Lazy Man and Money

Lazy Man 2022 Goals (March Update)

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New Year's Resolutions

I created my New Year’s goals very late and it’s time for the first update. Last year I tried to update every 6 weeks or so, but I forgot for a long stretch of about 20 weeks in the middle of the year. Setting goals is useless if you don’t review them often enough. Fortunately, I was able to squeeze a lot in at the end of the year.

So let’s check in where I am now. As I write this it is March 7. About 18% of the year is over. So anything better than 18% is on track to be completed.
Here’s my updated spreadsheet:

Lazy Man Goals March

Money Goals

Make $70K of income

My income goals are going quite well. This is a little surprising because the year always starts slow. I pick up steam in the summer months. Dog boarding becomes more popular as people go on vacation.

Save Money for Wife’s Retirement

We haven’t made any progress in saving for my wife’s retirement this year. That’s… not great. In January, we were paying off the work to finish the basement. In February, we booked some of our travel for the year. So far, in March, we have the summer camp expenses and private school deposits for next year’s enrollment. I think in April, we may write some checks for Roth IRAs. This might be a tough goal to hit for the year.

Business Goals

KidWealth.com

I’m only about 2% of the way to my goal of 50,000 page views this year. That’s not great, but I’m optimistic about how things are going. I hired a social media person so there’s a presence on Facebook and Instagram. I added a newsletter which wasn’t easy because I used a cheaper solution rather than pay huge prices for Mailchimp or Aweber. I’m doing more work on the design and it’s about 70% of where I want it to be.

My goal was to have 75 articles published by the end of the year. That’s roughly 1.5 a week. I have 14 articles published. I would have had more, but COVID went through our house and I lost a couple of weeks of working time.

My only hope at getting to 50,000 page views is if I grow the website’s traffic at 60% each month. It’s easier in the early stages, but as the numbers get bigger, it could be too much.

Content Audit/Article Refresh

I’ve made no progress in refreshing articles for Lazy Man and Money. Managing two blogs is a lot of work. I’m more likely to do a content refresh on Kid Wealth. Sometimes, I have so many things to add to an article that I just have to end it early. My thought is that I can always bring the article back and refresh it with the rest of my ideas in a month or two.

Look into Dog Training

I haven’t looked into dog training yet.

Personal Goals

Fitbit - March 2022

Lose Weight

I’ve lost about 10 pounds this year! I’ve never consistently tried to lose weight, but for some reason, it’s sticking now. We’ve been going out to eat a lot less than in the past. When we do, I try to eat only half my meal. Even then it sets me back about a day’s worth of progress.

The upcoming trip to Puerto Rico is going to be difficult. My best hope is that being active balances eating all the great food.

I’ve got about 7.5 left to get to my goal. Of course, those will probably be the tougher pounds.

My body fat percentage started the year at around 27.5 and it is now around 25. That’s good progress. I’ve gotten below 25% and hit my goal of 24% a few times.

Drink Less

I guess I felt strongly enough about drinking less that I completed “drink zero.” I’d say that’s why I’ve lost the weight, but I had already lost half of the weight when I set this goal.

Make a Bucket List

I made no progress on my bucket list.

Programming with Python

I spent a few hours watching YouTube clips about Python. That’s less progress than I would like. I was spending so much time getting KidWealth into shape that I couldn’t make any more progress than that.

Family Goals

Get Organized

My wife carried the baton on this one. She hired an organizer who is training with Marie Kondo (or her method). The time she’s come by hasn’t synced up well with my schedule. They are doing well. I’ve pitched in a little bit organizing some small areas about once a week.

I need to learn how to sell items on the Facebook marketplace. If I can do that, I can declutter a lot of the garage. We still have some items like a lightly used double stroller that has value, but we haven’t found anyone looking to buy it yet.

Travel Four Times

This year, we are going to Puerto Rico in March. We should be there now while you are reading this. However, as I’m writing this section, our flight down there got canceled and rescheduled a couple of days later.

I’m very excited if it works out. I’ve only been there for one day on a cruise layover and it wasn’t enough. It has fewer COVID travel issues for us because it is part of the United States. However, it has its own culture. As much I’m going to enjoy it myself, it’s more important for me that kids get to experience it. They’ve never been anywhere where Spanish was a major language.

We’re also looking to travel to Block Island (our staycation), Hershey or Iceland (we don’t know which), and Aruba (which we might not do either). This goal of traveling four times is in jeopardy because getting to Puerto Rico was a mess.

