It’s a little before the middle of the month, so I’m a little earlier than usual to review October 2020’s passive income. Many other bloggers get their review published on the first day or two. I can’t do that. I like to wait until the tenant checks have come and our mortgage payments are deducted from our accounts. Around the 5-7th of the month, our checking accounts seem to stabilize with all the typical big bills paid off.

Everyone knows that this year’s Halloween was a little different. As you’ll see in the pictures here, the kids still had a good Halloween even though it was socially distant. Most all the neighbors left out bags of candy. The Navy base had a walkthrough of Halloween displays with chutes of candy. The kids got to go on a Cub Scout overnight. They had a karate duel. We had the first snow of the year. We went to a farm for cider donuts and then learned to make them at home with a Raddish monthly kit (review coming eventually). I introduced the kids to Stratego, one of my favorite games growing up. I like the vintage game, which says it’s good for 10 to adult, but I think most 6-year-olds can probably handle it.

As for the adults, we were focused on completing the 1031 exchange, buying our new investment property. My wife was “virtually deployed” to help with the COVID response. I picked up a little more contract work. I did more work cleaning and decluttering the garage and basement. At my current pace of a few hours a week it may take all winter (or longer), but I don’t mind. I like having something that I can see slow, steady progress with.

I find myself taking more pictures of events so that when I review the month, I can realize all the things we did. The individual days go by very fast. Typically the morning is rushing the kids to school. The early evening is picking them, making dinner, getting their homework done, doing karate/boy scouts, etc. I think most families are like that though. There’s a lot of routine, which works well for us. On the weekends we add a lot of random events in.

That’s enough lead-in… let’s start the Passive Income report. I used to call this the Alternative Income Report, but everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions.

The way I calculate these numbers requires that long explanation – it isn’t intuitive at all. The reason why I do things a little differently is that this catalogs a journey. For example, we don’t have passive income from our rental properties while we are paying down their mortgages. Instead, I calculate the percentage of equity we have to show where on that journey we are. Each month you see that the bank owns less and we own more. When we get to owning 100% there will be no mortgages and all that rental income can be used for living expenses.

Lazy Man’s Passive Income – October 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. (I do 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 “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

This just hasn’t been the year for dog sitting. People aren’t traveling so they need me to sit their dogs. We’re getting a few customers each month. That’s very good considering COVID and most families are working and schooling. We’ll have to lower our expectations for 2020. When I get some time, I’ll make some business cards.

We went to a cider donut farm. They were the best donuts I’ve ever tasted until…

The September cooking kit from Radish had cider donut molds and a recipe. Better than the cider donut farm. It seems perverse to talk about “silver linings” to this pandemic, but the kids learning to cook is nothing to sneeze at.

My blog income continued to recover. The core advertising that we consistently have is up, which is very good news. We also got above-average one-time advertisers.

In August, dogs and blogs combined for a total of $1329.27. In October, it was:

Total Blogging + Dog Sitting Income: $1767.85

That’s still below average, but we’ll likely have to live with it until COVID ends or I can create a new income stream. I have some ideas on that new income stream, but it will be January before I get very far with that.

One of my favorite games growing up, Stratego. They had one of the best games I can imagine – the kids’ third game against each other. One had almost all his pieces left, but no miners. The other had his own #1 and #2 and defeated his brother’s spy, #1, and #2 with a flag surrounded by bombs. The brother with almost all pieces had to sacrifice them all until he had no movable pieces.

With dog sitting starting to come back my kids can get back to work and pitch in to help. My 8-year old is so good with dogs at this point. He can feed them, let them out, and play with them in the yard. My 6-year-old is good too. This help means that I can pay them a legitimately earned income (a small 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. I want to get them more involved in blogging, taking pictures, and things like that, but it’s going slow. I have a plan for them to be able to help with an article or two by the end of the year. They’ve also helped clean an investment property. It’s not a lot of work, but it all adds up.

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

We recently sold a condo, but couldn’t close on the replacement purchase in October. It didn’t… our bank created a mess because we were an investment property LLC. Maybe this is a spoiler for next month, but we did close on it a few days ago.

My wife found an awesome ketchup costume for Halloween. The kids reminded me that ketchup is Pikachu’s favorite food. We decided to flip the script for this picture and create Pikachu’s nightmare – fitting for Halloween, right?

