Happy October everyone! I love October. The weather gets a little cooler, but not too cold. The kids and I are mostly adjusted to the new school year. I have a whole month to look forward to Halloween.

Even though we are half-way through October, it still feels like September. We started the month finishing up our summer vacation at the Cartoon Network hotel in Amish country of Lancaster, Pennsylvania.

The Cartoon Network Hotel is a lot of fun! The kids are stomping on the squares to reveal a Cartoon Network character underneath.

At the end of the vacation, I had lost about 85% of my hearing because my ears were blocked. I don’t want to gross anyone out, but an ER visit and a doctor’s visit later, I was back to normal. It was a very weird week. Since I could barely hear anyone, I felt like Donald Trump’s old Twitter timeline. I could say things, but I wouldn’t react to any responses or feedback that others gave.

After I got back from vacation, I went on a big health diet. I lost 7 pounds very quickly and 3 more pounds throughout the rest of the month. Unfortunately, I’ve plateaued from there. I’m still keeping up with the diet. I need to add more exercise.

One of my meals is often an omelet like this one. Cheese, pinto beans, grilled chicken, and a bit of salsa. It keeps the carbs low while getting in some fiber and a bit of flavor.

My oldest decided to give baseball another chance. He had gotten hit in the face on the first pitch he saw the previous season. We found a softball mask that’s like a football helmet. That give him the confidence he has the confidence he needed.

We went to the annual Cat Video Fest showing at our local theater. I’m obviously a dog person, but it’s fun to watch cats do crazy things and some of the money helps local animal shelters. At the same local small theater we saw Toad the Wet Sprocket. They had 3-4 hit songs in the 1990s. My wife loves them and has most of their albums. I like any alternative music from the 90s.

My local business networking group surprised me with an awesome gift. I created a website and ran the whole technology infrastructure. I volunteered because it’s fun for me to get back into making small brochureware websites. I was also the only person in the group who knew how to do it.

We had a big hurricane watch that cancelled all the local events, but then turned out to be just a little rain. It was extremely windy the day before the big storm was suppose to hit, but we survived without anything major like trees falling. With day off, my wife had the idea of turning our house into to a breakfast restaurant for the day. She created and printed menus and placed them around the table. We circled what we wanted and she made most of it. I helped a tiny bit with the kids and the kids made her breakfast. Finally the expensive cooking camp paid off.

My Kid Wealth website won a Plutus Award. It took less than two years. That’s a lot faster than the 17 years (and counting) for Lazy Man and Money to win one – LOL.

My kids advanced belts in karate. My 9-year-old is now a red belt. My 11-year-old is an advanced red belt. The next step for him is black belt, but it’s possibly 6 months or a year away.

Speaking of the 11-year-old, September was the first month that I’ve been able to call him an 11-year-old. He had a birthday at the end of the month. We threw a party at the local arcade with all his friends. The night of his actual birthday, a new mini golf place opened up. They had been constructing it for 6 months, so it was a treat to have it open on the exact day.

There was a celebratory dance when the cake came out.

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

September is always a tough month for dog sitting. A lot of people are jumping head-first back into work after summer. The kids are back in school. Few people are traveling and need their dogs boarded. I don’t mind that because I need to focus my attention on getting our own kids ready for a successful school year.

Dogs have a lot of here!

Blogging went very poorly in September. I had one advertiser ghost me when it came time to pay. There weren’t a lot of other inquiries.

the bad picture, but it was far away.

That sounds like a lot of bad news, but the combination of the two was still better than a couple of months earlier this year.

In August, “dogs and blogs” combined for $4,478.82. In September, it was:

Total Blogging + Dog Sitting Income: $3,903.23

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

My kids help with the dog sitting. My 11-year-old is extremely good with dogs at this point. He can feed them, let them out, and play with them in the yard. My 9-year-old is also good with dogs. Since I’ve been doing this for 8 years now, having dogs around is just second nature. To them, it’s weird when there aren’t dogs around.

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.

Wearing the big helmet might look a little weird, but when you get a hit in your first plate appearance it pays off. Apologies for

2. Rental Property Income

The real estate market is starting too cool now that summer is over. People don’t want to move while their kids are starting school. They won’t want to move as it gets colder. I don’t expect the market to change too much though, people didn’t want to move before because they wanted to keep their low interest rates.

If you read my earlier reports, I would celebrate when our rental properties were worth more. That’s great for our net worth. However, that might have been misguided. I see so many people being locked out of the real estate market, and it’s hard. We’ve purposely kept our rents low, but the cost of labor and maintenance has gone up, so we need to consider raising them.

