How was everyone’s August? It feels like a long time ago now that the kids are back in school, and I’ve been to my annual financial blogger conference.
Every month lately has had bucket list events. I’m looking forward to September and getting back into a routine.
August felt like two separate months. I boarded many dogs for the first fifteen days and worked extremely hard to prepare everything. For the last fifteen days, we went on a Disney Cruise in Europe, and I did essentially nothing to earn money. It makes a strong case that dog boarding shouldn’t be considered passive income, but I’m writing this surrounded by four sleeping dogs. It’s hard to argue that I’m actively working with the dogs.
I always start with a little personal recap of what we were up to, but I’ve already written about my first Disney Cruise impressions and my second Disney Cruise impressions. At some point, I’ll combine both posts and clean them up.
To recap, we flew to France and missed our connection flight with around two hundred people. Usually, an hour is enough to make a connecting flight with time to grab a meal. Charles De Gaulle airport makes you go through customs in a terminal that is 30 minutes away. We got on another flight to Denmark, where we spent the night before boarding the ship. We cruised to Norway, Iceland, Scotland, and finally, England, where we spent a few extra days before returning home.
I’m going to spare you almost all the vacation photos. In Denmark, we walked to Copenhagen near our Airbnb and took a short river cruise. In Norway, we took a bus around Alesund and saw some great views. In Iceland, we went to Magic Ice (a bar made entirely of ice) and the famous Blue Lagoon. In Scotland, we found Nessie, the creature in Loch Ness. We also went to the Ring of Brodgar, their version of Stonehenge. In England, we did a tour of the Harry Potter studios, walked Abbey Road, and toured the Downton Abbey castle. We also saw Big Ben, Westminster Abbey, the palace (while the queen was alive), and the Prime meridian in Greenwich. We also walked the red carpet for the Rings of Power premier on our way to the original Hard Rock Cafe.
This was a picture of our cruise around Denmark
The trip reminded me of the power of excellent personal finance. We were able to do all that and not think about money (too much).
What else did we do? We went to Cat Video Fest, which is a compilation of funny internet cat videos in a movie theater. It was quirky and awesome – the kids loved it. Soon after, we saw Marcel the Shell with Shoes On, which should win all the movie awards. That’s all we had time to do during the early part of the month with all the dog boarding. The kids were busy with camps and karate anyway.
That’s a lot for one month; 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. 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. We still have mortgages to pay off. Instead, I calculate the percentage of equity we have to show where on that journey we are. You’ll see that the bank owns less, and we own more each month. There will be no mortgages when we own 100%, and all that rental income can be used for living expenses. When calculating the percentage of rental income, I take the rent (minus estimated expenses) and 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 have some income in that area, but that’s not the focus of this report.) I combine dog-sitting and blogging into one section of my “somewhat active” income. They are a little passive because I can make money even when I’m not immediately tending to them. I leave real estate and investment income as their separate main sources of very passive income. This way, if you want only to count those, you can do that.
For 2023, I’m only going to count 50% of blogging and dog-sitting income, 80% of real estate, and 100% of dividend income. That’s more realistic of what counts as passive.
1. Blogging + Dog Sitting Income
August would have been a record for dog sitting, but I was on a cruise ship for half the month. The first half of the month was very hectic and not at all passive. September is always a little slower as kids return to school and families travel less. However, there’s still plenty of business. I saw this article recently, “A return to the office is prompting people to get their pets a pet.”
This dog wanted me take him for a walk by his canine tooth. I just curled my index finger and he’d hook his tooth in there and we’d walk around the house. Every dog has their own thing.
Blogging was very quiet for the month. I essentially turned Lazy Man and Money into a travel blog for half the month. Also, because I was in the middle of the North Sea, avoiding internet connections, I couldn’t get back to advertisers.
In July, “dogs and blogs” combined for $7,671.19. In August, it was:
Total Blogging + Dog Sitting Income: $5,098.35
That’s very close to June’s numbers when I was also on vacation for a couple of weeks. 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 at pick-ups and drop-offs. My 8-year-old was a little slower to develop dog skills, but he’s carved out a household niche catering to the smaller dogs – he just loves them. They recently finished up vet summer camp at the local animal shelter.