Parenting Goals

We’ve got the kids in a lot of things… probably too many. Most days they’ve got somewhere to be after school whether it is karate, a team sport, drums, boy scouts, or something else. We finished off skiing and snowboarding for the year.

YouTube Channel

We’ve done nothing in this area. We haven’t even put up a bad video.

Drone Flying

The weather isn’t good enough for flying drones. For now, the kids will just have to stay addicted to video games – LOL.

Computer Programming

I got them started with Tynker.com a bit last year. They didn’t love it. I could give it another try this year. Maybe with my Python plan above, I can get them involved in that.

They’ve each looked at a computer programming book, so I’ll take what I can get for now.

The best chance is a local Lego robotics group, but it doesn’t start back up until September.

Specialty Camps

We’re in camp sign-up season now. We’ll see how it works out soon. So far we’ve got theater and sailing camps booked. Sailing is such a Rhode Island thing. Camp is a lot different than when I was a kid. It is also a lot more expensive.

Final Thoughts

This was a very successful last 6 weeks. I didn’t make progress in all the goals, but I’m doing well in the important ones. Income, health, travel, and Kid Wealth are going reasonable well.

The Three Components of Stock Market Return

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I was reading an article in Kiplinger’s Magazine something unusual caught my attention. I haven’t seen it talked about very much (if ever) in personal finance circles.

Did you know there are three components of stock market return? If you invested $100 in a stock index and it is up to $120, it’s always because of one or more of these three things. This can be very helpful in looking at how the stock market has performed in the past and might perform in the future.

The Three Components of Stock Market Return

1. Dividends

The easiest component to explain is dividends. Many companies pay out dividends as a way to share profits with investors. Some investments like Real Estates Investment Trusts (REITs) pay investors almost all their profits in dividends. It’s not unusual to get checks each year that add up to 8-10% of what you invested. In these cases, the other two components that I’m going to cover typically don’t contribute much.

There are also companies, often tech companies, that pay no dividends at all. With these companies, you are hoping that the other two components work to make your investment grow in value.

Finally, there are companies in the middle. They pay out a little dividend, but they also benefit from the other two components. Most companies fit in this range.

Dividends are usually the smallest component of the three. Overall, they don’t change that much.

2. Price-Earnings Expansion

Seasoned investors recognized that heading and know it’s about Price/Earnings Ratio (or P/E). For those who are newer at investing, this is the stock price divided by the company’s earnings. Generally, you want to pay as little money (low stock price) for the most amount of earnings. That way the company can pay out bigger dividends or use those big earnings to invest in new businesses that grow.

Back when I started investing in the mid-1990s, the average P/E ratio was between 15-20. During the internet investing craze around 2000, it jumped to 43, before the stock market crashed – and it went back to about 15. In late 2020 it was between 35 and 40. Recently, it’s come back down to around 25 as companies are making more profits and the stock market has gone down a bit since the start of the year.

When the stock market in the internet craze went up a lot, people made a lot of money on price-earnings expansion. Those were craze days when Amazon was losing money and people were investing in Pets.com because they had a cool sock puppet. Remember when Webvan blew billions of dollars trying to set up a grocery delivery service – clearly that was an idea that would never catch on, right? My roommate would joke that it should be called Amazon.org. I could give examples all day.

Back then many of those tech companies didn’t make real earnings. Investors lost patience and the big gains in the stock market disappeared in the crash. The P/E expansion from 15 to 43 when back down to 15. If you happened to sell at the height of that expansion, you would have made a great profit on your investment. In a related thought, I want to borrow your crystal ball.

Recently, the P/E got to 40 again, but the market hasn’t crashed. It went down about 10%, earnings went up, and the P/E is still a little high at 25. One of the reasons why the stock market is up is simply because people are willing to pay a higher price (25 P/E) than typical (15 P/E). Instead of the bubble bursting like in 2000, it feels like the air is getting let out a little slowly.

3. Earnings per Share Growth

Remember that Amazon.org story for the last section? It seems like Amazon decided that it would rather make money. They’ve done a tremendous job of it over the last 20 years. If you were an investor you didn’t see the P/E expansion. In fact, the P/Es were very high when it was just barely turning a profit. Instead, the explosion in earnings has meant that the P/E has gone down. People are willing to pay a much higher price because they are getting great earnings.

