April is over and I think I can safely say that it’s become my new nemesis. In 2020, the kids came back from their planned March break to start distance learning. I think many parents were traumatized by that experience. This April, my wife was deployed to get vaccines in people’s arms. She led a crew that performed more than 60,000 vaccines in 35 days. It was the longest we’ve been away from each other by three weeks since we first met. I did well with the kids for the first few weeks (it helped a ton that school was in person), but it broke down from there. We had some people try to help, but I think it made things more complicated because I had to manage cleaning and preparing the house before the guest on their visits. The last two weeks were a roller coaster. She’s back now and we’re able to start moving forward again.
(Did you know that April is Military Child month? Ironic, don’t you think?)
Under those circumstances, my goal was to survive the month. Success would be determined by how many fingers and toes the kids retained. (Fortunately, we were perfect in that area.)
The kids started out the month breaking their first wooden board at karate class. They met the Easter Bunny at the military commissary (supermarket). They placed near (or at the bottom in one case) in their pinewood derby for Cub Scouts. They found a bunch of Easter Eggs on the front lawn on Easter morning. We watch all the How to Train Your Dragon movies. They also got into all the Dav Pilkey books (Captain Underpants and Dog Man). We found some tips on how to draw the characters on YouTube, so they spent a lot of time making up their own comic books.
My dog went for a routine vet check-up and ended up getting a cotton swap stuck in his ear requiring a trip to an emergency animal hospital. (He’s fine now.) We came home to a bunch of baby bunnies. You’d think they wouldn’t like living near all the dogs, but they are fast enough to get out of danger. (So far!)
I had big goals like getting some projects done around the house. I got a couple of things done, but not too much. The rest of the month’s story is written in the numbers below. It’s probably the exact opposite of what you think.
This month I don’t have a lot of pictures, because a video conference of the Pinewood Derby wasn’t worth it. Watching movies and reading books didn’t make for photo greatness either. I didn’t want to memorialize my dog’s visit to the emergency hospital either. We have less stuff to do without my wife around (and I have less time to take pictures).
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 – April 2021
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
Blogging income continued to rebound to April. Maybe the economy is getting better, but I got a lot more advertisers that I had gotten in some time. I’m not sure if it’s sustainable yet, but it still feels good to have it come back.
We were surprised by the Easter Bunny at the local military commissary. He gave out candy and a gift certificate for a free ice cream at the local ice cream shop.
We had our best dog sitting month since the summer of 2019. It seems that travel is back – especially during school vacation. Having all the dogs around definitely kept me busy.
In March, dogs and blogs combined for a total of $1,176.09 – the start of the comeback. In April, it was:
Total Blogging + Dog Sitting Income: $3,584.48
That tripling is back to pre-COVID levels! Even if it’s just for a month, it’s a welcome relief.
With dog sitting back, my kids can pitch in to help. My 8-year old is extremely good with dogs at this point. He can feed them, let them out, and play with them in the yard. My 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 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. They get enough school work, homework, and extra-curriculars.
(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’s estimates on the property values continued to skyrocket. In March the properties when up nearly $15,000. In April, they doubled that and went up $30,000. We paid down the mortgages as we always do. Due to the growth, we’ve made over $75K in equity for the year. The housing market is really moving.
It can be difficult to deal with tenants, but I like to think of those equity gains as a salary. The “work” for last year’s $60,000 of equity is pretty minimal. We had to work a little more for the $75,000 this year, but ~$15,000/mo. is very good. Of course, equity isn’t really salary – we can’t spend the money, because it isn’t liquid. Also, it’s can’t continue like this. We’ll enjoy it while we can.
This month we went from 64.56% to 66.15% ownership of the equity in our properties. That’s close enough for me to call it 2/3s, which is a good milestone.
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), 66.15%, you get $2,249 in estimated monthly passive income. When I started tracking this (January 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 a little more than 4 years, we’ve seen the number grow $1000+/mo. It’s almost double. That’s good passive growth in ~4 years.
These bunnies visited way after Easter.
As the years march on (somewhere about 5 years from now), 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 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 $2,195.
