Thank you readers for sticking through last week. I had three articles that were 90% done, but I couldn’t polish them enough to schedule before our vacation. I hit a stressful time just before the 4th with a lot of dogs to sit and a rainy/muddy backyard. It’s not a good combination. Anyway…
We’re well into July, so half of 2021 is officially over. It seems like every month lately has a major theme to it. April was the month my wife was deployed to get shots in people’s arms. May was a month of recovery and home clean-up/repair. June was dog-sitting month as you’re about to find out. Before I get to those financials, let me get some blog housekeeping out of the way.
If you read more than one personal finance blog, you’ve probably already encountered this, but it is Plutus Award nomination season. The Plutus Awards is the red carpet award show for personal finance bloggers. In their 12 year history, I’ve watched 100 bloggers win an award, but have never one before. Since Lazy Man and Money covers all the categories in personal finance (FIRE, military, investing, retirement, family, side hustle, children, current events), it isn’t a good fit to be “best” in any particular one.
My best chance at winning a Plutus Award is probably the Lifetime Achievement award. That may sound arrogant, but I’ve been a finalist a couple of times.
The Lifetime Achievement award nomination blurb says, “Ten years is a good rule of thumb.” I’ve got 15 years of consistent blogging, so maybe it’s time. In the meantime, I’ll continue to be the Jamie Moyer or Susan Lucci of the personal finance blogging world.
Click here to nominate me. They’ll take “Lazy Man” or “Lazy Man and Money” or anything that’s reasonably close to identifying me in that box.
With that shameless plug behind us, here’s the family update for the month. As always, these are the best moments, not the typical ones.
- We went on a boat tour of the harbor around Newport. It’s one of those things in your area that tourists always do, but you never do. The kids loved it. We learned a lot of local history.
- We went to the movies and saw Peter Rabbit 2. There were only a couple of other people there. It’s weird to go to the movies again.
- We went to the zoo to see the white alligator that they had on loan from another zoo. It feels like we might have hit peak zoo age at 7-8.
- We went to our local beach (5-minute drive) and had a day there.
- We went to Block Island, turned off technology, and went hunting for the glass orbs that they hide there. We came up empty-handed again, but it was still great fun.
- My wife got to throw out the first pitch at a New England Collegiate Baseball League for her COVID-19 service.
- My wife took the kids went to a local amusement park. I got some pictures that they had a great time. I stayed home and did a lot of dog-sitting and blogging. It was actually really relaxing to focus for a few hours.
Jake loves his trips to Block Island. It took me quite a while to get him posed with the flag in the background.
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
In April we had the best dog sitting month since long before the pandemic started. In May, we did a little better. In June, we doubled April’s dog sitting numbers. We averaged three dogs a day, if you factor in we were on vacation for a few days. It was our best month ever. That’s what happens when everyone goes on vacation after getting a pandemic dog.
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. Some of it 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 always get that, especially because tourism is high in the Newport, RI area.
Our annual picture of the kids at the Block Island Labrinth meditation/circle. We’ve split into glass orb hunting teams the last couple of years and we dress the part.
Blogging income was a little lower than usual. Some advertisements were ordered and executed, but payment wasn’t completed in June, so I’m kicking the numbers to July’s report. I’m comfortable with this because the dog sitting income was so good.
In May, dogs and blogs combined for a total of $3,540.96. In June, it was:
Total Blogging + Dog Sitting Income: $4,334.71
We hit another record for the year, so the economic recovery from COVID continues. I didn’t think I’d make my goals this year, but it is looking like I might pass them now. I don’t want to get too excited.
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
Last month, I wrote, “Zillow’s estimates on the property values continued to skyrocket.” That was nothing compared to this month. Our primary residence jumped around 20%. Unfortunately for this report, our primary residence doesn’t count as a rental property since we need a place to live. I only mention the jump in our primary residence to give an example of how much the numbers are jumping.