Amazon is also an example of a company that doesn’t pay dividends. If you have been a long-term investor in Amazon you’ve made a lot of money and probably aren’t that worried about not getting dividends.

Putting the Three Components Together

What happens when we take all the components and combine them? Dividends are important over the long run, but they don’t significantly move the market.

The other two things, P/E expansion, and earnings growth move the market. When the P/E is above 40, it’s a long shot to expect further P/E expansion. It seems more like to expect the P/E to go down towards its norm between 15 and 20. That would cause the market to go down and you to lose money in your investment. At a P/E of 25, the stock market isn’t too high right now. I could see some P/E expansion or some P/E contraction. The P/E may also not move at all. My best guess is that the market isn’t going to skyrocket from P/E expansion where it is now.

On the other hand, companies are doing well with earnings. I don’t have a good handle on whether they can continue to do better. The United States Gross Domestic Product is very good, so maybe corporate earnings will continue to go up.

As I saw the P/E of the general market get high, I decided to be more defensive. I bought iShare’s HDV, which is a high-dividend ETF. It has a lot of household names that make money because people need to buy their products and services. It also has a P/E of around 18 – historically it is very average and more likely to expand than contract in my opinion. Over the last 6 months, the Vanguard’s Total Market ETF (VTI) has lost about 7%. Over the same time, HDV is up 7%. Getting defensive has turned out to be a great move lately.

Once I started to break down investing into these components it got a little easier for me where things might be headed as far as the return on investment goes, and adjust my decisions accordingly. I think it’s important to note that I didn’t sell and exit the market. I simply moved some of my money to a place that I felt would work out better given the valuations and trends.

Should You Max Out Your 401k?

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Should you max out your 401k?

I was reading Joe’s Udo’s Retire by 40 article asking, “What if you always maxed out your 401k? The first question that popped into my mind was, “Should you even max out your 401k? I used to think you should definitely max out your 401k if at all possible. Now, I feel the opposite. I don’t find myself changing my mind on too many things. So how did I get here?

Can You Max Out Your 401k

When I started as a software engineer in 1998, I was making around $34,000. I lived with two roommates and drove an Oldsmobile Delta 88 that my mother passed down when she got a new car. I could live fairly frugally.

With those circumstances, I was able to max out my 401k. Back then the maximum was around $10,000. I was even able to contribute $2,000 to my Roth IRA. That was a lot of saving back then. It also helped us have the potential of a great retirement income. At least a lot of it was pre-tax money, so it didn’t feel like my paycheck was that much smaller.

Times have changed. It’s nearly 25 years later. The 401k maximum contribution now is over $20,000. The cost of living is a lot higher. I didn’t have student loans, because I had gotten a scholarship. That seems very rare today. Rents are much higher now than they were then. Good luck if you want to put away money for a house – getting a 20% down payment seems out of reach nowadays. Used cars and food are much more expensive due to the inflation we’ve seen.

It’s not a pretty picture when you look at how much you’d have to max out your 401k after all that. Also, consider that in almost all cases, it would be wiser to max out your Roth IRA of $6,000 first.

The good news is that you’d probably make more money. The bad news is that it might not be too much more. As a software engineer, I would have probably done well in either era, but if the median salary in 1998 was ~$38,000. Today it isn’t that much more, ~$44,000.

Maybe as you get older and move up the corporate ladder it would seem easier to max out your 401k. In some time, you’ll probably have a spouse, which is great for splitting expenses and growing income. However, there’s bad news. You may want to buy that house and you may have kids coming. It might not get easier to max out your 401k.

If you get through all that, you are ready to ask the real question:

Should You Max Out Your 401k?

For the longest time, I believed that if you could afford it, the best plan was to max out all your retirement options.

Now, I think very differently.

We maxed out those retirement accounts whenever we could. The only problem is that now, at age 45, it isn’t easy to get that money back out to retire early. Some bloggers have detailed a lot of ways and they work for a lot of people. The main premise is that you’ll be using the money in the retirement to fund your entire retirement. In that scenario, you can get a lot of money at very, very low tax rates. It makes a lot of sense.

However, we aren’t normal because my wife has a pension. I also have a couple of side businesses that I’d do no matter what. So when we try to get money out of those retirement accounts, we’re starting at a higher tax bracket. I’m not sure it is any better than the tax bracket where I saved the money. I’m sure that many of you don’t have pensions, but I know a lot of people who continue to earn an income in retirement.