Getting pancakes and strawberries cooked to order at Energi Gal’s impromptu bed and breakfast.

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 78.70% of our properties and this month we own 79.11%. This is always a small change, when you look at it as one month. However, it adds up over time. We’ve gained about 4% of ownership this year. Since January, we’ve gained more than $60,000 in equity. The landlord job is paying well, even though it’s not in direct spendable cash.

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, 79.11%, you get $1,754/mo. in estimated passive-ish income. Last month it was $1,745/mo. I remember when that $9 gain would at least allow me to say it covers my Netflix bill.

Total Rental Property Income: $1,754

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.

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. Another option is to sell them, invest the money, and live off dividends.

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 4.16% yield.

Sing with me, Toad, and not-so-dry Sprockets: “All I want is to feel this way… To be this close, to feel the same…”

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 high dividends if we needed to live off the cash flow. A vast majority of our money is in retirement accounts, so 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.

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 was not kind last month. It got destroyed for the first time in a while. Last month, this number came out to $4150, and this month, it was down to…

Total Dividend-ish Income: $3,983

We’ve dropped below $50,000 a year, which isn’t great. We’re even down for the year on this number. The market is going to do it’s thing. It’s times like that I like to look back to January 2017 when I started putting these numbers together. The dividend income then was $1,180/mo. We’re in a lot better place.

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 was going to contact them and see if there’s some way around it. However, I ran into another estate planning lawyer and explained my issue and she said that they minimize the paperwork. I like that. The other place shouldn’t need me to transcribe every holding in every financial account.

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: $3,903.23 – Adjusted to $1,951.62
Rentals: $1,754.00 – Adjusted to $1,403.20
Dividends: $3,983.00 – Remains at $3,983.00

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

Total Adjusted Passive Income: $7,337.82

Last month it was $7,785.41. The numbers continue to go down, but I’m not too worried. The dog boarding and blogging income is always lumpy. I’m expecting it to go down over the next few months. The rental income continues to steadily climb. I don’t expect that to change too much. The stock market is going to twist and turn, but I’m optimistic over the next 12-15 months. The stock market usually does well in the 4th quarter and in an election year.

This ~$7,300 is nearly $90,000 of adjusted passive income annually. It’s just a little shy of the $100,000 that I estimate for our core/necessary expenses. In the next 3 or 4 years, the two biggest expenses, mortgages and education costs, will disappear. That would bring our necessary expenses down a lot. We’ll be able to spend on a lot more fun stuff.

Just one step away from being a black belt. Both kids loved using nunchucks.

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.

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.

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 when we’ll be in a lower tax bracket.

You’d think we’d feel “rich”, but we don’t. Some people tell me that we “won” the money game. I agree and would say that we feel “wealthy”. Our social circle has many generationally rich people. Nearly every one of my sons’ classmates live 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. In my opinion, that’s real wealth.

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

The three-month average in September 2021 was $9,021.72. In September 2022, it was $7,980.81. Now, in September of 2023, it is $8,140.11. You can see there’s a little up and down. A three month average smooths the lumpiness of the dog boarding and blogging. Because dog boarding can be very seasonal, it’s useful to compare the same month over a few years.

I don’t expect a lot of growth in any of these areas unless there’s a significant change. Maybe I will create a new business or we’ll run into some kind of small windfall. Unless something like that happens, not too much is going to change.

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.

We bought this cereal dispenser (affiliate link). I mix Aldi versions of Cheerios, Cinnamon Life, and Cinnamon Toast Crunch. It’s more healthy than most sugar cereals and the kids don’t complain about the taste. I can fill it at the beginning of the week and not think about at least one kid meal.

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 down -3.59%. Ouch. That’s the biggest drop in quite a while. However, for the year, we are still up 7.95%. The steak of hitting all-time net worth highs is over now.

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, our liquid cash shrunk by $36,000! That’s crazy!

We had vacation bills from August come due on credit cards. We also had a big car repair big that was over $4,000. The biggest thing is that I underpaid taxes as I hadn’t been sending the IRS enough money with the increased dog business. I’m an idiot. It would be fair to say that we shouldn’t have had that much liquid cash in the first place.

The spending will probably continue for a month or two. It won’t be nearly as high, but we’re doing a lot of upgrades around the house. My wife is also having a party for her military promotion, almost certain to be the last promotion she’ll get before retirement. It’s like a mini-wedding. Maybe we’ll calm down our spending soon after that.

One of the purchases was a new couch. It deserves its own blog post. Stay tuned.

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.

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.