Total Rental Property Income: $2,249
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. 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 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.
The market is still doing great. The yield curve issue of a couple of months ago is behind us, but maybe they’ll be coming back. I have done well with my satellite stocks overall, but they’ve been giving up their gains. I feel good to have locked in most of the gains. Now when I lose money with them, I don’t feel bad. It’s always good to play with the house’s money.
Our portfolio continues to hit new all-time highs. I get nervous that the markets were too high. So I continue to execute on my plan to continue to stay fully invested, but moving more money to bonds, i.e. giving my stocks a shave. It was a small move of money from stock to bonds mostly for the psychological effect of being active. The small amounts seem to add up and when stocks dropped last March, I was able to buy in at lower prices by cashing in some bonds that didn’t drop as much.
The annual Easter egg hunt went well. The 8-year-old worked to help his younger brother find eggs and it turned out that they got almost exactly the same number. The Easter bunny’s helper put an odd number of eggs out there, not thinking it would be that close. Since the younger kid had an extra egg, they decided it was fair for dad to have one.
We continue to get a profit-sharing check since I bought (a lot of) a company. The business was 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: $3,700
Last month, it was $3,601. A gain of almost $100 is extremely good. This number rarely moves that much, but slow and steady wins the race. When I started tracking this in 2017 we were at $1180/mo.
Annualized, this monthly $3,700 is $44,400. 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 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 should probably see an estate planning lawyer 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 keep the idea open that I’ll write a book someday.
The stock and real estate markets have been going up and for a long time. COVID dropped the stock market for a short time, but that’s the only hiccup. If you look at the charts, we had a small setback when we sold one property and bought another. It’s taken a few months, but it’s back to new highs.
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 a while. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.
I’m starting to get very encouraged about the future – at least in the United States. Last month, I wrote:
My wife is away shooting everyone in the arm. There are so many more like her – seems like the whole military, not to mention millions of civilian health care workers. I can’t wait to see what everything looks like in 4-6 weeks.
The vaccines are doing their thing and cases are heading down. On April 10th, the US had 68,000 cases. On May 10th, we had 22,000. If we can get everyone who is medically able to get the vaccine we’ll beat this. It may not be 100% gone, but it could get to a point that it is rare enough to not have to think about it.
From a financial perspective, I think we might be past any kind of COVID-19 crash.
Very Close to Passive Income: $5,949.00
Last month it was $5,796. The $5,949.00 greatly extends our all-time high yet again. As you can tell from the chart below, it just keeps moving in the right direction. It had been the stock market driving the gains for a while. However, real estate is starting to roll too. Now they are both working at the same time.
This would be more than $71,000 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 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). We have gained more than $3,000 in passive-ish income in a little more than 4 years. I wonder if we can get to $8,000/mo. in passive income by the start of 2025, another 4 years. That’s a little aggressive, but it would give us something to hope for.
Final Passive Income
When you add up “dogs and blogs” to the “very close to passive income” you get:
Passive Income: $9,533.48
Last month it was $6,972.09. That’s a break-out month! I spent the last year thinking that we’d hit new lows. This month we hit a new all-time high for a single month. With 2/3rds of this coming from passive-ish income that seems to consistently grow, the difference is what I can earn from dogs and blogs.
I’d like to see this average $8,000 this year. I didn’t think it was possible with dogs and blogs not performing, but now I wonder if there’s a chance. It will take quite a bit, as the number has been too low for too many months.
This ~$9,500+/mo income is more than $114,000 a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing is really nice. In the long term, $114K 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 when she retires), 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.
I love two things about the graph below. First, it’s the move up in the last month. Second, it doesn’t dip down too far. It’s been above $6,000 for a while now. It’s good that we are turning this ship around and moving it back in the right direction. I’d like to see $7,000 become 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.
April was another great month for our net worth. We saw it jump 2.91%. For the year overall, our net worth is up 11.05%. It’s very odd to have these kinds of gains when our numbers have been growing for so many years. In terms of dollars, sometimes the monthly gains are more than I’ve made in a year as a software engineer.
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 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 out. 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 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. 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.
How was your April? Let me know in the comments.