Furthermore, when I was putting money in my 401k, the investment options were… not great. Some of the funds had fees over 1%. Fortunately, I knew how to look for expense ratios and did the best I could with the options available to me. I’ve heard those fees are better now. I hope so.

In hindsight, I may have been better off just putting the after-tax money in a brokerage. Maybe I could have bought dividend stocks and held them for a long time. Then I’d awesome qualified dividends that would be taxed at around 15%. That’s a good tax rate compared to the bracket we may be in during retirement.

The biggest benefit to maxing your 401k, in my opinion, is that it is forced savings. You don’t need to save the money afterward and risk spending it on mountains of Swedish Fish. You never had the money in the first place.

I’m going to suggest that maybe you should be careful about maxing out your 401k. Obviously, at some very high-income levels, it may be fine. At these levels, a Roth IRA isn’t an option. At the income level of the vast majority of people, I’m not sure it makes sense to max out your 401k. I think it’s better to max out your Roth IRA and then maybe do half the max of a Roth IRA and half of after-tax directly in a brokerage for investing in safe index funds.

What do you think? Does maxing out a 401k make sense for more than a few outliers nowadays?

Kosmo’s 2021 Year in Review

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Kosmo’s back with an update over the last year. I’m hoping to have mine for you early next year when I finish with the numbers. Have a great New Year!

I know what you’re thinking. Year in review? Isn’t that just a scam to get paid for writing the same content twice? Of course not.

COVID, COVID, and more COVID

COVID dominated the news cycle in 2020 and still hasn’t released its hold. I come from a large family (eight kids) and basically, all my siblings have had COVID affect their family to some extent. One sister had it about a year ago and is just finally hitting her stride again. Another sister had it recently and now randomly smells smoke when there is none.

My daughter tested positive about a week ago and is a few days away from being able to return to normal. At this point, mild symptoms.

After she tested positive, the rest of us got tested at a drive-through clinic a few minutes from the house. We arrived at our appointment time and were done within minutes. My son, wife, and I also had a subsequent self-test. We dropped it off at the state hygienic lab last night (also just a short drive away). We got the results this morning – still negative. Great testing process in both cases.

New job

I’ve written many articles about my new job, and I won’t rehash all the details. The work has been very interesting. I’m on nine projects a the moment, with business partners that include analytical chemists, CPAs, and vice presidents. It’s rare that I don’t learn something in a meeting. I just got assigned a project this week that has the CEO’s son as the primary stakeholder.

I was in the office a handful of times between January and June before returning on a normal basis. Normal means two days in the office most weeks. I’m not a morning person, so rolling out of bed at 6 AM to drive fifty miles isn’t my idea of a fun time, but I discovered a McDonalds off the interstate that has great bacon, egg, and cheese biscuits and an efficient and friendly staff.

My biggest work failure of the year was an attempt to recruit a former colleague to come to work for my employer. The position interested her, and she would have been a great fit. In the end, she had to withdraw for personal reasons. I understand and respect her decision, but am disappointed that we weren’t able to add an employee of her caliber.

School

My kids spent the 2020-21 school year online. They did very well academically. This year, we decided to send them back. They’ve continued to do well academically, with my daughter improving from a 3.85 GPA in 7th grade to a 4.0 in the first trimester of this year.

My son (6th grade) had a bit of a rougher adjustment back into the social environment of school after a year off but is also excelling academically. He has plenty of brainpower, but I think we may have an uphill battle getting him to actually do all the work instead of just coasting.

Vacation

We took an actual vacation this year, returning to Door County, Wisconsin. After another pleasant stay in the peninsula, we are taking tentative steps toward the possible purchase of a rental/vacation/retirement home. Financially, we’re in a position where we can handle a decent down payment and could even swallow a few years of losses, in a worst-case scenario. Realistically, we should be able to make a bit of money on a property, even though we’d need to hire someone to manage it. We’re not trying to build a real estate empire; we’re just trying to get other people (renters) to pay for our retirement home.

Sports

I’m a proud alumnus of Iowa State University. This year, the Cyclones were coming off a shockingly good 2020 football season in which they won the regular-season conference title outright. They ended this season with a disappointing 7-5 record, with a number of frustratingly close conference losses, plus a loss to the damn Hawkeyes. Star running back Breece Hall had another outstanding season and will forgo a year of eligibility and enter the NFL draft.

