I knew about Donald Glover only through his career as a rapper, under the stage name Childish Gambino. When This Is America blew up in the media, I saw a lot of discussions about the critique he was making of how white America builds its power structures. But to be honest, since I'm not American, I didn’t feel entitled to have a strong opinion on that.
Now, talking about money (because that’s what I really want to discuss here, hello #FinanceEconomy community), I was introduced to the series Atlanta.
Hold on, I’m getting to the point.
The series tackles various social issues, but one thing that stood out to me was the struggle that ordinary people "non-rich folks" face in building real wealth. If you have to pay rent, food, transportation, and other daily expenses, how the hell do you have money left to invest? For many people, leaving money sitting idle and waiting three months for a return is simply not an option.
That’s where a concept that has always intrigued me comes in:
The snowball effect in investments. Especially when we talk about dividends.
It sounds like a beautiful idea on paper, you invest in assets that pay regular dividends, reinvest those dividends to buy more assets, and over time, your invested amount grows exponentially. Sounds perfect, right? Well, there’s a small problem.
You need a considerable amount of capital for those dividends to actually make a difference in your daily life.
prompt: "first person pov financial stock charts with TSLA symbols all around. green up arrows and down arrows everywhere withLora"
If you invest in a real estate fund that pays 0.7% per month and put in $1,000, do you know how much you’ll get? A measly $7 per month. That’s barely enough for a fast-food meal. Now, imagine you want to live solely off dividends you’d need an investment generating at least $1,000 per month. That means you’d have to have around $100,000 invested, depending on the yield. And let’s be honest...
Who has that kind of money just lying around??
I’m not saying investing in dividends is a bad idea.
Don’t get me wrong, far from it.
But for those just starting out, the idea that you can simply put a little money in and instantly become financially free is a fairy tale. The snowball effect works, yes, but it takes time. And for those who have bills knocking on their door every month, patience can be a luxury.
So, what’s the solution?
For those at the beginning of their financial journey, it makes more sense to invest in assets that can grow more quickly rather than focusing solely on dividends. Real estate funds and solid company stocks are great, but maybe the best approach is to balance that with investments that have greater short- and medium-term growth potential. If money is tight, it might make more sense to focus on increasing your active income before relying on passive income.
The money game is brutal
And if you enter it believing that all you need is patience, you might end up waiting longer than you should.
Building wealth requires strategy, and sometimes, instead of waiting for the snowball to grow on its own, you need to push it downhill with more force.
