Happy September! It’s been super busy here with the kids going back to school. I feel like I’m chasing my tail. I have been trying to get this article out for several days now.

It feels like August was a billion years ago. The vacation that we took at the end of the month broke up the month. I shared many pictures in that article, but I have more photos here. With the kids in school mode now, reflecting that they were in camps in August is weird.

One kid was in cooking camp while the other was in sailing. I love the idea of cooking camp, but it’s only three hours long. I drop off the kid and get back with only about 2.5 hours before I have to get him again.

We went to a Barbie party. My wife went all-in and got costumes for the kids so they could Barbie’s dog and horse. I had a pink shirt, so it was easy to dress like Ken. I’m not a big Barbie fan, but my wife puts up with boys in the house (I’m just an oversized boy). It’s only fair that we indulge her stuff sometimes, right?

Barbie had a special premier showing at a local theater.

The Cub Scouts had a Red Sox day at Fenway, so my kids got to go on the field!! They complained about getting up a little early. They have no idea how special that is.

We went to so many beach concerts that the kids got annoyed with us. They always had a great time, but overcoming that initial inertia to get them out was challenging.

We went to a fundraiser at the Newport Tennis Hall of Fame. Some people are looking to restore and open up a historical theater. We also went to a steak dinner fundraiser for the Elks or a similar group. I forgot to be honest. The facility is close to our house, but usually members only except for a couple of days a year.

We went to a Jamaican Polo team fundraiser. We have no affiliation with them, but it seemed like a fun thing to do. It was at the Top of Newport, a rooftop bar no one knows about. Maybe it’s just too expensive for the general public. It’s a great atmosphere in the summertime. They hired someone to play the steel drums, which always reminds me of vacation.

(That’s a lot of fundraisers for one month! Perhaps more than we’ve had all year.)

We went to the annual Fool’s Rules race. I had wanted to go for years, but we always missed it due to something else scheduled. The Fool’s Rules race is where a group of people (usually 2 or 3) build a sailboat and sail it in a race. They have two hours to make it, and it can’t use typical boat parts. So people often use things like 5-gallon water jugs or insulation foam that you can buy at Home Depot. There are some other rules, such as not having a motor. Some of the stuff can be constructed at home before the race. It’s fun to see what crazy things people are coming up with.

My oldest soon with a Fools Rules sailboat in the background.

Before leaving that vacation, we ended our time in Newport with their annual Salute to Summer at the local navy base. It combines a carnival, a concert, and a fireworks show.

Well, now you know why I didn’t write as much as I had hoped. Remember that all that doesn’t involve the big vacation at the end of the month, that essentially doubles the activities. I’m tired when I think about it, but if we don’t plan this stuff, we tend to blow the day on an electronic device a foot in front of our faces.

Let’s start the new and improved Passive Income report. I’ve streamlined this a bit to make it a faster, easier read. I’ll continue to trim it down through the year.

I used to call it alternative income, but that idea didn’t catch on as it did when I used it back in 2008. Everyone loves “passive income” better. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you may have some questions about the math that I’m going to use in this post.

The way I calculate these numbers requires that little explanation. I do things differently to show the journey. Following the progress keeps me motivated. For example, we only have a little passive income from our rental properties. We still have mortgages to pay off. Instead, I calculate the percentage of equity we have to show where we are on that journey. Over time, the bank owns less of the properties, and we own more. There will be no mortgages when this number reaches 100%, and all that rental income can be used for living expenses.

When calculating the percentage of rental income, I take the rent (minus estimated expenses) and apply it to the portion of equity we own. Think of it like you and a friend owning a property 50/50. This would be how you’d handle it, with each splitting the profits at the end 50/50. If your friend is the bank and it owns 80%, you should only count on 20% of that net rental income. We used to be in that 20% range, but now it’s closer to 75%.

Lazy Man’s Passive Income

I categorize our passive income into three primary sources that are represented mainly in my passive income pyramid. For this report, I ignore the bottom section, “career/job,” – that’s not passive at all. (I have some income in that area, but that’s not the focus of this report.) I combine dog-sitting and blogging into one section of my “somewhat active” income. They are passive because I can make money even when not immediately tending to them. I can do other money-making activities while I board dogs. When I’m on vacation, some blog money still comes in. I combine real estate and investment income as their separate primary sources of very passive income. This way, if you want only to count those, you can do that.

New for this year, my passive income will only be 50% of my blogging and dog-sitting income, 80% of my real estate income, and 100% of my dividend income. That rewards types of income that are truly passive and punishes my quasi-passive sources like blogging.

1. Blogging + Dog Sitting Income

August is a high-demand month for dog boarding. Unfortunately, the month started with uncertainty. The zoning officer said I couldn’t run Rover.com boarding out of my home because it is in a residential area. I convinced him that he had misinterpreted town law, but he applied a different ordinance intended for dog ownership that limits three dogs on a property.

We went on vacation at the end of the month. That limited time that I could board dogs as well. Overall, we did about half the business we would have done during a normal summer month.