As for October’s numbers, we stayed exactly the same as we had in the past. The condos lost a little value and we continued to pay them off.

That moved us from having 60.64% of the equity in our properties to 60.63%. Previously, I calculated that, after insurance, property taxes, condo fees, and estimated maintenance we’d make $3,325 a month. That number because it represents our net gain. I recently updated this with the new property and it looks like we’ll be at $3,387.50 – a minor difference.

Our mattress, at 12 years old needed replacing. We tried a Zinus mattress (that we found for cheap), but it was terrible. We ended up using our old mattress, the Zinus mattress, and a feather bed to create a “Frankenbed.” It lasted a couple of weeks before we broke down and bought one good, albeit expensive mattress. The kids loved Frankenbed and had a night on it to themselves while my wife and I happily traded for their more comfortable beds.

If you multiply our expected net rent, $3,387.50, by the amount of equity we have (i.e. where we are on our journey) 60.63% you get $2,054 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 44 months, we’ve seen the number grow $880/mo. That’s good passive growth in almost 4 years.

It looks like the formula still works with the property switch.

As the years march on, the ratio will grow to 100% of a rent that should net $3,400 monthly after expenses. Since rent is inflation-resistant, we can raise it as costs of living go up, we don’t have to factor in inflation like other investments. So we can think of it as $40,800/yr. of income in today’s dollars buying the same value of stuff in the future. That should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping habits, and military healthcare.)

In the previous report, the rental property income was $2,054. Hopefully, we’ll start putting this number in the right direction as we get a renter in the property.

Total Rental Property Income: $2,054

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure, I make a few dollars if you sign up for it.

At this Cub Scout overnight, the kids accomplished much of the year’s requirements. Unfortunately, I missed much of it to take care a dog (as well as our own.) It was an income of around a $75 and a savings of $75.

On the last snapshot, October, the market was doing great. There was a little dip, but that has mostly recovered. Our portfolio is at an all time high. We’ll see if investments can continue to grow. With COVID cases continuing to rise, there may be another shutdown in the future.

We continue to get a profit-sharing check since I bought (a lot of) a company. The business is doing well. It’s actually almost ideally positioned in this pandemic due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $3,143

Last month, it was $3,010. We are past the pre-COVID numbers. We aren’t far above it, but it’s amazing that we are even close.

The kids continued to advance their karate career. Their sensei pulled out foam noodles for some “combat” training. They quickly learned that they could defend themselves by making their making their target area small (crotching down). That made them go low with their noodly strikes. The 6-year-old executed a perfect jump on a swipe at the legs from his older brother and scored a hit. It was straight out of the movies – I almost fell out of my chair!

Annualized, this monthly $3,143 is $37,721. If our mortgage was paid off, we might be able to live on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this potential income for now. (We can use the profit-sharing check as it goes straight to our checking account.) We’ll let this investment continue to compound for another 15 years until we are 59.5. Then we’ll have to see if we want to tap it or let it continue until we are required to take some of it at age 72.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe I’ll write a book someday.

We had an October snow! Not much of it stuck on the ground, but that didn’t stop the kids from playing.

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t even know if companies can reliably pay dividends anymore. Without customers and profits, many companies have cut their dividends.

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. We haven’t seen any kind of crash yet.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Here we are in month 8 of an unfortunate economic event. Stocks went down a lot, but then went back up. Real estate has held steady. Overall, the plan keeps rolling along, even during COVID-19.

While the stock market is doing well, the real economy is very bad. It used to be terrible, but people are getting back to work and jobs are coming back. It looks like we’ll finally get a president who won’t ignore COVID and hope it disappears. We’ll finally get a president who is going to start to reverse the climate change disaster that sees so many natural disasters ravage the United States.

Very Close to Passive Income: $5,197

Last month it was $5,064. The $5,197 is tied for an all-time high that we hit a couple of months ago.

This would be more $62,000 a year of almost completely passive income. What’s better is that there would be no need to touch the investments themselves. We wouldn’t have to sell stocks or get a reverse mortgage. Property maintenance and taxes are already factored in. We would still have all the underlying assets (property, stocks, etc.) and be able to pass these to the kids for them to build on – unless we choose to draw them down for more fun, charity, or other spending.