The Cyclone basketball team won some games last year. Two, to be exact. After ending the season on an eighteen-game losing streak, the coach got fired. A new coach came in and took advantage of relaxed transfer rules to completely remake the team. They have emerged as a defensive juggernaut and have risen to #8 in the nation at the time I’m writing this. We do have some difficult games looming.

My main sport is baseball. There’s currently a work stoppage due to the collective bargaining agreement expiring. It’s not apparent to non-fans yet, since it’s the off-season. If the stoppage carries over into the season, it will be a dreary spring.

Finances

Our finances are, honestly, pretty boring. I’m 46 years old, and our home mortgage is roughly 25% of our home’s equity. Other than the possible purchase of a rental property, the largest expense looming on the horizon is college for the kids. They are in 8th and 6th grade, and we’ve been funding 529s for them since they were in diapers. Nonetheless, there’s the concern about exactly how much college will cost, and how much of the cost we should have them pay. It’s a more difficult question for us than it was for my parents. (Editor’s Note: see How Much Do I Need To Save For College) For my parents, the obvious answer (and the most fair to my siblings) was that I needed to figure out how to pay for college on my own.

Our retirement accounts are invested in fairly boring date-targeted funds, and we have some additional funds invested in an equally boring index fund. You’d fall asleep going through our finances, but we’re steadily adding to our net worth every year. This is partly due to boring investing and partly due to living well within our means.

2022

I’m looking forward to seeing the end of COVID in 2022. It has been a rough two years for everyone – financially, emotionally, and physically. Omicron is on the rise as we head into Christmas, and the research has been unclear. It’s probably less serious than Delta. Maybe less serious? I’m hoping that we finally emerge from the other side, into a world that is more like 2019 was.

How was your 2021 – and what are you looking forward to in 2022?

Passive Income Update: October 2021

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Passive Income Pyramid
My Passive Income Pyramid

It’s almost turkey season, but before we get there, I need to take a last look at October and see whether it was a financial trick or treat. Rather than jump right in, here’s a little personal update of the month.

Usually, I have a ton of updates about what we did each month. This always comes with lots of pictures. However, this month was a little different. When I went through my phone’s pictures, there wasn’t much. We had a lot of dog boarding this month. That isn’t different than the summer, but it’s concentrated on the weekends when most people travel. During the week, we are busy with work, kids’ school, and after-school activities like karate and Cub Scouts.

We did have a few Halloween events. The state zoo had its annual Jack-o-Lantern Spectacular, which features thousands of carved and illuminated pumpkins. This time we went on a special night for the Boy Scouts and were able to get a nighttime, close-up visit with the animals while they were in their pens enjoying dinner. The kids thought it was a special night.

The kids’ school also has had great Halloween parties in the past, but those days are over. Before COVID they realized that a Halloween party can’t be fun for both the pre-school kids and 7th graders. COVID finished off any chance of having the same kind of party. Instead, the parent’s association put together a Halloween Scavenger Hunt that involved going to volunteer houses around the city to solve clues and get candy. It worked out well.

That’s enough of the personal stuff… let’s start the Passive Income report. I used to call this the Alternative Income Report because some of this income has an active component to it. However, that idea isn’t catching on and 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.

The way I calculate these numbers requires that little explanation – it isn’t intuitive. I do things a little differently to show the journey. For example, we don’t have real passive income from our rental properties right now. We still have mortgages to pay off. Instead, I calculate the percentage of equity we have to show where on that journey we are. Each month, you’ll 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. When it comes to calculating the percentage of rental income, I take the rent (minus estimated expenses) and multiply it by 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 of you splitting the profits at the end 50/50.

Lazy Man’s Passive Income

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. They are more passive because I can make money even when I’m not immediately tending to them. I’m writing this while boarding 4 dogs right now. I leave real estate and investment income as their separate main sources of very passive income.

1. Blogging + Dog Sitting Income

In case you haven’t been following this throughout the year, here’s a brief update on dog sitting. January through March – pandemic – no travel – no one needs dog boarding. June through September – vaccines – everyone needs dog boarding for their pandemic dog while they catch up on a year of missed travel. In September, I made 25% less than August, but it was still twice the income of our biggest month outside of this summer surge. This was expected because kids are back in school and families are traveling less. It’s a seasonal business that I know well…

… or at least I thought I did. October is usually a down month for dog-sitting. Not this year. Dog sitting income was up 24% from last month almost reaching all-time highs to become the second-best month of the year.

