewhat) separate product from what we have gone over so far. The easiest way to get started is to first open a SoFi Invest account and then add a SoFi IRA through the app. The IRA comes with some cool features, letting you decide whether to take a DIY approach or allow the automated robo-adivsor technology manage it.

• Benefits for all SoFi Users – Regardless of which SoFi products you use (SoFi Invest, SoFi student loan refi, SoFi personal loan, etc.) there are some free benefits that all SoFi users receive. These change from time-to-time, but they can include live invite-only events, career coaching, will drafting, and more.

To sign up and get started on SoFi Invest you can use this link.

If you plan on depositing $1,000 or more in your initial deposit, use this link instead so you can receive a $50 bonus.

Simply by having money that can be used to purchase shares of companies allows the rich to make money even if all they are doing is sitting on the couch all day.

You don’t have to be rich to have passive income, though.

You can slowly funnel your income into the stock market and see the stock price grow.

More established companies will pay a regular dividend that sends some of the profits back to shareholders.

Dividend income isn’t the only form of passive income, though. Many people cite things such as blogging, books, courses, rental income, and other forms of income that can be (at times) put on auto-pilot.

When you compare dividend income to any of the other forms of supposedly passive income, though, it becomes clear that there is nothing quite like dividend income.

Literally all you need to do is purchase a share of a company or dividend-paying mutual fund/ETF to receive the dividend. It doesn’t require your attention, and could – in theory – never require your attention.

Look at real estate, though. It technically can be made passive if you purchase a rental property and hire a management company. That way you don’t have to address any problems or repairs with the property, nor do you have to find and manage tenants.

What many smaller investors end up doing, though, is seeing how expensive management costs are and end up managing the property themselves. They may not be performing repairs, but they are calling contractors and signing off on repairs. You end up having to be “on call” in case something goes wrong at the property.

Same thing with blogging. While I am a big fan of blogging as a way to make money either on the side or full-time, it does require constant time and energy.

You can hire out various aspects of your blog, from content creation to graphics to accounting, but at the end of the day it’s going to take at least some time on your part to make sure the blog maintains it’s profitability.

Ultimately everyone who looks at passive income streams ends up recognizing just how powerful dividends are.

The problem though, is that dividends do require that you have money to invest. There’s no getting around it.

It can be difficult for people to wrap their heads around how much money they will need to earn passive dividend income. And a lot of people are curious how much money they will need to get enough dividend income to live off of, which is really the ideal financial position (though as you will see, can be unrealistic for many).

To give perspective I thought it would be helpful to show how much money you would need to make $1,000 of dividend income a year.

I created a dividend analysis tool in Google Sheets that will help us easily calculate this (you can get a free copy of the spreadsheet emailed to you by filling out the form at the bottom of the post).

Let’s look at Home Depot. They have a dividend yield of 2.41%, which means you will need to purchase 167 shares to get $1,000 in annual dividend income. That will require you to invest $41,417 in Home Depot stock.

 
Let’s run this analysis on all 30 stocks that make up the Dow Jones Industrial Average.

Keep in mind that these are well-established companies and aren’t necessarily reflective of what you’d see for a small or mid-size company. And some large companies pay no dividends at all.

Special Offer: If you open and fund your free SoFi Invest account with $1,000 to start you will receive $50 of your favorite stock as a welcome offer. Use our link to get the offer.

Here’s the breakdown of the 30 stocks. Keep in mind this is at a point in time and this calculation will change on a daily basis.

 
Want to see a live version of this spreadsheet? You can view it here

 
As you can see, the amount you would need varies widely, but for the Dow Jones Industrial Average stocks you would, at minimum, need to invest about $13,000 in ExxonMobil to achieve $1,000 in dividend income.

If these amounts seem like a lot, remember that most people do not rely on dividends for income. Instead, they sell their stocks over time to fund their retirement. Stocks – including those that pay dividends – generally increase in value over time.

But it can be exciting to think of the possibilities that passive dividend income create. Some (including me) use this as motivation to improve their finances. The ability to invest more money – and create more dividend income – motivates me to side hustle and increase the amount of cash I can use to purchase investments.

I wrote the post 5 ways to find cash to invest in the stock market to help people identify opportunities to increase their investments (and speed up financial independence).

It’s worth noting that many stocks do not pay dividends, especially early stage companies that are focused on growing as quickly as possible. Instead of sending dividends to shareholders, they use their cash to reinvest in the company.

Dividend yields are generally relatively low, and for good reason. When a company pays a dividend, they are only paying out a portion of their profits. They are also keeping some of their profits to reinvest in the company for future growth (that theoretically will show up in a rising stock price).

If you want to play around with different stocks you can get the free dividend analysis tool by signing up below. If you don’t see the email from us please check your spam folder.

There is another tool within this file that allows you to run scenarios based on how much annual income you want from dividends. For example, if you wanted to know how much money you would need to get $50,000 in dividend income from a given stock, all you need to do is plug in the stock ticker and $50,000 desired income to get your answer.

You can get a free $50 in your favorite stocks when you sign up for a free SoFi Invest account and fund it with at least $1,000. Get this offer by using our link.

Emergency funds are so vital to financial wellness, because without them, it’s pretty difficult to make any significant progress. An emergency fund essentially provides a buffer so you aren’t completely derailed from your financial goals when unexpected expenses happen.

There is no one-size fits all amount to dictate how big your emergency fund should be. That being said, you will often hear financial experts advise to sock away 3 to 6 months of expenses in an emergency fund.

