We’re into August, so July is in the rearview mirror. This means that I can review all the July numbers. The short update is that the numbers were amazing because I sat every dog in the world… and the blogging income wasn’t bad either. We’ll get to the details in that in a little bit. Let’s start with a life update.
Usually, life updates in this space are all positive. That’s because I go through my phone’s pictures over the last month and it reminds me of the fun times when I took pictures. Usually, when bad things are happening, I don’t stop to take pictures of them. However, sometimes there are exceptions, so let’s get that out of them out of the way.
When we didn’t the million dollar email we were expecting, my wife took it hard. Actually, it wasn’t as hard as in the past, but as the president of a large organization, she had to console dozens and dozens of people along with a bunch of other related activities. That wasn’t a fun part of the month. Around the same time, my mother shared with me an obituary of an old “friend” from high school. I put “friend” in quotes because he was in a circle of friends with me, but we didn’t get along that well. I’m debating about writing an article about it.
Now that I’ve got the bad news stuff behind me let’s get to the fun stuff. This last July we:
- We celebrated the Fourth of July with some friends.
- We went on a vacation to Hershey Park in Pennsylvania. We’ve done this a few times and it can be a frugal vacation, especially because it is a drive for us. However, we stayed at the deluxe hotel and did some fancy experiences so it cost a little more.
- We stayed at the Cartoon Network Hotel in Lancaster Pennsylvania. My kids love Cartoon Network shows, so this was a great trip. For a converted motel, the Cartoon Network Hotel isn’t half bad. You have to set your expectation that it is a motel and not a hotel.
- We went to a local topiary garden as they had an art exhibit of giant bugs in addition to their typical animals made from bushes.
Gumball and Darwin at the Cartoon Network Hotel. Parents, if you have to watch a kid show, the Amazing World of Gumball is an extremely good choice.
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 – 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. In April it grew 447%, which was really just acknowledging how small the dog sitting business was. In May, it grew another 27%, which was about the most we ever made in a month. In June it grew 65% from May’s numbers. Eclipsing record earnings by 65% was simply amazing. In July, it grew 49%. So that’s building records on top of records.
Some of that growth is simply due to hosting more dogs. However, I also raised prices around 20% to be more in-line with the market. It’s easier to play Lemonade Stand when it’s just a game on your computer. It’s difficult when your emotions for a dog and a regular client come into play.
In any event, more dogs at higher rates lead to more dog sitting income.
This wasn’t my idea, but I remember sparklers being popular when I was a kid. No one was hurt.
In the past, I have written that dog sitting is passive-ish income, which is why it is on this report. However, to do the kind of numbers that we did in June, it was very, very active. That month was child’s play compared to this month. Some of the activity was managing the dogs themselves, but a lot of it is managing the dog owners. We had a lot of Meet and Greets which take a lot of time and coordination of schedules. They are necessary and useful for all parties. In the ideal dog-sitting situation, we’d have 3 dogs who are all repeat customers each day. They’d be long stays with few dog pick-ups and drop-offs. We don’t usually get that, especially because tourism is high in the Newport, RI area.
Dog sitting should go back to being more passive in the fall when kids go back to school and families travel less. Beach town tourism disappears in the wintertime as you might imagine.
Blogging income was beyond expectations as well. A couple of the advertisements that were ordered in June were executed in July. That’s great for July, but some of the advertisements in July didn’t get paid yet. I’ll push those to August. August is already looking like another great income month with plenty of dogs and blog income.
In June, dogs and blogs combined for a total of $4,334.71. In July, it was:
Total Blogging + Dog Sitting Income: $7,148.45
We hit another record for the year.
With the pandemic and no dog-sitting income, I didn’t think I’d make my goals this year, but it is looking like I might pass them now.
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. During school, they have too much to keep them busy. I thought we might make progress this summer, but their camps and our vacations are keeping 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
For one month, Zillow’s estimates on the property values stayed more or less the same. That’s significant because some properties rose 20% last month. It’s time for real estate to take a break.
This month we went from 70.08% to 70.59% ownership of the equity in our properties. It was a very small gain as Zillow raised the Zestimate a bit of one property. Some of the gain is simply paying down the mortgages. We are only a few years away from getting real profits from the rental properties.
I love Milton Hershey’s famous quote about happiness.
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 $3,400 by the amount of equity we have (i.e. where we are on our journey to 100% equity ownership), 70.59%, you get $2,400 in estimated monthly passive income. 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 a rent that should net $3,400 monthly after expenses. 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 $2,383.
Total Rental Property Income: $2400
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.)
Big bugs and animal bushes (not pictured)
The markets seemed to hover around highs. We lost some money in some places, but made money in other places. Overall we made minor investment gains. Like with the real estate markets it makes sense for things to take a pause. I think it’s good for the markets to take a pause. When everything goes up several percent each month it makes me worried that there’s a bubble.
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: $3,821
Last month, it was $3,808. 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.
This is the pool at Hotel Hershey. Who needs an amusement park?
Annualized, this monthly $3,821 is $45,846. 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 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.
The stock and real estate markets just keep going up and up even if it was just a little this month.
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.
Me and one of the kids make a chocolate bar. It was expensive ($25+ per bar), but a good experience. The other kid chose a different experience with mom. I know I need to lose the white socks with the shoes.
Last month I said that I was losing confidence in the recovery. There are still too many people who haven’t gotten the vaccine. The Delta variant is causing cases to rise quite a bit. I tell my kids that COVID last year was like Charmander, but this Delta variant looks like Charizard. (Pokemon evolutions seemed like a natural analogy.) They understand the good news in that we have vaccines to battle it now. Fortunately, in Rhode Island are highly vaccinated. My kids are too young to get the vaccine, so we just have to be careful if they are indoors with strangers. This month we found out that it is even worse than we thought. Even though we are vaccinated we could get COVID and pass it on to our kids. That’s a pretty bad thought.
Very Close to Passive Income: $6,220
Last month it was $6,191. The $6,220 is another all-time high. The small gains aren’t impressive, but slow and steady wins the race.
This would be almost $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 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), because the money isn’t liquid. 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.
Final Passive Income
When you add up “dogs and blogs” to the “very close to passive income” you get:
Passive Income: $13,369.45
Last month it was $10,525.71. That’s a huge jump and an all-time high. I spent the last year thinking that I’d hit new lows. With most of the money coming from passive-ish income that seems to consistently grow, the difference is what I can earn from dogs and blogs. This summer dog season is always big, but never this big. It’s great for blog income to come back at the same time.
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. Dogs and blogs were not performing at the start of the year. However, it’s over $9,000 on average now, so we just have to keep things going through the leaner winter months.
The Newport Officer’s Club has a great view of the Pell Bridge. We get at least one picture every year.
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 16 months have proven, you never know what bad news is lurking around the corner. This preparation gives us the financial flexibility to fight it.
On the way to Hershey, we stopped at Harold and Kumar’s favorite place.
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.
July was a boring number for our net worth. We saw it jump 0.52%. For the year overall, our net worth is up 24.26%. That’s usually the best we do in any year.
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 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. In the end, it seems my wife’s pension may be worth ~$2.4 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.
How was your July? Let me know in the comments.