Halloween 2020 wasn’t what we thought it would be, but it was great nonetheless.

A trip to the church’s Pumpkin Patch fundraiser. Normalcy is rare, so we’ll take this slice of it and make the most of it.

This “very close to passive income” has grown from $2,354/mo. in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit-sharing check). In a few months, we’ll get to four years of tracking this number, and we may have gained $3,000 in passive-ish income. I wonder if we can get to $8,000/mo. in passive income by the start of 2025 (which will be another 4 years).

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $6,964.85

Last month it was $6,393.27. Things were going in the wrong direction last month, but we’re back up to around our average. I’d like to see this get closer to $8,000 in 2021, but I need a plan for something new. For now, I’ll just be happy that with four different income streams (and two consistent ones), there isn’t much room for everything to drop.

This nearly ~$7000+/mo income is ~$83K+ a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing isn’t half bad. In the long term, $75K would be a lot more income than we’d need – given our necessary expenses for the next 45 years. Of course, those necessary expenses aren’t going to cover all our spending, but it’s a large percentage of it.

As 2020 has proven, you never know what bad news is lurking around the corner. This preparation gives us the financial flexibility to fight it.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last couple of years (which isn’t passive at all). That’s the fuel that drives the passive income engine – it allows us to live well and invest. My income doesn’t match my wife’s, but I’m good at stretching a dollar in almost all our spending.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She’s had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real publisher, but I don’t want to take on the “job” of writing. That’s probably a deal-breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for a while now. Though we are getting close to dipping below that $6,000 mark.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

Like most investors in October, our net worth did very well. We saw it jump by 2.41%. For the year overall, our net worth is up 17.03%. If you didn’t know better you might think 2020 was another boring year – a typical saving and investing plan for us. In fact, growing our net worth 17% in a year might be above average. With the Rule of 72, we’d double our net worth in a little more than 4 years.

Diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be more towards the beginning of their journey. 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 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 10-15 years.

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation 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. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial-based decision on a pension.

I always end this article by asking how your last month went. I know that COVID-19 makes everything difficult and that cases are going in the wrong direction. I have more hope as I publish this than I have had in a long time. Feel free to use the comment space to vent, I try to give a thoughtful reply to every comment I get.

It’s the middle of the month and that means it’s time to review August 2020’s passive income.

August was a mess because our tenants broke their lease and we proceeded to list and sell our condo. We’re trying to do a 1031 exchange which means that if we act quickly we won’t have to pay taxes on the gains. The goal would be to have the property closer to where we live now. Unfortunately, we haven’t been able to identify and move forward on the replacement property.

August was also a time when the kids didn’t have camp or school. In a non-COVID world we would have had at least a week of vacation. We had expected to be able to go to Hershey Park, but COVID numbers got worse and we didn’t want to be in a position to have to quarantine before the kids could get back to school.

We were able to get to vacation again at Block Island. We went looking for the glass orbs that are hidden there as part of a deal with the tourism board. Each kid partnered with a parent and made their own team name, shirts, and flags. Here’s Team Floppy Whale. I’m purposely extending my stomach because the iron-on letters stick on well. It was a tough balancing act for this picture.

You can read how the hunt went as well as how to save money on Block Island.

We also got to do a local beach party/fundraiser, which included s’mores, non-alcoholic beverages, ice cream, and live music. We even got to go to a local water park.

All COVID things considered we had a full month as you’ll hopefully see in the pictures. I’ve read that the pictures aren’t showing up for some users, so if that’s happening please send me a mail. I saw this happening myself once, but then it started working and I have no idea what could be going on.

That’s enough lead-in… let’s start the Passive Income report. I used to call this the Alternative Income Report, but everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions.

The way I calculate these numbers requires that long explanation – it isn’t intuitive at all. The reason why I do things a little differently is that it is a journey. For example, we don’t have passive income from our rental properties while we are paying down their mortgages. These numbers reflect the progress of that journey.

Lazy Man’s Passive Income – August 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. (I do 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 “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

After a few months of zero dog sitting, we’re getting dog requests again. July was an almost half a normal month. August was almost exactly the same as in 2020. It seems like for the first time dog sitting is back after COVID.

