A portfolio that pays $12K a year

Bob Lai wanted to retire early. So he became an extreme saver

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by

From the January 2017 issue of the magazine.

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dividend portfolio

Bob Lai, 34, lives in Vancouver and blogs at Tawcan.com. (Photo by Grady Mitchell)

Since my early 20s, I’ve always tracked my spending. That’s because I realized early that the key to wealth is increasing your net worth and to do that, you must have a money management system you can depend on. What has motivated me, since graduating at age 24 with a degree in engineering, is my goal to save more. To achieve this goal, I’ve done a lot of crazy things. For instance, I lived with my parents for 18 months, and dried my clothes on drying racks just to save $2.50 per dryer load at the laundromat. I also slept in my sub-zero sleeping bag to save on heating. It sounds extreme, but these habits are part of what has allowed me to save tens of thousands of dollars every year.

But things changed a bit after marrying my wife Ayoe in 2011. At that point, it wasn’t just about saving money. I expanded my financial goals by setting up a budgeting system described by T. Harv Eker in Secrets of the Millionaire Mind. That means I break down my after-tax income into six different accounts and allocate a certain percentage to each account: necessities (55%), education (10%), play (10%), financial freedom account (10%), long term savings for spending (10%) and my give account (5%). I also set out to build a dividend-stock portfolio that would help supplement our monthly income by paying out $1,000 a month within five years. To accomplish that I started saving a large percentage of my salary. But I didn’t deprive myself—I still did all of the outdoor adventure sports I’ve loved over the years, including skiing.

I get a regular dividend cheque from 22 different stocks that I’ve chosen over the years. I own three of the Big Six banks as well as a mix of Canadian and U.S. stocks, including Agrium and General Electric. But more dividends isn’t my goal; safe, solid, consistent returns is my goal. In fact, when a number of stocks I own announced dividend increases, including Chevron, Canadian Natural Resources and Inter Pipelines, I was slightly concerned. Why? Because these companies have seen their revenues drop due to the lower oil price. For now, I’ll keep a close eye on these holdings to make sure the dividend payments are sustainable. Still, I’m confident that we will finish the year with about $12,000 in dividends—a milestone for us.

My next goal? To grow our investments so the dividends generate $45,000 in 10 years. My dream is to be financially independent by age 44, but that doesn’t mean I want to quit my job. I love my work; I just want to spend more time pursuing my passion for photography, skiing and cooking.

I’ve learned several financial lessons over the years (spend less than you earn, pay yourself first and optimize your savings so you can invest) but the greatest lesson I learned was to be happy today. Improve yourself, spend time with family and friends, read books, and try new things—all this brings me even more joy and happiness than watching my dividends go up and it’s what I believe is the real key to a meaningful life.

—As told to Julie Cazzin

Have your own personal finance success story you’d like to share with us? Email us at letters@moneysense.ca


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11 comments on “A portfolio that pays $12K a year

  1. Congratulations in achieving this goal. I am curious to know how much is invested and what stocks are in your portfolio.

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    • Check out his blog, tawcan.com

      Reply

  2. What is the approximate value of the portfolio you have in order to get that 12k a year?

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    • Being too lazy to look it up on his website, based on the clues about his portfolio I’m guessing a portfolio size of about $350k yielding about 3.5%. But could be in the range of $300k to $500k.

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      • For 300k to 500k,if he buy a house with that money a couple years ago , he is getting more than 12k a year.

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        • Vingo, did you remember to deduct realtor fees (for both buying and selling said property), legal fees, land transfer taxes, property taxes, mortgage interest, maintenance, and opportunity cost on the down payment when doing your back of envelope calculations? Figured not.

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        • I’ve had a 400k house for 5 years. With no mortgage. You absolutely do not in any way gain 12k a year with it. It’s a complete myth,
          It gained about 15k$ in value in 5 years, but it costs something like 3000$ in taxes. There are also things that break down over time and need to be fixed. And of course, that’s evaluation, that’s not necessary the money you get if you were to sell it. Certainly not after all the fees.

          The difference with dividend investing is that it’s *actual money* you get. It’s not an evaluation that’s going up and could come down, or a suggested sales prices before tax. It’s real money you can use now.

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    • Congrats Bob, keep working towards your dream of financial independence.
      You will find a lot of resources on http://www.freedomlifeplanning.com that will help you and others reach their financial objectives. Good luck!

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  3. Finally an article that gives information on stocks that someone has invested in. Often we read that an individual has done well but we are given no specifics on his/her investments. Well done with this article and well done Bob Lai.

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    • Meh. A lot of work for nothing. Just buy VGG. Also some of his holdings are very risky (I wouldn’t touch Corus, for example, with a 500-foot stick).
      Also, his portfolio is extremely vulnerable to interest rate hikes. You have to think about why dividend stocks are in such demand.

      Reply

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