Passive Income Update: August 2021

September is here and the kids are in school. That means I should have fewer kids and dogs to care for, which will mean more writing here. Much like the July numbers, the August numbers were amazing because I boarded every dog in the world. We’ll get to that in a bit though. There’s a reason why it’s “personal” before “finance.” Let’s get to the personal part with a life update.

Life updates in this space are almost always positive. To write this section, I go through my phone’s pictures over the last month and I take pictures of the good times. Usually, when bad things are happening, I don’t stop to take pictures of them. So keep in mind that you are seeing a highlight reel and it’s not like everything is great all the time.

This August was so busy with dog sitting my wife ended up taking the kids to some of the events. They went to a local water slide that wasn’t great, so they went to a much better water park a little later in the month. My wife was helping run an event at a golf tournament and brought my 8-year-old. Of course, he won a big basket of chocolate in a raffle. Chocolate is his favorite thing in the world. She also brought the kids on their first fishing trip with her father and they both caught fish. I was a little sad to miss these events, but sometimes it was nice to be have some time to myself have some time with a million strange dogs. My wife works a lot, so it was good that she got this time with them.

The kids continued their specialty camps. My older boy (8-year-old) did another cooking class. My younger boy (7-year-old) did art. The 8-year-old wanted to switch camps at the last minute, so we canceled one and tried another. However, that camp canceled on us (not enough enrollment). With my wife and I were both working, we turned to some of what I call “fun home school“. He did a few worksheets, some Tynker.com programming, and MoneyTime Kids, with some breaks in between for TV or recess. The TV breaks were Science Max on YouTube. (The MoneyTime Kids was also a push for myself to develop Kid Wealth to be ready for official launch.

My favorite art of my 7-year-old. It always makes me laugh. A dragon coming out of another dragon’s eye, but he’s upset because his watch is broken.

We went to the beach a few times – sometimes in the evening for a concert or event, sometimes during the day. We got to the military base’s Officer’s Club a few times. It’s a restaurant with a fantastic view and very, very cheap prices. They had food trucks and fireworks to say goodbye to summer. My wife got us invited to a somewhat exclusive beach club for a pharmacy convention. My 7-year-old got invited to the most exclusive beach club, famous for the Vanderbilts and Astors memberships. It was so exclusive that we couldn’t go with him. He said it was boring as it didn’t have a water slide.

That’s enough of the personal stuff… 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 – June 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

I continue to see growth in the dog sitting business. That’s what happens when everyone gets vaccines and goes on vacation after getting a pandemic dog. Here’s the growth by month:

April: 447% (March was almost non-existent because of few vaccines and travel
May: 27% (Most I had made in a month in 5 years)
June: 65% – Destroying the May record
July: 49% – Destroying the June record (more than all of 2020)
August: 17% – almost half of all of 2019 (pre-COVID numbers)

Eight-year-old enjoyed cooking camp and knows his way around a kitchen very well now

We’ve consistently had dogs which has been a game-changer. In the past, I’ve averaged one dog a day. We’re up to 3.5 dogs a day on average now and I charge more (mostly to limit the number of requests). My wife encouraged me to print business cards a few months ago. However, during the summer months, I essentially have all the business I can handle and I’m turning dogs away. I’m not the only one though. Sometimes another sitter will text me if I have availability because they are too full as well.

In the past, 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. At this new level, it’s active, active, work! Coordinating schedules with other dog owners and Meet and Greets takes a lot of time.

Dog sitting is starting to go back to being passive in September. It’s looking like we’ll get fewer dogs with kids go back to school and families traveling less. Beach town tourism disappears in the wintertime. We had a busy Labor Day weekend, but we’ll see what happens after that. I think I’m more popular than I was before this summer, so maybe I’ll continue to be busy.

That’s a lot of dog-sitting writing, but what about blogging? Blogging income is just going okay. It’s a little above average, but I need to put more time into it. Fortunately, if the dog sitting drops off, I’ll have more time.

In July, “dogs and blogs” combined for a total of $7,148.45. In August, it was:

Total Blogging + Dog Sitting Income: $7,138.91

I missed a new record by less than $10! Ouch. I actually had a some website advertising that was done in August pay me in early September, but I’m keeping it in September. This is still a great number.

My kids help with the dog sitting. 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. He even got a $20 tip from a client! 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. I want to get them more involved in blogging, taking pictures, and things like that, but it’s going slow. During school, they have too much to keep them busy. I thought we might make progress this summer, but their camps and our vacations kept them busy.

(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 seems to have settled down after the big run-up of a few months ago. In fact, they even fell a tiny bit. I get nervous about bubbles when prices rise so much and so suddenly. I am happy to have a little pause. Of course, while this pause is going on, we continue to pay down the mortgages. We generally pay down $3000 a month in the real properties. Some months, like this month, that’s our only gain.