Blogging income has been consistently low since coronavirus started. Advertising is down, but our spending, in general, is down too. Few people are searching for information about retiring early. In August it was particularly low as I didn’t pay for some advertisements I placed. Those payments should be coming this month and in October. Hopefully, that will set me up for a record-breaking close to the end of the year.

(My oldest plays with one of the only young puppies we’ve boarded. He was only around for a few hours – just the right about fun with minimum destruction.)

You may have noticed that I hadn’t been writing as much. It was tough with the kids around all the time. Often writing blog posts doesn’t pay off until the future. Also, sometimes an advertiser may make a small change that temporarily negates a month of writing. It’s a little like investing in the stock market. I’m investing more money in the form of time spent blogging, but the stock market could go down and end up losing money. That still doesn’t mean that I shouldn’t have invested that money in the first place.

In July, dogs and blogs combined for a total of $2,407.09. In August, it was:

Total Blogging + Dog Sitting Income: $1995.01

Now that dog sitting is coming back my kids can get back to work and pitch in to help. My 7-year old even went to the animal shelter for camp and came back with so many tips and tricks for training dogs. This help means that I can pay them a legitimately earned income (a small 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. I want to get them more involved in blogging, taking pictures and things like that, but it’s going slow. I have a plan for them to be able to help with a few articles by the end of the year. I need to work quickly though, because once school starts in a few days, it will be hard to get them focused.

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

Once again, we keep reaching new highs in real estate ownership. The value of our properties took a big jump. As with every month, we paid off a couple of thousand dollars of mortgage debt and grow some equity. This combination leads to growth in this area.

The big news is that we lost a tenant due to financial hardship, so this category is going to look a little different going forward as we sell one property and buy another. For August we still collected rent, so I don’t see a need to change right away. I have to think about what I’m doing over the next couple of months during the transition. I’m hopeful that in a few months, we’ll be able to say that this number is moving up nicely with the new property.

My 6-year-old asked for only brown M&Ms and, despite us yelling at him, Newport Creamery made it happen. He wanted to make dirt for his gummy worm sundae creation.

We now have 66.10% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.

If you multiply $3,325 by 66.10% you get $2,198 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 43 months, we’ve seen the number grow $1024/mo. That’s like giving ourselves an annual $12,288 raise until the end of time. It’s a very nice gain from almost 4 years ago.

The change in properties will be a real test of this accounting procedure. We’ll suddenly lose a percentage of equity, but the rent profit should grow. I’m curious to see how it all works out when the dust settles.

(Kids love their boogie boards in the ocean. Hopefully surfing classes will open next summer)

As the years march on, the ratio will grow to 100% of a rent that should be around $3,750 monthly Since rent is inflation-resistant, we can raise it as costs of living go up, we don’t have to factor in inflation like other investments. With the change in properties, we may be more likely to reach the annual $40,000 income. It should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping habits, and military healthcare.)

In the previous report, the rental property income was $2,155. This number always moves slowly as it only changes if one of two things happens: 1) The properties go up in value. 2) We charge more for rent.

Total Rental Property Income: $2,198

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure, I make a few dollars if you sign up for it.

(This one-player Gravity Maze is a big hit with my puzzle-loving 6-year old.)

On the last snapshot, August 5, the market was doing great. It’s only continued to go up from there to this month’s cutoff on September 5th. Maybe the market loves the free money that the government is giving out. Maybe it’s looking forward to vaccines and opening up the country for business. I’m scared by all this, but I can’t deny the math. The market has done very well over the last month. Those last four sentences were actually straight from the last report. I didn’t have to change anything, because the market continued as you probably know. (The market had a set-back after I compiled the numbers, so we’ll have to visit that next month.)

We continue to get a profit-sharing check since I bought (a lot of) a company. The business is doing well. It’s actually almost ideally positioned due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $2,999

Last month, it was $2,958. We were a little past the pre-COVID numbers. Growing $41 over the month is very strong.

Annualized, this monthly $2,999 is ~$36,000. If our mortgage was paid off, we probably be able to live on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this income for now. (We can use the profit-sharing check as it goes straight to our checking account.) We’ll let the rest of this income continue to compound for at least another 15 years until we are 59.5, but hopefully a lot longer.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe there’s room to have a book someday.

