Wow, it feels like we’re in the home stretch of summer being over. The kids have just a few weeks left of camp, and the back-to-school dance happens again.
One of the kids acted in two plays, while the other did the set design in one of them. One of the plays was an original musical where the acting kids worked with camp counselors on writing the plot, music, choreography, etc. I learned what a jazz square was by watching one of the videos they posted online. The set design kids make the sets and run the lighting, curtains, videography, etc., on the night of the show. The other play was A Midsummer Night’s Dream. That’s shorter because Billy Shakes did much of the creative work. I still can’t believe my 10-year-old liked Shakespeare – we didn’t cover his stuff until high school.
This is from the musical.
And this is the concession stand my youngest son helped build. He’s holding up a sign for a cameo that they asked him to do.
My wife and I went to a couple of concerts at the historical Breakers mansion: Cantus, an a cappella band, and Kelli O’Hara, mostly known for her Broadway stuff. It’s not my core interest, but they were very good, and the venue and evening were magical.
The kids worked on their bucket lists, and my wife noticed that going on whale watch was on there. She booked one right away, and we did that. The military base had a free golf lesson for kids, so I booked them. One kid had a cooking camp, and it ended at noon. My wife got out of work early and took him surfing.
I beat my wife in a 5k “race.” (Race is in quotes because it was for a fun event involving local craft breweries.) That’s only notable because she ran a marathon earlier this year, and I don’t run. She would have destroyed me if it was 6k.
In hindsight, it might not be the best idea to run a 5k in the peak of summer heat – and then drink a bunch of beer.
We visited a local topiary garden with a “Lego in Nature” exhibit. The artist spends hundreds of hours making each of these giant animals with Lego bricks and brings them around the country every few months. This was the only one on the east coast, but it was 10 minutes from us and free with our museum pass.
My 9-year-old has mastered the Rubik’s Cube. He can solve it in about 2-3 minutes without referring to an algorithm. Now, I mess it up whenever I see it.
Lastly, we did a local escape room. We’ve done two now, and I love them!
Escape room fun!
Wow, that’s a lot for one month. Let’s start the new and improved Passive Income report. I’ve streamlined this a bit to make it a faster, easier read. I’ll continue to trim it down through the year.
I used to call it alternative income, but that idea didn’t catch on as it did when I used it back in 2008. 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 that I’m going to use in this post.
You’d think we’d always be at the beach since we live five minutes away. Summer goes by quickly and there’s always a lot of other things to do. The kids look further out than they were in this picture. I went out and played Monkey in the Middle, but I still have a little athleticism over them.
The way I calculate these numbers requires that little explanation. I do things differently to show the journey. Following the progress keeps me motivated. For example, we only have a little 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 we are on that journey. Over time, the bank owns less of the properties, and we own more. There will be no mortgages when this number reaches 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 apply it to 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 splitting the profits at the end 50/50. If your friend is the bank and it owns 80%, you should only count on 20% of that net rental income. We used to be in that 20% range, but now it’s closer to 75%.
Lazy Man’s Passive Income
I categorize our passive income into three primary sources that are represented mainly 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 passive because I can make money even when not immediately tending to them. I can do other money-making activities while I board dogs. When I’m on vacation, some blog money still comes in. I combine real estate and investment income as their separate primary sources of very passive income. This way, if you want only to count those, you can do that.
New for this year, my passive income will only be 50% of my blogging and dog-sitting income, 80% of my real estate income, and 100% of my dividend income. That rewards types of income that are truly passive and punishes my quasi-passive sources like blogging.
1. Blogging + Dog Sitting Income
There is always a high demand for dog boarding in July. Everyone wants to travel, and they leave their dogs behind with me. Many tourists come to Newport, Rhode Island, for a festival. Some leave their dogs while they visit the beach or mansions.
Usually, I put a dog picture in this space, but I have too many other pictures to share. This is the golf lesson at the military base’s gym.
We don’t travel ourselves in July, so it’s one of the best boarding months. The only problem was that the town zoning officer wanted to shut me down for the last week of the month. I had to give up a lot of bookings. Ultimately, I won and can host three dogs at our house anytime. That will cut down on business quite a bit as I can’t be reliable for my regular customers anymore.
The good news is that I wasn’t completely shut down. Three dogs is a good amount and gives me time to focus on other interests. I might have more time to blog.
Speaking of blogging, we got a solid rebound in July. Blogging is still a tough business, and I did quite well to get a rebound in a month when I didn’t write much.