Once again our rental properties went up tens of thousands of dollars – nearly $60,000 this month. I’m 100% sure that we are in a housing bubble. I expect it to last somewhere between 2 and 5 years. As exciting as it is to see the numbers go up, I’m trying to keep myself grounded. If the bubble pops and prices drop suddenly, I can say, “I called it!” If the bubble doesn’t pop, we’ll just continue to have great numbers here.
This is a picture of Clingstone that I took while on the boat tour. Google Photos really made the blues pop. Strange, but true, a pizza company delivers via a boat to the house… at least according to our tour guide. I wonder what they tip?
This month we went from 67.50% to 70.08% ownership of the equity in our properties. That huge growth in value of the rental properties gave us a lot more equity helping out the percentage. I don’t think we’ve had a month anywhere close to this last one! 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 $3,400 by the amount of equity we have (i.e. where we are on our journey to 100% equity ownership), 70.08%, you get $2,383 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.
The white alligator at the zoo. The kids thought it might be a robot for a bit.
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 $2,295.
Total Rental Property Income: $2,383
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 continues to hit new highs. I am starting to sell off my satellite stocks because the market feels too high to me. My risk tolerance of losing these gains isn’t very high, so I want to be more conservative in my investments. I continue to stay fully invested, but I’m moving more money to bonds, i.e. giving my stocks a shave. I like to move a little money from stock to bonds mostly for the psychological effect of being active. The small amounts seem to add up. When stocks dropped last March due to COVID, I was able to buy in at lower prices by cashing in some bonds that didn’t drop as much.
My youngest is kind of a nut in an awesome way. He’s got a lot of Robin Williams, Chris Farley, and John Ritter in him. I meant to focus on the physical comedy aspect, but I just realized they had something else in common. Ummm, let’s move on.
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: $3,808
Last month, it was $3,733. I’m spoiled by our investments going up month after month. After over 50 reports, I think there were only a few where it dropped… and it seemed to rebound right away. This dividend-estimated number hasn’t historically moved that much from month-to-month, but seems to be picking up a lot in the last year. 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.
Annualized, this monthly $3,808 is $45,696. 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.
The stock and real estate markets just keep going up and up. COVID could only slow the stock market for a short time, but stimulus boosted it. Real estate seemed to jump more due to COVID. If you look at the charts, we had a small setback when we sold one property and bought another in late 2020. It was just a tiny hiccup.
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.
My wife after throwing out the first pitch.
When it comes to COVID, last month, I said that I was starting to get very encouraged about the future in the United States. I’m less encouraged this month. 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, Rhode Island is highly vaccinated. My kids are too young to get the vaccine, so we just have to be careful if they are indoors with strangers.
Very Close to Passive Income: $6,191
Last month it was $6,028. The $6,191 is another all-time high. As you can tell from the chart below, it is a huge jump. The stock market drove gains for a while, but real estate is the biggest driver now.
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.
Netflix and Chill, am I right ;-)?
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: $10,525.71
Last month it was $9,568.96. That’s another big jump and an all-time high. I spent the last year thinking that we’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. When we get October people will travel less and we’ll see that income drop off again.
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 $8,000 on average now, so now it’s a matter of just keeping things going.
This ~$10,500+/mo income is more than $125,000 a year. That (hypothetical) annual income for writing on a blog, taking care of dogs, and investing is very nice. In the long term, $125K 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.
The kids at our local beach.
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 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.
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.
June was the best month ever for net worth… by far. We saw it jump 7.17%! I had to pause and think about it for a minute. If that happened every month for 10 months, we’d double our net worth. The big driver here was the real estate valuation of our primary residence, so it doesn’t show up in any of the passive income above. The growth in value of our primary residence doesn’t mean too much as we can’t sell it or downsize for some time. It’s just a number that lives on paper rather than in real spendable currency.
For the year overall, our net worth is up 23.62%. That’s usually the best we do in any whole year. I can’t remember ever seeing that kind of gain in 6 months. In terms of dollars, the monthly gain may be more than we make in a year as a couple.
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 ~$2.4 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.
How was your June? Let me know in the comments.