In the past (and above), I have written that dog sitting is passive-ish income, which is why it is on this report. When it is one dog a day on average, it is passive. With three dogs on average, it is closer to a full-time job. The dogs compete for attention. Coordinating schedules for drop-offs and pick-ups with other dog owners and Meet and Greets takes a lot of time.

It looks like dog-sitting is going to be busy going forward. November’s bookings are strong enough to match October, but I’m traveling for a few days and we’re taking limited dogs over Thanksgiving.

That’s a lot about dog-sitting, but what about blogging? Blogging income rebounded a bit, but was starting to taper throughout the month. Fortunately, I had a good start with advertisers from September who paid in October.

In September, “dogs and blogs” combined for a total of $5,326.58. In October, it was:

Total Blogging + Dog Sitting Income: $6,520.55

I think it’s important to put this number in a little context. The average of this for Oct 2018, Oct 2019, and Oct 2020 is $2,257. I’m doing nearly 3x better and have an extra $4000 to spend and invest. I will have to start making changes to the report soon because it isn’t fair to count this dog-sitting as passive income.

My kids help with the dog sitting. My 9-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. My 7-year-old is good too, but it’s more of a work in progress. This help means that 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.

Someday, I want to get them more involved in blogging, taking pictures, and things like that. During school, they have too much to keep them busy. After school, there’s homework, becoming mini-ninjas, scouting, and sports fill up their days.

(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

The huge housing market surge seems to have settled down. For the last couple of months, Zillow’s estimates have been very consistent. This seems a lot healthier than the jump of 15-25% that we saw earlier this year. We continue to pay down the mortgages. Typically that’s about $2000 a month. For the last few months paying down the mortgages has been the biggest gain.

We went from 70.93% to 71.41% ownership of the equity in our properties. We are only a few years away from getting real profits from the rental properties.

If we owned the rental properties with no mortgages (100% of the equity), I calculate that, after insurance, property taxes, condo fees, and estimated condo maintenance we’d make about $3,400 a month. That number represents our net gain.

If you multiply our expected net rent by $3,400 by the amount of equity we have (i.e. where we are on our journey to 100% equity ownership), 71.41%, you get $2,428 in estimated monthly passive income. That’s a small gain of $16 from last month, but slow and steady wins this race.

When I started tracking this (January 2017), we only owned 36.4% of the properties and the properties had lower rents. The math worked out to $1,174 back then. So in almost 5 years, we’ve seen that number more than double. That’s the power of 15-year mortgages.

In about 5 years from now, the ratio will grow to 100% of that $3,400 rent. Except that rent should be closer to $3700 in the next year – our properties are way below market. Since rent is inflation-resistant (we can raise rents as costs of living go up), we don’t have to factor in inflation like other investments. So we can think of it as around $40,000/yr. of income in today’s dollars buying the same value 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 $2,412.

Total Rental Property Income: $2,428

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. For example, HDV is currently paying a 3.75% yield. It could also come from simply holding strong companies that have a long history of dividend growth. There are some income investing ideas here. We can also look at making passive income with Dividend Kings. If we wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get a 4-5% 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.)

The markets reached new highs yet again. I feel it can’t continue, but it does, so I guess I better enjoy it while I can. I had some individual stock picks that didn’t do well, but since most of our investments are in index funds, Mr. Market carried us higher.

We continue to get a profit-sharing check since I bought (a lot of) a company. The business was almost ideally positioned in this pandameic due to its virtual nature. 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.

Total Dividend-ish Income: $3,945

Last month, we had a drop down to $3,786. This month we’re enjoying another all-time high. When I started tracking this number in 2017 we were at $1,180/mo. Our money is working hard to multiply, especially because we aren’t adding much to the investments. Instead we’re focusing on saving money for my wife to retire.

Annualized, this monthly $3,945 is $47,340. If our mortgage was paid off, we should 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 probably let this investment continue to compound for another 14 years until we are age 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. We are going to see an estate planning lawyer soon and we may look at tax and financial professionals soon.

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 as well. I’m too tone-deaf to have a rockstar music career, but I may write a book someday. This is important to separate from the dogs and blogs income at the beginning that takes some active work to keep up.

The big growth this month comes from the stock market. Real estate didn’t move too much. 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 FIRE folks 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 a while. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Our own freeloading dog (LOL) gets special walks along the beach. He dragged me in the ocean here.