Kids playing cornhole at the Elks steak fundraiser

Blogging did reasonably well in August. Other bloggers like my Running Out of Life article and spread it around to their readers, and that helped with traffic. For the first time in a long time, I missed a whole week of blogging while we were on vacation.

Speaking of blogging, we got a solid rebound in July. Blogging is still a tough business, and I did quite well to get a rebound in a month when I didn’t write much.

In July, “dogs and blogs” combined for $7,437.82. In August, it was:

Total Blogging + Dog Sitting Income: $4,478.82

The blue line is the monthly income. The red line is the 3-month average.

That may seem like a significant drop, but our yearly average is $5,673.26. It’s lower than that, but reasonable for being on vacation.

My kids help with the dog sitting. My 10-year-old is extremely good with dogs at this point. He can feed them, let them out, and play with them in the yard. He’s spending more time in front of the clients as a helper at pick-ups and drop-offs. My 9-year-old was a little slower to develop dog skills, but he’s carved out a household niche catering to the smaller dogs – he loves them.

Their help means I can pay them a legitimately earned income (a percentage of the overall dog-sitting income). Because the income is earned, they can save money in their kid Roth IRAs, and it will be money that they’ll never pay tax on. Kids should start a Roth IRA as soon as possible.

2. Rental Property Income

The real estate market is heating up again. There’s no supply and a lot of money sitting on the sidelines. I think we’re going to high prices for some time. I used to be very happy about this because it means we have more money, even if it’s on paper. However, now I see so many people being locked out of the real estate market, and it’s hard.

Beach Concert Part 1

We bought our primary residence for around $400,000 in 2011, and Zillow has it priced at nearly $900,000 now. That’s a lot of paper net worth we can’t easily access.

In any case, Zillow thought our properties were worth a little more than they were last month. We lowered our mortgage/liability on them like we do every month.

Last month, we owned 78.44% of our properties, but this month we own 78.70%. This is always a small change. Since January, we’ve gained more than $50,000 in equity. It’s safe to say that our landlord job is paying well.

Beach Concert Part 2. Lifeguards abandon their chairs at night, so kids can take them over.

Suppose we owned both rental properties with no mortgages (100% of the equity). In that case, we’d make about $2,218 a month after insurance, property taxes, condo fees, and estimated condo maintenance. The $2218 number is specific, but that’s how the rents came out, with the fraction accounting for the condo maintenance.

If you multiply our rents of $2,218 by the amount of equity we have, 78.70%, you get $1,745/mo. in estimated passive-ish income. Last month it was $1,739/mo. They say slow and steady wins the race. It’s hard to get more slow and steady than $6.

When I started tracking rental property income this way (January 2017), we only owned 36.4% of the properties with lower rents. The math worked out to $1,174 of passive income back then. In almost seven years, it grew a ton. We sold off a property to invest it in the stock market and still have about 50% more income after expenses.

The background is the International Tennis Hall of Fame. It’s one of the few grass tennis courts in the country.

Eventually, these properties should bring about $25K-30K after expenses. Rent is inflation-resistant as it’ll rise over time. That means that even though this is $25K in today’s dollars, it will still have that buying power in the future.

At some point, I won’t want to manage properties. One option is to let my kids do it and pay them well for the help. They are at least ten years away from that, though. If that doesn’t work out, I might invest in a different real estate platform. I’ve heard some good things about Ark7.

Total Rental Property Income: $1,745

3. Dividend Income

For this section, I look at our stock market investments. I assume we could earn a 2.5% dividend yield on those investments. That assumption is a conservative number that helps us think about what kind of cash we can expect. Getting that 2.5% number should be easy, as we could put all the money in a high-dividend ETF. For example, the high-yield ETF, iShares Core High Dividend ETF (HDV), currently pays a 3.96% yield.

Most bloggers use the actual dividends they earned that month. I have too many accounts, and I’m too “Lazy” to add up their dividends. Even if we aren’t getting the 2.5% number now, we could move the money from growth to dividends if we needed to live off the cash flow. A vast majority of our money is in retirement accounts, and cash flow isn’t essential to us now. I also combine all the taxable and retirement account numbers. It’s too much work to separate them.

Red Sox game! I didn’t include the picture with the kids on the field because I got Lazy when editing their faces out.

We continue to get a profit-sharing check since I bought (a lot of) a company. The company is doing well, and they occasionally give me an extra profit-sharing check. The investment income from this is essentially the same as dividend income. It is taxed differently, but for this report, it makes sense to group all stock ownership in this bucket.

The stock market has been dull lately. It goes up and down a little bit. Over the last month, it didn’t move much. Last month, this number came out to $4187, and this month, it was down to…

Total Dividend-ish Income: $4,150

In January 2017, the dividend income was at $1,180/mo. We’re still around $50,000 a year – enough to live reasonably well, especially if we paid off our mortgage.

For the 113th month in a row (?), we’re looking into estate planning, but they gave us a lot of paperwork to do before we can move forward. I need to contact them and see if there’s some way around it.

Adjusted Passive Income

I used to combine real estate and dividend income into “very close to passive income.” However, now I add up the 50% dogs/blogs, 80% real estate, and 100% dividend income. That gives a more accurate number of what’s truly passive.