In June, “dogs and blogs” combined for $6,544.02. In July, it was:
Total Blogging + Dog Sitting Income: $7,437.82
The blue line is the monthly income. The red line is the 3-month average.
Overall, that’s our second-best month of the year. It’s good when things go according to plan.
My kids help with the dog sitting. My 10-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 9-year-old was a little slower to develop dog skills, but he’s carved out a household niche catering to the smaller dogs – he loves them.
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. Kids should start a Roth IRA as soon as possible.
2. Rental Property Income
The real estate market has cooled a little bit. It can’t be on fire all month of every month. Zillow thought our properties were a little less than they were last month. We lowered our mortgage/liability on them like we do every month, but it wasn’t enough to grow our percentage of equity in them.
Our seats for Cantus were… not optimal. We were close, but the sides were mostly staring at the men’s butts. Wait, maybe my wife planned that on purpose?
For Kelli O’Hara, the side seats were great. We were about 12-15 feet away from her.
Last month we owned 78.56% of our properties, but this month we only own 78.44%. It’s a small change overall. Since January, we’ve gained $40,000 in equity, about 3% more than we had. That’s not bad for half a year?
Suppose we owned both rental properties with no mortgages (100% of the equity). In that case, we’d make about $2,218 a month after insurance, property taxes, condo fees, and estimated condo maintenance. The $2218 number is specific, but that’s how the rents came out, with the fraction accounting for the condo maintenance.
If you multiply our rents of $2,218 by the amount of equity we have, 78.44%, you get $1,739/mo. in estimated passive-ish income. Last month it was $1,742/mo. We lost $3, which doesn’t buy much with inflation nowadays. So it’s no big deal.
When I started tracking rental property income this way (January 2017), we only owned 36.4% of the properties with lower rents. The math worked out to $1,174 of passive income back then. In six years, it grew a ton. We sold off a property to invest it in the stock market and still have about 50% more income after expenses.
Eventually, these properties should bring about $25K-30K after expenses. Rent is inflation resistant as it’ll rise over time. That means that even though this is $25K in today’s dollars, it will still have that buying power in the future.
Total Rental Property Income: $1,739
3. Dividend Income
For this section, I look at our stock market investments. I assume we could earn a 2.5% dividend yield on those investments. That assumption is a conservative number that helps us think about what kind of cash we can expect. Getting that 2.5% number should be easy, as we could put all money in a high-dividend ETF. For example, the high-yield ETF, iShares Core High Dividend ETF (HDV), currently pays a 4.11% yield.
Most bloggers use the actual dividends they earned that month. I have quite a few accounts, and I’m too “Lazy” to add up their dividends. Even if we aren’t getting the 2.5% number now, we could move the money from growth to dividends if we needed to live off the cash flow. A vast majority of our money is in retirement accounts, and cash flow isn’t essential to us now. I also combine all the taxable and retirement account numbers. It’s too much work to separate them.
We’re going to do another double picture of my 9-year old. A surfing lesson at the beginning of the month…
… and a solving of the cube at the end of the month. Yes, I know it’s not solved. You’ll have to trust me on that one.
We continue to get a profit-sharing check since I bought (a lot of) a company. The company is doing well, and they occasionally give me an extra profit-sharing check. 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.
The stock market has been on fire lately. We had been reaching new highs every day until some organization named Fitch lowered the U.S. credit rating. That tanked the markets a little bit. Despite that, the markets were up over the last month. Perhaps there will be more room for the markets to move next month.
Total Dividend-ish Income: $4,187
Last month it was $4,138.
In January 2017, the dividend income was at $1,180/mo. We’re over $50,000 a year – enough to live reasonably well, especially if we paid off our mortgage.
For the 78th 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 just finished our taxes, and now I can move forward on this.
Adjusted Passive Income
I used to combine real estate and dividend income into “very close to passive income.” However, now I add up the 50% dogs/blogs, 80% real estate, and 100% dividend income. That gives a more accurate number of what’s truly passive.
Dog/Blogs: $7,437.82 – Adjusted to $3,718.91
Rentals: $1,739 – Adjusted to $1,391.20
Dividends: $4,187.00 – Remains at $4,187.00
Dogs/Blogs Blue Line
Rental – Red Line
Dividend – Yellow Line
Total Adjusted Passive Income: $9,297.11
Last month it was $8,803.61. Dogs/blogs, and dividends have done well. Rentals stayed the same.