(I got the Trolls World Tour movie from Redbox for free due to an email promotion they were running. It had a bonus dance at the end. Definitely a better value than paying $20 when the COVID lockdown started)

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t even know if companies can reliably pay dividends anymore. Without customers, and profits, many companies have cut their dividends.

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. We haven’t seen any kind of crash yet.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

(Every year the kids play on these rocks while we enjoy weekend concerts at the local Navy Base. It’s cheap and fun for all. This year is different with no concerts and eating being an adventure, but they made the most of it.)

Here we are in an unfortunate economic event. Our stocks went down a lot, but then went back up. Our real estate has held steady. A couple of our tenants continue to pay rent, but one couldn’t and chose to move out before telling us. Overall, the plan keeps rolling along, even during COVID.

While the stock market is doing well, the real economy is terrible. No president wants to see six-figure homeland deaths, and an unemployment rate balloon to ~15%. They shouldn’t want to see climate change create millions of acres of fires. The best answer is a bailout of nearly everyone and everything at a cost of several trillion dollars… and it may go up from there. If only the people in political power believed that an ounce of prevention was worth a pound of cure, the United States would be in a much better situation. To make things worse, he doesn’t acknowledge that the United States had the worst response of any country.

Very Close to Passive Income: $5,197

Last month it was $5,113. We are making new highs every month. This would be $62,359 a year of almost completely passive income thrown off investments without ever drawing down on them – no selling stocks or reverse mortgages. We would still have all the underlying assets (property, stocks, etc.) and be able to will these to the kids for them to build on.

(With the New Octonauts movie hitting Netflix, the kids found their love of their old “Gups” that had been collecting dust for 2-3 years. You can see some of the high tech toys I have bought in some of these pictures, but I love when they simply use their imagination.)

This “very close to passive income” has grown from $2,354 in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit-sharing check). Add in stock market growth (of a conservative 4%) and this number could be real, non-fudged $100K/year. I’m especially looking forward to 7 years from now when most of the mortgages on the investment properties (and our primary residence) are paid off. That’s going to be a huge financial swing for us.

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $7,192.01

Last month it was $7,520.09. If not for that invoicing issue, we probably would have had a new record for post-COVID passive income. There’s still some time left this year to reach new records.

This nearly ~$7200+/mo income is ~$86K+ a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing feels like a dream. In the long term, $86K would be a lot more income than we’d need. Here’s what our necessary expenses look like… for the next 45 years. Of course, those necessary expenses aren’t everything, but it’s a large percentage of everything.

(The local water park may not have had the most slides and excitement, but it was enough for a couple of hours – perfect for a 6 and 7-year-old to have a great time.)

As 2020 has proven, you never know what bad news is lurking around the corner. This preparation gives us the financial flexibility to fight it.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last couple of years (which isn’t passive at all). That’s the fuel that drives the passive income engine – it allows us to invest more and live well. This is especialy true since I’m good at strenching a dollar.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real publisher, but I don’t want to take on the “job” of writing. That’s probably a deal-breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for a while now. I thought that it may be tested with the coronavirus, but it doesn’t look like it will be. It’s consistently over $7,000, but I haven’t been able to turn the corner and make it $8,000 for a while.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

Like most investors in August, our net worth did very well. It was a big jump of 2.83% growth. For the year, our net worth is UP 12.10%. If you didn’t know better you might think 2020 was another boring year and a typical saving and investing plan.

(My 6-year who loves to build creates a rock tower at Block Island. He could have probably made them all day.)

Diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be more towards the beginning their journey. 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 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 10-15 years.

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation 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. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial-based decision on a pension.

I always end this article by asking how your last month went. I know that COVID-19 is making everything difficult. I hope that some of it is getting easier. I’m sure that for many the kids going back to school, in whatever form, represents new challenges and anxieties. Feel free to use the comment space to vent, I try to give a thoughtful reply every comment I get.

I know it’s late in the month to review last month’s numbers. I haven’t been in the best mental health state lately. Of course who is nowadays? Don’t let some of the pictures in the article below fool you. There have been some good moments, but lots of time when I feel like I’m just stuck in the mud, unable to move forward with anything.

When I last reported passive income in May things were about as bad as they could be. We were still dealing with homeschooling kids and added systemic racism and police brutality riots. The online community of personal finance bloggers seemed to be destroyed after a number of revelations lead it to be “canceled” by the community.