Dog/Blogs: $4,478.82 – Adjusted to $2,239.41
Rentals: $1,745 – Adjusted to $1,396.00
Dividends: $4,150 – Remains at $4,150

Dogs/Blogs Blue Line
Rental – Red Line
Dividend – Yellow Line

Total Adjusted Passive Income: $7,785.41

Last month it was $9,297.11. The numbers are down, but I don’t mind. I look at the long-term, and it’s going in the right direction.

This ~$7,785 is nearly $95,000 of passive-ish income annually. That’s almost exactly what all our necessary expenses comes out to. Eventually, the two biggest expenses (mortgages and education costs) will disappear, and we’ll make much more than we need. That means we’ll be able to spend on a lot more fun stuff.

It’s incredibly useful to have different income streams. As making money from blogging becomes more difficult, dog boarding income has grown to supplement it. For a long time, real estate didn’t grow much at all; then, in the last couple of years, it grew a ton. The stock market grew for over a decade from 2010 to 2021 but had a slight setback last year. This year it’s recovered. When something goes down, it seems another thing jumps up.

I’ve been writing for months that dog boarding will probably go down. I felt like we’d travel more or there may be more competition. I didn’t expect the town to target me specifically and attempt to shut me down. Hopefully, it will go down gradually. I will try to be positive because with the other areas coming up, I can tread water for a while.

The chance of all the income streams falling on hard times is low, but anything is possible. If we had another event like the Great Recession in 2008, they’d all be impacted quite a bit. In that case, we’d have to rely more on active income that I’m not reporting here. We might also have to rely on savings for a while.

Kids’ camp version of cooking chef challenge show.

It’s also important to remember that these numbers aren’t “real” because much of the money isn’t liquid. We can’t spend those retirement investments without taxes and penalties. We can only access the equity we have in properties if we sell them or open a HELOC. We can do some things to get to this money, but it only makes sense when my wife retires, and we are in a lower tax bracket.

You’d think we’d feel “rich” having “won” the money game. Most of the time, we don’t feel rich at all. Our social circle tends to have generationally rich people. Nearly every of my son’s classmates lives in a $2-3 million house. Dog boarding is looked down upon in the private school society. However, we are “rich” relative to many people’s circumstances. Money is relative. There’s a lot of value to being able to laugh at emergency bills and make reasonable splurges.

(The blue line represents the total adjusted passive income. The Red Line represents the three-month average.)

The three-month average in August 2021 was $8,856.01. In August 2022, it was $8,101.23. Now, in August of 2023, it is $8,628.71.

It doesn’t look like it’s growing too much. In August of 2021, people were getting vaccines and traveling a ton. That led to a lot of dog boarding in those numbers. All of these numbers are very good, especially adjusted to reflect their passive nature.

None of the numbers here include my wife’s bread-winning day job as a pharmacist or the minor freelance work I’ve been doing over the last few years. This income isn’t passive at all. When my wife retires, we can count her vested military pension as more passive income. It might be worth around $85,000/year and includes access to a good health care plan. A pension is a passive income cheat code. They are so rare nowadays. It gives us a lot of flexibility that most people don’t have.

For now, this active income (including the dog boarding) is the fuel that drives the passive income engine – it allows us to live well, get our kids a top education at a private school, pay off our mortgages, and invest. My income doesn’t match my wife’s, but the flexibility allows me to stretch almost every dollar of our spending. It also allows me the flexibility to bring the kids to school and after-school activities.

Net Worth Update

My net worth updates aren’t fascinating. I don’t share the exact numbers. That’s why it’s just a footnote, not its own article.

Net worth is one of the most critical numbers in personal finance, so it is worth sharing in some way. Showing relative growth can be helpful.

This past month, our net worth was up 0.72%. For the year, it’s up 11.97%. The steak of hitting all-time net worth highs has reached five months. That’s great, but most of it is in Zillow’s evaluation of our primary residence. That’s not useful net worth until the mortage is paid off.

Many bloggers show how much they spent and how much they made during the month. I don’t keep track of all those numbers. Some tools can make it relatively easy. However, tracking overall monthly numbers works best for me. I can look at our liquid cash numbers, which gives me similar information. In the last month, we grew our liquid cash by $3,000. For the year, our liquid money has increased by $35,000.

There’s a big wild card in calculating our net worth. Now that my wife’s military pension is vested, it’s reasonable to ask whether we should include it in our net worth. If the U.S. government didn’t back it like treasuries or FDIC, I may feel I should account for some uncertainty. I decided that it makes sense to include it. She could have earned a larger immediate salary if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth.

Let’s end the month with a salute to summer.

It’s important to recognize that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 17 years. FIRE wasn’t a “thing” back in 2006, but that’s been my goal since the first sentence of this blog.

We naturally are further along in that journey than some younger readers who may be just starting. Many of those readers are saddled with huge student loans we didn’t have to deal with. If you are one of these readers, I hope you won’t be discouraged by some of the numbers above. I didn’t start many of these graphs until year 10 of blogging and early retirement planning. Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 15-20 years.

How was your month? Let me know in the comments.