Update June 2023.
At Her Lab we stand for financial freedom and there are two steps to achieve it: financial literacy and several streams of income. And by being here, you are tackling both.
By being financially literate, you understand and use to your benefit financial concepts and tools like budgeting or investing. This allows you to be financially independent, and to make key life choices from a position of self-confidence and safety.
By creating several streams of income, you free yourself from depending entirely on your salary. Because that salary could be gone for many reasons, you want to ensure that money is flowing into your life constantly and from different sources.
Why is this a wellbeing imperative for women? According to McKinsey, women’s jobs were 1.8% more vulnerable to the Covid-19 pandemic than men’s jobs. According to a UN report, conflict and climate change have devastating effects on prospects for women’s wellbeing. But besides global crisis, money is a powerful tool that allows women to walk away from toxic jobs or relationships. It is our responsibility and duty to educate ourselves and build financial freedom, being an example for future generations.
Dividends are one of the advantages of investing, and understanding them is crucial to ripe its benefits. But don’t worry, no degree in finances or expensive financial advisor needed. Here are the basics to do it yourself in an afternoon.
But first, what are dividends?
Dividends are payments companies make to their investors when business is doing well and it is up to the company to decide whether they want to pay them out. Companies like Ford, Pfizer, Intel, or BP have recently paid dividends to their investors, however, it doesn’t mean they will continue doing it.
The amount is paid according to the number of shares you own, so if you own 10 shares in a company that pays 2€ per share, you will receive 20€. The top advantage is that you receive this cash without selling your shares, so they can continue making money for your future self. The downside is that dividends are usually subject to tax, however, in most cases the company will deduct the tax from the payment so you don’t have to worry about it.
How to invest in dividends?
- Decide how much you want to invest. Remember to identify your risk tolerance by calculating your monthly expenses and making sure you have an emergency fund.
- Research companies that have a history of paying dividends.
- Create your portfolio of dividend-paying stock. Remember that diversification is key to reduce risk!
- Press the BUY button. If you are new to investing, learn how to make your first investment with our courses and resources.
- Monitor your investments and adjust if needed.
How to make an extra income out of it?
Usually, dividends are paid every quarter. It is smart to track how much money is entering your bank account from dividends and for that, a simple list on Word or Excel is enough. Having visibility of the value of this extra income will help you make the most out of it.
You might already have in mind an excellent way of enjoying your new extra income from dividends, but if not, this is the perfect time to set some goals. Are you planning for a life event like buying a property or taking a gap year? Looking at travelling more or upgrading your social life? Thinking about investing for retiring? These are all fabulous goals your dividends’ income can contribute to.
After making your first investment in dividend-paying stocks, take some time to understand how much money you are making with them and what can be the impact towards your goals. Don’t worry if at the beginning the contribution from dividends is small, this will increase as your capacity to invest more increases too.
The key to ultimately create an extra income out of dividends is to take the first step and continue learning what works for you and what doesn’t.
Want to start investing? Cut through the noise with Her Lab education and resources.