Dividends provide an avenue for you to see a return on your investment without having to “cash out”.
This idea of dividends spans far wider than simply your financial plan. Those high-paying dividends can be found throughout your life.
Where Are These Dividends?
As you hit the gym day after day, week after week, your health improves as a result of your consistent commitment. The investments that you are making into your body pay off in small ways; a little extra energy at the end of a long day, a little less pain on a walk/hike with your loved ones, that little bit extra strength that makes all those little tasks just that little bit easier.
And there are some big payouts too. That healthy lifestyle reduces the incalculable cost of major surgeries, saving you from constant pains, and months of lost time in recovery.
Those dividends are received in the loving moments with your family. Or a deep conversation with good friends. The types of relationships that pick you up when you’re down. The relationships that support your dreams as you reach out for them. The relationships that give you a sense of peace during the stormiest days.
How Do You Get Dividends?
There is no shortcut here. Dividends are only paid out to those who make the investments first.
If you want to live a rich life, you need to make sure that you are putting the right amount away. You need to ensure your investments in all areas of life are well funded.
Dividends Without Investment
Unfortunately, we see all too often the outcomes of people who don’t invest enough. When the account flickers in the red. When that cheque comes back marked insufficient funds.
These shortfalls manifest themselves in all sorts of ways. Our failing health a few years before we should. An estranged child who just can’t find that connection with their parents. The divorce papers that sever a once loving union.
These returned cheques happen all too often in today’s day and age. With Canadian divorce rates hitting or exceeding 40% according to the Divorce Collaborative in Vancouver. In “A Statistical Snapshot of Youth at Risk and Youth Offending in Canada” cites a juvenile delinquency rate of 6%. Of course these studies only pick up the worst offenders, when a wayward child embraces crime as they rage against the world. There are countless others who simply never narrow the emotional distance with their parents.
With eye opening statistics like these, one has to ask, “where does it all go wrong?”
Where It All Goes Wrong
The biggest issue is that those investments are hard to measure. It’s often too hard to know that you’ve been letting those investments slide, until it’s far too late to do anything about it. You don’t get a quarterly investment report from your spouse and children. Oftentimes it’s hard to even tell if those little payouts we all spend occasionally were the result of dividends, or we had to sell some equity to make the withdrawal.
See, nobody sets out with the intention of under-contributing to those key areas in life. The trade-offs are far more insidious than most people give them credit for.
Let’s take the most common example: our ambitious young professional.
For simplicity, we’ll use “him” and “his” to indicate those small insidious choices. But this scenario works equally well for our female readers.
Our young man does what so many others of his age group have done. He went to college for 4 years, and walked out with a degree. It’s time to get to work.
He takes what sounds on paper like a decent job, but he’s starting from the bottom. No worries, his parents say, you’ve got to put in your dues before you can make it in this world. Sounds easy enough for our ambitious young man. He’s no stranger to hard work. Heck, this is a great opportunity to outshine his contemporaries.
That salary says 40 hours, but those first couple of years go by in a flash. Days are long, and weeks longer. But he’s making some headway, professionally.
As he ages, day by day, his twenties start slipping away. No matter, he’s got a steady girlfriend, and there’s even talk of marriage and babies. Those blessings come sooner than he could have planned, he’s still got a long way up that corporate ladder. No matter, his new wife is understanding, and the baby is simply too young to know better. Besides, a couple more years of these long hours and he’ll finally have made it.
Before he knows it, that little baby is about to start school. It’s unfortunate that work took up so many hours when they were young, but the job is finally good now. Besides, he’ll just put in some extra time to forge those bonds when his kid is a little older. It certainly won’t be long now before he can really take his foot off the gas - he’s put in the hours, it’s time for that professional investment to start paying dividends, right?
That first decade of marriage was a whirlwind. Career promotions interspersed with a growing toddler, upgrading the house a couple of times, even a new car in the driveway! Both professionally and financially, our young hero is crushing it.
Then one day, after a grueling week at work, he arrives home. Takes a quick look into his child's bedroom, just a bit too late again to read that bedtime story. As he heads off to see the wife, he has a sense something is wrong. Did he forget a birthday? Surely not their anniversary, right?
Just like the other 40% of that statistic, he quickly realizes when he sees those papers on the kitchen counter. All those years, those long hours at work. He hadn’t been as vigilant, setting aside time and energy for career growth, but failing to make those investments in his family. His wife, his baby, they hardly knew who he was anymore. Those long hours, the “understanding” that he thought was established. That wasn’t a dividend of the relationship, that was a withdrawal. That account was in overdraft, and the tax collectors were at the door, brandishing a life fine labelled “divorce”.
And who could he lean on for support? Those once cherished friends had stopped calling, he was always just so busy. Phone calls went from weeks to months, to haven’t heard from them in years.
Throughout all those years, he’d been filled with nothing but good intentions. Chasing the good life. They’ll all thank me someday for the sacrifices I’ve made, he thought.
If only someday could have come sooner.
How To Avoid That Fate
What can you do to ensure the accounts in your life are growing in the right direction?
Just like you receive a monthly or quarterly investment report, you need to make your own report to evaluate the different areas in your life. Are you making the right choices in relation to your goals? Are you considering everything that is important in your life when you set those goals?
Our young hero in the above story certainly had goals. But those goals didn’t include his relationships with family and friends. And while he was measuring his progress up the corporate ladder, he failed to measure the impact that grind was having on those closest to him.
Each season, take an inventory of those important elements in your life: career, finances, relationships, romance, spirituality, and physical health. Are you making investments? Or are you withdrawing too much?
Success (and failure) isn’t one grand gesture, it’s the thousands of tiny choices made each day. Too many choices in favor of one of life’s priorities over another will tip the scales. Just make sure you know how much is sitting in each of those accounts, so that you can avoid life’s terrible bankruptcy courts.