Their help means I can pay them a legitimately earned income (a percentage of the overall dog-sitting income). Because the income is earned they can save money in their kid Roth IRAs and it will be money that they’ll never pay tax on. Learn why you should get started with a kid Roth IRA as soon as possible.
(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
Last month, I announced that we sold a rental property going down from three to two. We were fortunate that we knew how to sell at the top of the market.
Now we have a lot less potential rental income from our properties. However, we also have lower liabilities as we don’t have the property mortgage anymore.
The Disney Cruise had a lot of art classes. My youngest son really gets into art.
The sale gave us some cash that I could invest. We’re moving money from rental property income to dividend income. Dividend income will be easier, but it’s also less money. I recently did some analysis of this in my stocks vs. real estate article.
Zillow decided our remaining properties weren’t worth as much this month. That seems accurate, as the housing market is cooling down a bit.
We went from 74.86% to 74.67% ownership of the equity in our properties. It’s very rare to drop, but this minor drop can happen. If we owned both remaining rental properties with no mortgages (100% of the equity), we’d make about $2,200 a month after insurance, property taxes, condo fees, and estimated condo maintenance.
I like to use an “expected rent” as we’re currently trying to catch up from years of very low rents. We liked our tenants, so we’ve kept them at a discount. However, with housing and rents going up so quickly, there’s a massive gap between what we could reasonably be bringing in and what we are bringing in.
If you multiply our expected net rent of $2,200 by the amount of equity we have, 74.67%, you get $1,643/mo. in estimated passive income. That’s a loss of a whopping $1141 from last month. It’s good that we got a lot of cash from the sale to invest in other assets.
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. In 5.5 years, it grew enormously but dropped to $1,643, which is still good, especially with a check of $250,000 or almost $50,000 yearly.
When we get 100% ownership, it should bring about $25,000 after expenses. Rent is inflation resistant as it’ll rise over time. That means that even though this is $25,000 in today’s dollars, we don’t have to worry about buying fewer goods and services in the future.
Total Rental Property Income: $1,643
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 about a 3.69% yield, but it has been less in the past.
There’s a chance we could do better than this. 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 5% average dividend yield. (That link to the newsletter has a special discount rate; in full disclosure, I make a few dollars if you sign up for it.)
The view from one of our favorite “restaurants” – the Newport Navy Base.
Of course, our investment plan isn’t entirely centered around dividend income. The 2.5% dividend is a conservative number that helps us think about what kind of cash we can expect. Our portfolio there will pay almost 3% in dividends, but we should see asset growth. Our numbers here would be much more if we estimated at 3%.
The stock market had another significant drop when we ran these numbers on Sept 5th. That means we had a drop in our expected dividend income. Since then, the market has recovered a bit, so we should have a good September if it continues.
Until the recent sale of that investment property, more than 97% of this money was in our retirement accounts. That meant the retirement money would be invested for at least another 13 years until age 59.5. Now we have a healthier mix of funds for which we can invest and receive a check that we can use right now.
We continue to get a profit-sharing check since I bought (a lot of) a company. 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: $4,247
Last month, it was $4,132. A gain of $103 is very nice.. but how did I gain when the market was down? We’re moving money from the real estate sale into the stock market, so we have more money working. It looks like the numbers will be a little crazy for a month or two while we go through the transition.
When I started tracking this number in January 2017, we were at $1,180/mo. It’s been a tremendous last 5.5 years.
For the 25th month in a row (?), we’re looking into estate planning, but they gave us a lot of paperwork to do before we can move forward. I’m still not making any progress on this. Maybe now that the kids are back in school and I’m back from FinCon, I can get this done.
Very Close to Passive Income
Our “very close to passive income” combines rental property income and dividend income. If we had any royalty income from books, movies, or music, I’d also include that. 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. That takes some active work to keep up. Rental property requires a little work, but not nearly as much.
This was our Disney cruise route before final docking in Dover, England.
I love having both the rental properties and stock market income working together. With the stock market dropping recently, our real estate has saved our net worth from dropping further. And now, we locked in those gains with the sale. It was the opposite for the last decade – real estate didn’t do much while stocks quadrupled. Everyone interested in FIRE should consider having stock market 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.