Break: This month in COVID

This section has been about the state of COVID for a while, so it should have its own section. Delta looks to have peaked, but cases aren’t going back down to the summer levels as I expected. My wife got her booster last weekend and I got mine a few days ago. Our kids got their first shot now that they are eligible. I feel confident that our family is in a good position for a while now.

I think we can win the war against COVID if we can convince everyone to fight the battle. We have safe, super-effective, vaccines. We should be getting cheap ($12) or free rapid tests to prevent the spread. Pfizer has a pill that seems to reduce hospitalizations and deaths by 90%. (Merck’s pill is already approved, but it’s “only” at a 50% reduction.) The pills have been tested on people with risk factors, but they should even better when no risk factors are involved.

It feels like we have, or will have, multiple layers of protection like an onion.

Now… back to the month in passive income finance.

Very Close to Passive Income: $6,373

Last month it was $6,198, so this is a very good gain.

This would be over $76,000 a year of passive-ish income. What’s better is that there would be no need to touch the investments themselves. We wouldn’t have to sell stocks for living expenses. We wouldn’t have to get a reverse mortgage on our home. Property maintenance and property taxes for rental properties are already factored in. We would still have all the underlying assets (property, stocks, etc.) and be able to pass these on to the kids for them to build on – unless we choose to draw them down for more fun, charity, or other spending.

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 the profit-sharing check), because the money isn’t liquid. We don’t feel “rich” by any stretch of the word, even though we are relative to many people’s circumstances. We have gained almost $4,000/mo. in passive-ish income in almost 5 years. I used to wonder if we can get to $8,000/mo. in passive income by the start of 2025. A year ago, it was a stretch goal… now it feels like a certainty unless we have that major crash.

Final Passive Income

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

Passive Income: $12,893.55

Last month it was $11,524.58. I thought that I was done setting records until next summer’s dog sitting season. I started the year thinking that this was a race to the bottom as “dogs and blogs” weren’t working and income was going down and down. Even though this is less passive with all the dog sitting, it’s great to have real earning power. When “dogs and blogs” aren’t going well, the passive-ish income can still keep this number from getting too low.

I had set a goal at the start of the year for this to average $8,000 for the year, but I honestly didn’t think it was possible. However, it’s over $10,000, so I’m going to consider this battle won.

Climate change brought us a couple of downed limbs this year. This tree damage broke our fence and is going to set us back some significant money. Insurance paid for the clean-up – I’m not a fan of using chain saws.

This ~$12,900/mo. income is almost $155,000 a year. That (hypothetical) annual income for writing on a blog, taking care of dogs, and investing is very nice. However, this amount of dog care isn’t something that I want to continue over the longer term. If we could manage 100K from all these sources we’d be doing quite well – 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 the last year and a half 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 day job of bread-winning pharmacist income, her vested military pension (more passive income when she retires), or the freelance work I’ve been doing over the last few 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 the flexibility gives me the time to stretch almost every dollar in almost all our spending. It also gives me the flexibility to bring the kids to a bunch of events.

I love two things about the graph below. First, there’s a solid trend of the numbers staying high for several months now. Second, it doesn’t dip down too far. It’s been above $6,000 for a while now. It seems safe to say that $7,000 or $7,500 should be considered the new floor.


(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.

We saw our net worth drop in September, but it bounced back in October. It jumped up 3.12%. For the year overall, our net worth is up 28.19%. Thats’s the most our net worth has gone up in one year since 2013 when I started keeping meticulous net worth tracking.

Recently for something new, I decided to share our liquid cash. I’ve been tracking it for some time, but never thought to share it. Many other bloggers break down their income and expenses in great detail. I’m too “Lazy” for all that, even if my credit cards reports can do a lot of it. Looking at our liquid cash is a way to roughly gauge the bottom line, income minus expenses. In the past, we haven’t focused much on this because we’ve been investing that money. However, our focus now is to build enough cash so my wife feels comfortable retiring. Our liquid cash went down $7,412.09 this month. We have some rent checks that haven’t come in. We had to shift some of our liquid cash around this month to work with that. We should work on our spending, but with the holiday season that might not happen.

It’s important to realize that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 15 years. FIRE wasn’t a “thing” back then, but it’s in the news a lot now. We naturally are further along in that journey than some younger readers who may be just starting it – especially ones saddled with huge student loans. 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 15 years.

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. I decided that it does make sense to include it. She could have earned more in 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. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

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