How Much Money Do I Need To Invest To Make $3000 A Month?

How much money do I need to invest to make $3000 a month from dividends? Figuring out how much money is needed to make 3 grand per month. I am not a licensed investment advisor and this post is not investment advice. It is for entertainment purposes only. This post may contain affiliate links.

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Originally, I planned to retire early when I earned an average of $1,500 per month from dividend investing.

However, my taste and lifestyle changed since then. I like organic food, road trips, and a nice place to live. So now I’m thinking I’d like to earn $2000 to $3000 per month in passive income. 

Additionally, inflation has eroded the buying power of a dollar since I set my $1500 target.

As such, I’ve started to think about either saving more money or working longer to grow my dividend income. 

The question is how much money do I need to invest to make $3000 a month? How much longer would I have to work, or how much money would I need to save?

In this post, I will work out how much money I need to invest to make $3000 a month in dividends.

Let’s dive in.

How Much Money Do I Need To Invest To Make $3000 A Month?

In a previous article, I estimated that I would need to invest $397,489.54 to earn $19,000 annually from dividend investing. This works out to just over $1583 per month.

But what if $1500 per month is no longer enough? What if I need to double that?

How much money do I need to invest to make $3000 a month?

To figure that out, there are a few other details that must be determined first.

We need to know the average dividend yield of all stocks owned, and the desired annual income amount. In this case, the desired annual income is $36,000 or $3000 monthly.

As for the dividend yield, I will use the same dividend yield I used in my previous article: 4.78%.

How To Calculate How Much Money You Need To Invest

Now that we know the average dividend yield and the desired monthly income, we can calculate how much money needs to be invested.

To calculate how much money is needed, we need to divide the desired annual income by the dividend yield.

Example:

Income desired: $3000 monthly or $36,000 annually

Average dividend yield: 4.78%

$36,000/0.0478 = $753,138.08

Therefore, to earn $36,000 annually or $3,000 monthly, at an average dividend yield of 4.78%, I must invest at least $753,138.08.

What If The Dividend Yield Is Lower?

Frankly, a dividend yield of 4.78% is quite high.

If you hold stocks for long enough, it is likely that you will be able to obtain yields this high because of dividend raises.

Otherwise, many quality stocks pay dividend yields that are 3% or less.

For the record, I wanted to work out how much money would need to be invested at an average yield of 3% as well.

At an average dividend yield of 3%, an investor would need to invest at least $1,200,000. 

Example:

$36,000/0.03 = $1,200,000

Clearly, the dividend yield makes a massive difference. It would require nearly $450,000 more at a yield of 3% compared to a 4.78% yield. 

However, it’s important to keep in mind that higher dividend yields are at greater risk of cuts.

Taxes May Affect The Amount You Need To Invest

It should be noted that taxes may require more money to be invested in order to earn $3000 monthly.

The money figure I mentioned is based on the hypothetical notion that the funds could be invested in a tax-free account.

Unfortunately, it’s unlikely that it would be possible to invest over $750,000 into a tax-free account. The only way that would work is if tremendous growth was achieved within a tax-free savings account that grew the account to that sum. Then, it would be possible to diversify the funds from the growth stock into dividend stocks with no additional taxes.

For most investors, though, they will incur taxes and have to invest more to earn $3000 a month in dividends.

As such, it’s important to speak to a tax specialist or accountant to determine how you will be taxed.

How Much Money Do I Need To Invest To Make $3000 A Month? – Final Thoughts

In summary, at least $753,138.08 needs to be invested to earn $3000 monthly from dividends.

This amount is based on an average dividend yield of 4.78%, which is on the higher side. 

However, as dividend stocks raise payments over the long term, it is likely that dividend investors will see average yields above 5%, if they hold stocks for long enough.

So, it might be possible to earn $3000 per month in dividends with less if you select stocks with soaringly high dividend growth rates.

Of course, investors also have to deal with taxes on their investment income. As such, it’s a good idea to talk to a tax specialist or accountant to find out how much tax will eat into your dividend income.

Is the amount needed to generate $3000 monthly in dividends more or less than you thought it would be? What’s your retirement number?

I’d love to hear your thoughts in the comments below.

Closely Related Articles On Dividend Investing To Check Out

How To Make $1000 A Month In Dividends

How Much Do I Need To Invest To Live Off Dividends?

I am not a licensed investment or tax adviser. All opinions are my own. This post may contain advertisements by Monumetric. This post may also contain internal links, affiliate links to BizBudding, Amazon, Bluehost, and Questrade, links to trusted external sites, and links to RTC social media accounts.

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