Needless to say, it can take some time and dedication – and perhaps a side hustle – to fully stock a 3-6 month emergency fund. And once you finish saving, you may wonder what to focus on next?

Here’s what to do once you have an emergency fund.

Bulk It Up Even More

 
Okay, okay, I know what you’re thinking. You just finished saving for your emergency fund and you’re ready to move on. But hear me out!

With the COVID pandemic, thousands of businesses have been forced to close and layoff their workers. Millions of people have lost their main income source.

Now, while a pandemic isn’t necessarily going to happen every year, it did prompt us to wonder: Is a 6 month emergency fund truly enough?

You may want to consider what we call a “jumbo emergency fund”, which can cover 12 months of expenses. Not everyone needs a jumbo emergency fund, but there are certain cases where it may be an ideal solution.

For instance, if you have one income for the family, you don’t have the buffer of a spouse’s income, so you may want to save more for a rainy day. Further, you may want to bulk up your emergency fund even more if you have a variable income, significant health issues, or a large family.

And let’s be honest…does it really hurt to have extra emergency savings? The peace of mind may be worth it.

Pay Off Credit Card Debt

 
Once you are content with your emergency fund, your next step is to focus on paying off credit card debt.

Credit card debt typically has an extremely high interest rate, so it should almost always be the first debt you prioritize paying off.

Credit card debt can be challenging to pay off, but with some creativity and persistence, it is totally possible. If you find yourself in credit card debt, one thing you may want to consider is using a personal loan or a 0% balance transfer card to help lower the interest rate, which allows a higher percentage of your monthly payment to go towards the principal balance of your debt.

Save in an HSA

 
An HSA, or Health Savings Account, is a relatively new savings vessel. You may be thinking “isn’t an HSA an insurance thing?” Yes, it is, but it is also an opportunity to save money.

If you are on a High Deductible Health Plan, or HDHP, you are typically eligible to contribute to an HSA. In order to be better prepared to deal with the high deductible that comes with an HDHP, the IRS allows you to save tax-free dollars to pay for eligible medical expenses.

The best thing about HSAs is the amount you save rolls over from year to year. So, if you don’t end up needing to spend the money on related medical costs, you can keep growing your fund. As it grows, it is kind of like having a separate medical emergency fund. There is no “end date” for an HSA: the money is yours forever, regardless of changes in employment or insurance.

Of course, since it allows you to save tax-free dollars, the IRS has to put parameters around how much you can save in an HSA. For 2020 the IRS has set contribution limits for HSAs to $3,550 for an individual or $7,100 for a family. For those over the age of 55 there is an opportunity to contribute an additional $1,000.

It also acts as a retirement account, which may sound odd but is actually a really great perk. Read more about that in our Health Savings Account Guide

Save for a Big Purchase

 
Want to save for a down payment on a house? Travel? Save for a wedding?

Once you have a stocked emergency fund, it’s a perfect time to transition to focusing on other savings goals.

Whatever you’re saving for, make sure you are making your money work for you by putting it in a high-yield savings account. Typical banks pay pennies in interest. High-yield savings accounts have much higher interest rates than checking accounts or even other savings accounts, so your savings will continue to grow over time.

Pay Off Student Loans…the Right Way

 
Not all student loans are created the same, so you’ll want to do your due diligence before you start paying them off.

For instance, if you work for a qualifying employer, such as the government or certain non-profits, you may qualify for Public Service Loan Forgiveness. If you qualify for forgiveness and your debt is big enough to justify pursuing it, you will want to pay as little as possible towards your student loans to maximize forgiveness. Otherwise you are paying back money that otherwise could have been forgiven! That money can instead be used to pay down other debt, save for a down payment on a house, or invest in the stock market.

And if you have private student loan debt, there’s a good chance you can benefit from refinancing your loans. Private student loans usually have a higher interest rate – sometimes 10%+ – so by refinancing to a lower interest rate and save hundreds or even thousands of dollars. You can receive free rate quotes to see if you would benefit from refinancing.

To easily consider your options, grab our free student loan spreadsheet, which will help you track your debt repayment progress, provides you useful calculators, and helps you understand whether you would benefit from moving to an income-driven repayment plan.

Invest

 
Many experts recommend that you prioritize investing when your debt is at or below 5%. One exception is a company 401k or 403b retirement match. If your employer is matching contributions and you aren’t contributing at least to the match amount you are leaving “free” money on the table. This is part of your overall compensation package at your job, so take full advantage of it!

If you are contributing to the company match on your retirement account – if you have one – and your debt is below 5% interest, it makes sense to start investing. You can do this through a retirement account like an IRA, 401k, 403b, or some combination.

You can also invest in a non-retirement account. The benefit of investing here is that you have access to this capital before retirement, so it adds another layer of security on top of an emergency fund. It can also be used for future large purchases, such as a vehicle or house.

One easy way to get started investing is to sign up for a free SoFi Invest account. If you fund your brokerage account with $1,000 to start you will receive $50 of your favorite stock as a welcome offer.

Track Your Net Worth

 
While tracking your net worth isn’t necessarily a savings goal, it’s a good thing to start doing once you have stocked your emergency fund.

Your net worth is essentially a snapshot of your overall financial well-being. You compare your assets (such as savings or property) to your liabilities (like debt) to see your overall worth.

Keep in mind, if you have credit card debt or student loan debt, you may have a negative net worth. That’s okay – it will increase as you pay off your debt and increase your savings.

You can track your net worth for free using a tool like Personal Capital which has an online dashboard or a more traditional spreadsheet (my preferred approach).