4 Things a Dividend Farmer Needs: Seeds

Seed Money

Any farmer will tell you without seeds there won’t be a crop.  This is true regardless of the quality of the ground, the conditions during the season, or the skill of the farmer.

In dividend investing, you need seed money to begin your dividend farming operation.  Where do you get the money?  Many people live paycheck to paycheck or cycle increasing debt loads across a host of credit cards.  If you’re in this condition, check out Dave Ramsey’s debt snowball strategy. 

In a nutshell, Ramsey’s strategy is to pay off your smallest debt first.  Then apply the money you saved from the first debt as an extra payment on the next largest debt until it’s paid off as well.  Rinse and repeat the process until you’ve eliminated all your debt. 

This is a great way to dig out and generate seed money.  Primerica also advocates the debt snowball strategy, but does so in order to steer your eventual post-debt savings into its loaded investment products.  More about that in another post.

If you have a working spouse or you can swing a part-time job for a few extra dollars, then those might be sources of seed money for you.

Of course, if you have small discretionary funds or access to a flexible employer 401K that allows investments in individual stocks, you have the seeds you need to start farming.  You only need know how to start.

One thing you should not do, is borrow money to begin your dividend farm.  Don’t borrow from family, friends, home equity if you have any, or your 401K.  Even though dividend investing is among the more stable investment strategies it is not worth borrowing money to pursue.  The same can be said of most other investment vehicles with the possible exception of real estate, which is the topic of a future post.  

You’ve learned where to find good ground.  You have some ideas and a resource to help generate seed money.  The next ingredient needed in a solid farming operation is time.  Once you understand the power of time and compound interest you’ll see how fruitful dividend farming can be.

The thoughts and opinions expressed here are those of the author, who is not a financial professional, and therefore should not be considered as investment advice.  This information is presented for education and entertainment purposes only.  For specific investment advice or assistance, please contact a registered investment advisor, licensed broker, or other financial professional.