When I was growing up, I was fascinated by technology. I just loved gadgets and always wanted the shiny new thing. As I grew older and technology advanced greatly, my fascination only grew and I was caught up by the hype surrounding mobile phones. I remember that from the age of 17 to 22, I had a new smartphone every year. And we all know how expensive the latest versions of I-phones, Galaxy’s or HTC’s can be. Add the cost of a 12 month contract and all of a sudden having a new phone every year becomes an expensive habit.
Whilst getting a new phone is fun and exciting, the novelty quickly wears off as a newer and much more advanced version seems to come along the moment you buy yours. Keeping up with the latest mobile phone craze seems to be a losers game. Thankfully, I was able to realise this at the early age of 22. This was around the time I first became aware of my finances and truly appreciated the importance of budgets, saving and investing.
As I became more aware of personal finance, passive income and escaping the rat race, I realised that I needed to kick my expensive mobile phone addiction. Instead of spending hundreds a year on a phone and contract not much better than the last, it would be much wiser to invest the money saved into companies that profit from the mobile phone craze.
As such, I haven’t bought a new phone in over 3 years and still using my old Galaxy s4. In all honesty, I do not reminisce having a new phone. My Galaxy s4 works perfectly and does everything I need to do on a phone. And the best part is that over this time, I have saved just over £1,000 in mobile phone upgrades.
Naturally, I have invested this money into the stock market in order to compound it over time. Last week, I bought 461 shares in mobile phone provider Vodafone to bring my total holding in the company to 528. The total spend on the entire purchase was in the region of £1150 – the amount I saved by not upgrading my phone over the past 3 years.
The best thing about this transaction is that after all the years I have been paying Vodafone for various mobile phone contracts, Vodafone will now start to pay me £60.46 every year. Yes, that’s right, the tables have turned! Vodafone currently pays an annual dividend of 11.45p a year and with 521 shares to my name, £60.46 will hit my account without me having to lift a finger. The best part is that Vodafone has consistently increased its dividend over the past 18 years. The recent trend has seen the dividends increase by 2% so going by this, I expect to receive £61.66 in 2018, £63 in 2019 and £64.1 in 2020. This is certainly a sweet deal for simply delaying gratification; delaying a new mobile phone purchase which I don’t really need.
The point of the above illustration is to show you how our choices today can impact our financial future. It would have been easy for me to just sit and moan saying that I do not earn enough money and life is not fair. But I realised that instead of spending money on products I don’t really need, I am better off buying ownership stakes in the company’s the make these products. This way, I get to benefit and profit from peoples status anxiety.
Passive Income Use: Getting a mobile phone contract for free
The great part about the passive income I will receive from Vodafone is the fact that it is close to covering my mobile phone contract bill.
As I own my phone outright and am on a sim only deal, I currently only pay £6 a month for an excellent package with Vodafone. As you can see, my dividends from Vodafone currently cover 90% of my annual phone bill! That is truly amazing. If I buy just a few more VOD shares, I will be able to cover my full bill via dividend payments an in essence be getting a mobile contract for free.
It is really that simple. By delaying gratification and investing in dividend paying stocks, you can ‘hack the system’ so to speak and use your dividends to pay your bills.
You can use this dividend hack on a wide range of things. You can buy shares in utility companies to help pay your gas, electric and water bills. You can buy shares in oil and energy companies to help pay your fuel costs. Heck, you can even buy shares in alcohol companies to get free beer.
This Vodafone purchase epitomises why I started the journey to financial freedom (link goals). I want my passive income to be able to cover all my bills and costs. That way, I will never have to work for money and instead do what I love. I can even start paying my bills with a smile.
Buying Apple shares instead of the product.
I came a cross a few articles which gave figures on how much money you would have today if you bought shares in Apple instead of the products it makes. These articles were from 2011 but as everyone loves apple, I thought it would be a good idea to do a bit of an update as the stock value has increased greatly since 2011.
- July 1999 – original ibook g3. Cost $1,599. If you had bought Apple stock instead, it would be worth $97,964 today!
- October 2003 – original 5gb Ipod. Cost $399. If you had dumped that amount into apple shares instead, it would be worth $41, 843 today!
- January 2007 – original 8gb iPhone. Cost $599. The value if you had bought Apple stock instead, $5,516
You can use the following calculator for any stock to see your opportunity cost – https://dqydj.com/stock-return-calculator-dividend-reinvestment-drip/. So the next time you want to go and buy a shiny new toy, just think of all the gains you are giving up on!