The kids built a hermit crab habitat. My 7-year-old was in charge of building. My 8-year-old fetched the hermit crabs from the ocean. At one point they had around 20 in this hole.

This month we went from 70.59% to 70.66% ownership of the equity in our properties. Yikes, that’s a small sliver. 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), 70.66%, you get $2,402 in estimated monthly passive income. I feel like the paperboy in Better Off Dead – “I want my two dollars!”

A friend had a foam platform for lakes and oceans. This was a big hit, so we might get one. However, they are fairly expensive at $300 or $400.

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 a little more than 4 years, we’ve seen that number 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. 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 $2,400.

Total Rental Property Income: $2402

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.)

Hurricane Henri hit us and we lost a tree branch. That’s not too bad. A week later, we got hit by Ida and the same tree lost a bigger branch. Strange, it’s a completely healthy tree.

The markets reached new highs yet again. I feel it can’t continue, but it does, so I guess I better enjoy it now. There will be a time when the markets go down. I’m preparing myself for that by focusing on all these gains now. I’m also trying to diversify money across industries and increase the amount in bonds in hopes that they’ll be more stable if a crash does happen.

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 the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $3,880

Last month, it was $3,821. This dividend-estimated number hasn’t historically moved that much from month to month, so this is a good return back to those times. When I started tracking this number in 2017 we were at $1,180/mo. Our money is really working hard to multiply, especially because we aren’t investing much, but instead focusing on saving money for my wife to retire.

The kids climbed a sizable rock formation at the beach. I probably won’t win Father of the Year since I was this far away taking the picture. I put a stop to it when they came racing down holding hands.

Annualized, this monthly $3,880 is $46,564. 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. I still need to see an estate planning lawyer and possibly some other 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 definitely takes some more work.

I would have probably got this MoneyTime Kids question wrong.

The big growth this month came from the stock market. Real estate was mostly flat. 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.

The Delta variant cases are starting to slow their meteoric rise. I guess that’s the good news. The bad news is that cases are still very high. My kids are starting school and I’m more nervous this year than I was last year. Their school did exceptionally well to stay in-person all last year without any cases of students (to the best of my knowledge). When they sent people home, it was always precautionary because a close contact of a student had tested positive. I think we are about 4-5 months away from vaccines for the 5-11 year-old group that includes my kids. If they get vaccinated and we get boosters, I think we’ll all be in sync for feeling as prepared as possible.

If you haven’t gotten vaccinated yet and you are eligible, please don’t put it off. Getting vaccinated can help kids and other people who aren’t eligible. There was thinking that kids were mostly immune to COVID, but Delta spreads a lot faster so getting a lot more kids means more hospitalizations. There’s some debate on whether should be mandated to wear masks in the classroom. Until they are vaccinated, the best way to get our kids unmasked in school is for the eligible people to choose to get vaccinated. As my kids are fond of saying about a number of things now, “you can’t have it both ways.”

Finally, I think it is quite patriotic to help America’s hospitals and health care by doing everything you can to avoid adding to the problem. Vaccinations are on the rise, so maybe people are starting to see that there’s been at least a billion worldwide doses administered and there’s no problem. I’ll get off my soapbox now.

Very Close to Passive Income: $6,283

Last month it was $6,220. The $6,283 is another all-time high. It seems like I can just leave that sentence in my template for when I write this article.

This would be more than $75,000 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 for the dividends are assuming 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.

The Newport Officer’s Club event to send everyone off on a great summer. I know the picture is blurry, but that’s the best I had.

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 a little more than 4 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: $13,420.91

Last month it was $13,369.45. That’s squeaking into another all-time. I started the year thinking that I was just going to lower and lower because the “dogs and blogs” weren’t working. Even though this is less passive with all the dog sitting, it’s great to have real earning power. When “dogs and blogs” isn’t going well, the passive-ish income can still keep me 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 poassible. Dogs and blogs were not performing at the start of the year. However, it’s over $9,500 on average now, so I just have to keep things going through the leaner winter months.

This picture of the Newport Officer’s Club is better.

This ~$13,000+/mo income is more than $160,000 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 stretching 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.

One restaraunt near us had lunch boxes filled with action figures for the kids to play with while we waited for food. This is such a wonderful idea and I don’t know why no one else does it!

August was another good month for our net worth. We saw it jump 1.49%. For the year overall, our net worth is up 26.12%. That’s usually the best we do in any year and there’s still time for it to grow.

For something new this month, I decided to share our liquid cash. I’ve been tracking it for some time, but this is the first time that I thought I’d 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 can do a lot of it. This is a way to roughly gauge the bottom line. In the past, we haven’t focused much on this because we’ve been investing it. However, our focus now is to build enough cash so my wife feels comfortable retiring. We grew our liquid cash by $8,206.95 this month. For the year, we’ve grown it $27,026.51, so the average is about $3,000/mo. The dog sitting income has really made a difference.

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 out – 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 August? Let me know in the comments.