You know what I love about blogging? It’s that you learn about important things that you probably weren’t going to go searching for on your own. That’s exactly what Matt from Mom and Dad Money did for me when he wrote an epic guest post for My Money Design about two weeks ago. Even though there were a lot of great points buried within the text, one of the things I took away from it personally was the mention about how a long term capital gain (much like your dividend income) is taxed at a lower and more favorable rate than your ordinary income.
Taxes? Time to Stop Reading This Post …
Wait! Don’t leave. I promise not to bore you too much with a bunch of technical jargon.
Time and time again on this blog we’ve proven that we sometimes don’t know we can do something until we ask for it. That was exactly the case this week when I learned that I can DRIP stocks with my broker. Until now I didn’t think that my account had this feature, but I was glad to find out that it does and I will certainly be putting it to use.
For those of you who don’t know, DRIP stands for dividend reinvestment plan (or program). It is also sometimes abbreviated DRP. When people say you DRIP stocks, they are usually referring to some system you enroll in where instead of receiving your dividend payments by check or cash each quarter you instead automatically buy more shares of that same dividend paying stock. There are a lot of really strong reasons as to why this is a big advantage to you.