With rental income not moving much and dividend income growing significantly with the new money, we’re seeing this passive income grow.
Very Close to Passive Income: $5,890.00
This would be over $70,000 a year of passive-ish income. We wouldn’t need to touch the investments themselves. We wouldn’t have to sell stocks or have a “withdrawal rate” – simply live off dividends. We wouldn’t have to get a reverse mortgage on our home or investment properties. 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 draw them down for more fun, charity, or other spending.
When I started this blog, I aimed to have around $75,000 in passive income. That was my definition of winning the money game. It would be enough to cover our needs and most of our wants. We’re not quite there, but we are close.
This $5,890.00 of “very close to passive income” has grown from $2,354/month in January 2017. So in less than six years, we’ve more than doubled our passive income (an extra $1,000 from the double). It’s an excellent income for many, even in their top earning years. This is one of the reasons why I went with the “Lazy” name; it shows that investing money can do more “work” (or somehow produce more value) than active working can. It’s a crazy system. I’m just doing my best to work within it.
England’s transportation system was clean, efficient, and full of positive messages like this one.
It’s worth noting that, once again, these numbers are fudged and aren’t “real” (except for the profit-sharing check and the new investment income) because the money isn’t liquid. We can’t spend those retirement investments or the equity we have in properties. We don’t feel “rich” by any stretch, even though we are relative to many people’s circumstances. We still have some day-to-day struggles with money. These are relatively minor compared to what most people experience, I imagine. The recent rental property sale gives us much more financial freedom now. We still have plenty of money working for the future.
I wonder if we can get to $8,000/month in passive income by the start of 2025. We’ll have to see how it goes as time’s arrow marches forward. Most of it will depend on how the markets perform.
Final Passive-ish Income
When you add up “dogs and blogs” to the “very close to passive income,” you get:
Passive-ish Income: $10,988.35
Last month it was $13,450.19. The big difference was an increase in dogs and blogs because of the big vacation.
That would be over $130k a year. That (hypothetical) annual income for writing on a blog, taking care of dogs, investing, and landlording is very nice. For the year, we’re averaging around $135k from all these – which is more than for our necessary expenses for the next 45 years. Of course, those necessary expenses aren’t going to cover all our spending, but they are a large percentage.
None of the numbers here include my wife’s bread-winning day job as a pharmacist or the (small amount of) freelance work I’ve been doing over the last few years (which isn’t passive at all). When my wife retires, we can count her vested military pension as more genuinely passive income. For now, those jobs (and the dog boarding) are the fuel that drives the passive income engine – it allows us to live well, pay off our mortgage, and invest. My income doesn’t match my wife’s, but the flexibility gives me the time to stretch almost every dollar in much of our spending. It also allows me the flexibility to bring the kids to school and after-school activities.
I love two things about the graph below. First, there’s a definite trend of the numbers staying high for several months. Second, it doesn’t dip down too far. We should be able to count on at least $8,000, maybe $9,000 a month.
(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 fascinating as I don’t share the exact numbers. That’s why it’s just a footnote, not its own article.
I truly believe that net worth is one of the most critical numbers in personal finance, so it is worth sharing in some way. Showing relative growth can be helpful.
We saw our net worth drop by 3.02% last month. None of the markets were very good to us. We’re down 1.68% on the year. That’s not great, but I know a lot of people who are
Most of that could be attributed to the selling costs of the property. The market did well, but Zillow valued our properties as being worth less money. For the year, our net worth is down 1.68%. That’s not bad, considering I’ve seen a lot of bloggers who are down around 15%.
It’s important to recognize that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for almost 16 years. FIRE wasn’t a “thing” back in 2006. We naturally are further along in that journey than some younger readers who may be just starting. Some of those readers are saddled with huge student loans that we didn’t have to deal with. If you are one of these readers, I hope you won’t be discouraged by some of the numbers above. I didn’t start many of these graphs until year 10 of blogging and early retirement planning. Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 15-20 years.
There’s a big wild card in calculating our net worth. Now that my wife’s military pension is vested, it’s reasonable to ask whether we should include it in our net worth. If the US government didn’t back it like treasuries or FDIC, I may feel I should account for some uncertainty. I decided that it does make sense to include it. She could have earned a larger immediate salary if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. 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.