How Much Money Would you Need to Live off Dividend Income? [Free Download] (2024)

Anyone who has thought about passive income has asked themselves the question: how much money would I need to live off dividends?

Not that dividend income is the only form of passive income, but few would disagree that dividend income the ultimate passive income – it requires little to no effort to maintain.

Many companies pay dividends, but the dividend yield can vary greatly from company-to-company, and some companies pay no dividends at all.

Living off dividends is a long-term goal of mine, though it wouldn’t be easy. It’s not realistic unless you have a large sum of money to invest in dividend-paying stocks, hence the reason it’s typically a longer-term goal of people versus something you can achieve in a short-period of time.

One thing you will notice when you start researching dividend-paying stocks is that the yield is usually relatively low. Companies are forced to decide whether to re-invest profits into their business or to give it to stock owners. Usually companies have a mixed approach and both re-invest and give stock owners profits in the form of a dividend, with a majority of profits being re-invested in the business.

So how much money will you need to live off of dividend income? To answer that question I’ve created a dividend analysis tool.

How to use the Young Adult Money Dividend Income Analysis Tool

I created a dividend analysis tool in the past, but it wasn’t very practical. It didn’t automatically pull in stock data. This new dividend analysis tool automatically pulls in relevant information, and updates automatically if you enter a different stock ticker symbol.

There are two different calculators in this tool. The first dividend calculator, shown below, will tell you how much income you can expect to receive from a certain stock’s dividend payments for a given amount invested.

The only cells you need to populate are the green highlighted cells. Google Spreadsheets does the rest of the work through formulas.

The second dividend calculator is my favorite one. You put in the stock ticker for a given company as well as how much income you want to receive from dividends.

When you go to the tool, be sure to make your own copy.

Thoughts on the Amount of Money Needed to Live off Dividend Income

One thing you may have noticed is that it will take a lot of money to create an income you can live off of solely from dividends. It’s important to remember that companies are always trying to increase their income, and in turn, their stock price.

Instead of being discouraged by the amount of money needed to live off of dividends, use it as motivation to save more of your income and to increase your income.

For example, I might be able to make $2 million through my 9-5 job alone, but it will take me decades. Instead I focus on both increasing my income at my 9-5 and working my side hustles and I’m always looking to increase my monthly income. I also love the idea of building businesses I can sell for a lump sum later on, which can then be invested in dividend-paying stocks.

If your goal is to live off of dividend income, the best thing you can do is increase your income. That extra income can then be diverted towards dividend-paying stocks or mutual funds. You can do this at your 9-5 job or by increasing side hustle income. Your ability to increase your income at your 9-5 will depend on a number of things that you may or may not have control over: your specific job, the demand for your skills, the economy, and a number of other factors.

Making an extra $5,000 or $10,000 at your 9-5 job can be a lot easier than making an extra $5,000 or $10,000 through a side hustle. For example, you may get a promotion that nets you an extra $5,000 a year. In your new role, you may have more responsibilities but you may work the same number of hours. A side hustle, on the other hand, typically requires you using your free time to work.

The biggest benefit of side hustles, though, is that you have complete control over how much time you commit towards them and what you decide to pursue. Another benefit is that side hustle income is typically “extra” income that you don’t necessarily need and can easily be diverted towards things like investing in dividend-paying stocks.

Starting a blog is my go-to side hustle. I’m clearly biased because I’ve been blogging for nearly a decade, but this is my favorite side hustle.

There are countless benefits when it comes to blogging, from leveraging it to sell your own products and services, to using it to become an authority in your area of interest or expertise, to making money through affiliate links. For those who question whether blogging is saturated, I think there is always room for new and unique content. It’s not the easiest way to make side income, but if you stick with it there is definitely a path to making money off of blogging.

My wife and I have both done a number of side hustles, which I highlight in 10+ ways I’ve made side income.

If you’re interested in starting a side hustle, you may want to check out 50+ legitimate ways to make side hustle income online and at home.

Income is just one side of the equation. Cash flow is ultimately what matters. If you increase your cash flow you can direct those funds towards goals that improve your financial life. That can include investing to increase your dividend income over time.