The bright side was that the nation was opening up and we were down to around 20K new cases in the United States a day. It seems that opening up wasn’t the right plan, as cases per day doubled in June… and they’ve only gotten worse from there.

On a personal level, the kids got out of (home)school, which has helped a lot. We got a chance to take a coronavirus staycation. Here’s a picture of the kids enjoying some s’mores on Block Island:

Our state, Rhode Island, is doing as well as any in the nation, especially for being between the epicenters of NY and MA. We can do almost anything now, but it’s different because it’s all masked and socially-distant. I know that it’s very difficult across much of the country. It’s a strange, helpless feeling. I just want everyone to experience this so that you know what you get if everyone masks-up, tests, and quarantines.

In a lot of ways, we’re very lucky to have the kids at camp. However, I still worry. While we haven’t had a lot of cases, but they are starting to rise a little bit. It’s so hard to look at someone like getting near them would be the end of the world.

That’s enough lead-in… let’s start the Passive Income report. I used to call this the Alternative Income Report, but everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions.

The way I calculate these numbers requires explanation – it isn’t intuitive at all. The reason why I do things a little differently is that it is a journey. For example, we don’t have passive income from our rental properties while we are paying down their mortgages. These numbers reflect the progress of that journey.

Lazy Man’s Passive Income – June 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. I combine dog sitting and blogging into one section of “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

After a few months of zero dog sitting, we’re getting dog requests again. It was only one dog for a few days in June, but we’ve been busy in July.

Blogging income has been down. I can’t do much about it while we have coronavirus. Advertising is down, but our spending, in general, is down too. Few people are searching for information about retiring early. In June we didn’t have the kids at camp. My wife took some time off and we tried to do some staycation stuff. I’m spending almost all my time with the kids until camps start. From 6AM to 8PM, I don’t even try to work. I’m setting up some educational activities, cooking food, doing laundry, washing so many dishes, doing the educational activities, walking the dog with the kids to get fresh air, and fighting through their bedtime routine.

In May, dogs and blogs combined for a total of $2,167.12. In June, it was:

Total Blogging + Dog Sitting Income: $1,804.15

This is the lowest it’s been for the year and yet another reason why my mental health isn’t where I want it to be. I simply don’t feel like I have any control in my life. Again, I know a lot of people are feeling that way.

In the olden days of pre-COVID-19, I would say that dog sitting is great because my kids are old enough to pitch in and help. I could pay them a legitimately earned income (a small percentage of the overall income). This allows them to save money in their kid Roth IRAs, money that they’ll never pay tax on. I’m starting to rethink that because there isn’t as much dog sitting income this year. The kids may play a more meaningful role in the blog going forward.

(The above is our oldest kid who is a natural with our dog. He’s grown up with him his whole life. This is the center of the labyrinth meditation maze on Block Island.)

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

Zillow estimates seem to be finally factoring COVID-19. The value of our properties went down a bit. At least tenants continue to pay us. That’s a load off my mind since we lose money on these properties every month. (We’re accidental landlords, for the most part, making the best of the situation. However, we also have 15-year mortgages in hopes of turning them into an income stream in several years.) As with every month, we paid off a couple of thousand dollars of mortgage debt and grow some equity.

We now have 64.39% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.

If you multiply $3,325 by 64.39% you get $2,141 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 41 months, we’ve seen the number grow $1076/mo. That’s like giving ourselves an annual $12,804 raise until the end of time. It’s a very nice gain from 3+ years ago.

As the years march on, the ratio will grow to 100% of the $3,325 monthly, inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ above. I may need to update that $40,000 number as well – it’s looking closer to $30,000. In either case, it should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping, and military healthcare.)

In the previous report, the rental property income was $2,122. This number always moves slowly as it only changes if one of two things happens: 1) The properties go up in value. 2) We charge more for rent.

Total Rental Property Income: $2,141

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure, I make a few dollars if you sign up for it.

(We still had school in early June. This was part of my overly optimistic “Dad School”, where the kids used technology like this Osmo coding toy. Read my Osmo review here. I haven’t been able to keep the kids doing much “educational” during the summer.)