This ~$9,300 is about $111,500 of passive-ish income annually. That’s more than what we need to live on all our necessary expenses, including a few other luxuries. Eventually, the two biggest expenses (mortgages and education costs) will disappear, and we’ll make much more than we need. That means we’ll be able to spend on a lot more fun stuff.
It’s incredibly useful to have different income streams. As making money from blogging becomes more difficult, dog boarding income has grown to supplement it. For a long time, real estate didn’t grow much at all; then, in the last couple of years, it grew a ton. The stock market grew for over a decade from 2010 to 2021 but had a slight setback last year. This year it’s recovered. When something goes down, it seems another thing jumps up.
Afternoon tea at the Marble House’s Chinese Tea House. Tourists come from all over the place for it.
I’ve been writing for months that dog boarding will probably go down. I felt like we’d travel more or there may be more competition. I didn’t expect the town to target me specifically and attempt to shut me down. Hopefully, it will go down gradually. I will try to be positive because with the other areas coming up, I can tread water for a while.
The chance of all the income streams falling on hard times is low, but anything is possible. If we had another event like the Great Recession in 2008, they’d all be impacted quite a bit. In that case, we’d have to rely more on active income that I’m not reporting here. We might also have to rely on savings for a while.
It’s also important to remember that these numbers aren’t “real” because much of the money isn’t liquid. We can’t spend those retirement investments without taxes and penalties. We can only access the equity we have in properties if we sell them or open a HELOC. We can do some things to get to this money, but it only makes sense when my wife retires, and we are in a lower tax bracket.
You’d think we’d feel “rich” having “won” the money game. Most of the time, we don’t feel rich at all. Our social circle tends to have generationally rich people. Nearly every of my son’s classmates lives in a $2-3 million house. Dog boarding is looked down upon in the private school society. However, we are “rich” relative to many people’s circumstances. Money is relative. There’s a lot of value to being able to laugh at emergency bills and make reasonable splurges.
(The blue line represents the total adjusted passive income. The Red Line represents the three-month average.)
The three-month average in July 2021 was $8,178.82. In July 2021, it was $8,384.74. Now in July of 2023, it is $8,852.51. That’s steady growth every year.
None of the numbers here include my wife’s bread-winning day job as a pharmacist or the minor freelance work I’ve been doing over the last few years. This income isn’t passive at all. When my wife retires, we can count her vested military pension as more passive income. It looks like it might be worth around $85,000/year and includes access to a good health care plan. A pension is a passive income cheat code. They are so rare nowadays. It gives us a lot of flexibility that most people don’t have.
Two more camps. In this one, my 9-year-old is taking his first cooking camp. It was a big hit!
And in this camp, my 10-year-old is playing Snug the Joiner in Midsummer Night’s Dream.
For now, this active income (including the dog boarding) is the fuel that drives the passive income engine – it allows us to live well, get our kids a top education at a private school, pay off our mortgages, and invest. My income doesn’t match my wife’s, but the flexibility gives me the time to stretch almost every dollar of our spending. It also allows me the flexibility to bring the kids to school and after-school activities.
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 article.
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.
This past month, our net worth was up 0.64%. For the year, it’s up 11.17%. We’ve reached an all-time net worth for the fourth straight month.
Many bloggers show how much they spent and how much they made during the month. I don’t keep track of all those numbers. Some tools can make it relatively easy. However, tracking overall monthly numbers works best for me. I can look at our liquid cash numbers, which gives me similar information. In the last month, we grew our liquid cash by $12,000. For the year, our liquid money has increased by $32,000.
You wouldn’t think to combine Lego bricks with nature, but the exhibit was very cool – especially if you have a couple of kids and it’s a 10-minute drive away.
We’re spending a lot of money on home improvements. We’ve reached a phase where we intentionally spend money to improve our lives and create lasting memories. Some things we did this month, like the whale watch, weren’t cheap, but they were a good experience. It’s a switch from years of frugality, but it’s working out well. Being able to track liquid cash assures me we aren’t going overboard.
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 U.S. government didn’t back it like treasuries or FDIC, I may feel I should account for some uncertainty. I decided that it makes 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.
Finally, I need to include at least one of our annual pictures from the Officer’s Club on the Newport Naval Base. There must have been more than fifty sailboats out on the water at this time.
It’s important to recognize that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 17 years. FIRE wasn’t a “thing” back in 2006, but that’s been my goal since the first sentence of this blog.
We naturally are further along in that journey than some younger readers who may be just starting. Many 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.
How was your month? Let me know in the comments.