The last snapshot had the markets coming back. When I took these numbers on July 7, the market was doing great. Maybe the market loves the free money that the government is giving out. Maybe it’s looking forward to vaccines and opening up the country for business. I’m scared by all this, but I can’t deny the math. The market has done very well over the last month.

Last month, we continued to get a profit-sharing check since I bought (a lot of) a company. The business is still doing well. It’s actually almost ideally positioned due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $2,856

Last month, it was $2,798. A couple of months ago, I wrote, “even in a bad-case scenario, we’d be north of $2500.” We weren’t obvious, but we are back there now, with some room to spare.

(I’m up over 400+ days of learning Japanese on Duolingo. I know a number of characters and probably a few hundred words, but I’ve only spent a few minutes a day, so I need to do some “deep learning” time to make it all stick.)

Hopefully, we’ll beat COVID-19 and the economy gets fully back to normal. I expect that it will take at least 2 years and probably a lot longer. However, if that happens, this number will grow even stronger than before. I bought shares of companies at depressed prices throughout the drop.

Annualized, this monthly $2,856 is $34,272. If our mortgage was paid off, we might be able to scrape by on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this income for now. (We can use the profit-sharing check as it goes straight to our checking account.) We’ll let the rest of this income continue to compound for at least another 15 years, but hopefully a lot longer.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe there’s room to have a book someday.

(Kids are staying cool in this $20 inflatable pool. We keep our expectations low and the costs low and we find we are fairly happy with the results.)

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t even know if companies can reliably pay dividends anymore. Without customers, and profits, many companies have cut their dividends.

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. That housing crash may be coming, but for this month it hasn’t happened.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Here we are in an unfortunate economic event. Our stocks went down a lot, but then went back up. Our real estate has held steady. We’re just lucky because many tenants can’t pay rent.

(My younger son plays with an Ozobot – yet another learning to code toy that we have around the house. He loves to draw, so this is well-suited for him.)

While the stock market is doing well, the real economy is terrible. No President wants to see long food lines, six-figure homeland deaths, and an unemployment rate balloon to ~15%. The best answer is a bailout of nearly everyone and everything at a cost of several trillion dollars… and it may go up from there. If only the people in political power believed that an ounce of prevention is worth a pound of cure, we’d be in a much better situation. It would have, figuratively, saved our bacon.

It seems like we don’t know which way things are going to go. Since we are easing up on social distancing, it might go poorly again. Some states are seeing increased problems.

Very Close to Passive Income: $4,997

Last month it was $4,919. We had lost $500 a couple of months ago, but we are just a few dollars off from the highs of March. All things considered, that’s not bad at all.

This “very close to passive income” has grown from $2,354 in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit-sharing check). Add in stock market growth (of a conservative 4%) and this number could be real, non-fudged $100K/year. I’m especially looking forward to 7 years from now when the mortgages on the investment properties (and our primary residence) are paid off. That’s going to be a huge financial swing for us.

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $6,801.15

That’s reasonably good overall for another month of everything being shut down. We’re getting back to our frugal roots, so one could argue that this lower number overall could put us in a better long-term financial position. That all depends if we continue to be frugal after coronavirus, which may not be likely.

This nearly $6800+/mo income is $81K+ a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing feels like a dream. In the long term, $81K would be a lot more income than we’d need. Here’s what our necessary expenses look like… for the next 45 years. Of course, those necessary expenses aren’t everything, but it’s a large percentage of everything.

I always say that you never know what bad news is lurking around the corner, but this gives us the financial flexibility to fight it.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last couple of years (which isn’t passive at all). That’s the fuel that drives the passive income engine.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real publisher, but I don’t want to take on the “job” of writing. That’s probably a deal-breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for a while now. I thought that it may be tested with the coronavirus, but maybe it won’t be after all.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

Like most investors in June, our net worth did very well. It was a slow and steady gain of 1.77%. For the year, our net worth is UP 5.25%. We continue to do something right.

Our real estate value is going down just a little bit. The lesson here is that diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be beginning their journey. I hope you won’t be discouraged by some of the numbers above if you are just starting out. I didn’t start many of these graphs until year 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances).

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation 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. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial-based decision on a pension.

I always end this article by asking how your last month went. I know that COVID-19 is making everything difficult. Feel free to use the comments to vent – it doesn’t even have to be about personal finance.