I hope everyone is having a great April so far. It’s been either rain or nice warm days, but I’m looking forward to the summer. Before I get that far ahead of myself, it’s time to take a look back at March.
March was by almost all measures a great month here. The big news was our trip to Puerto Rico. It got off to a rough start. Our flight was at 5AM on daylight savings. My wife and I each set our alarms (good to have a back-up) for 2:45AM – the hour that skipped over. Fortunately, I woke up at 3:11 and we were able to get to the airport just in time – to get the next that flight was cancelled. The next available flight would be a couple of days away from an airport a couple of hours away.
We were able to push out return flight, so we still got seven days in Puerto Rico. I had only spent half a day there once while we waited to leave on a cruise. I was surprised by how dominate Spanish is there. In the tourist areas, at least you had a 50/50 chance of English, but if you got off the beaten path it was 75% Spanish, maybe more. My Spanish is from school and good enough for reading, but not good enough for conversing.
The family loved the trip though. My wife still prefered last year’s trip to Hawaii, but the kids liked Puerto Rico better. There were better regional Pokemon to catch in Pokemon Go – LOL. The children’s museum in Puerto Rico was very good for them. The kids also made a point that they had better pool time (Hawaii had pool reservations due to COVID) and better beaches (the waves weren’t as dangerous). I think as long as the kids have new interesting “kid things” to do it will get the thumbs up.
In hindsight, I don’t what we did all week. For the first five days we were at the big Marriott in San Juan. We went out for mallorcas (kind of like fried dough in the mainland U.S.) for breakfast and then toured El Morro – an old fort that served as a mini-city. We went to a local natural water slide – it was literally a brook that had carved out the rocks for years making it a water slide. It wasn’t completely smooth as if it was man-made, but felt like a normal water slide. We went to the pork highway where mulitple restaurants have whole pigs on the spit and you get a fresh cut. It’s on the Food Network and those travel food shows. I couldn’t fully enjoy it because I was traumatized from the parking – a huge traffic jam and nowhere to park.
My family loved Puerto Rico – especially this Marriott pool
We got back from Puerto Rico just in time to drop the kids off with grandparents, so my wife and I could have our annual mini-honeymoon at the best local bed and breakfast, Castle Hill. It’s where all the celebrities stay when they are in town. It’s usually around $700 a night, but they have a Cyber-Monday deal that includes a free room with a highly discounted package of gift cards to the restaurant group.
That’s enough of the personal stuff… 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 to it. 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 right now. We still have mortgages to pay off. Instead, I calculate the percentage of equity we have to show where on that journey we are. Each month, you’ll 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. When it comes to 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 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. They are a little passive because I can make money even when I’m not immediately tending to them. For example, I’m writing this while boarding 2 dogs right now. I leave real estate and investment income as their separate main sources of very passive income. This way if you want to only count those you can do that.
1. Blogging + Dog Sitting Income
March was a very good month for dog boarding. We were traveling for 10 days, so we were shut down for that. That’s one of the reasons why dog boarding may not fit well here. It’s not a ton of labor, but there are sacrifices – I can’t earn money while traveling. Those sacrifices are cuddly, though.
I have about a $6,500 headstart over the last year’s start before vaccines got rolling. April is looking like our 3rd biggest month ever. That’s big because the summer tourist season is always at the top of the earning bell curve.
Floating heads at the children’s museum
Blogging ramped up in March. The first quarter always starts slow as everyone is getting their advertising budgets figured out. With March comes the end of the first quarter and they seem to be spending. It was better than what the average month was in 2021, so we’ll take it.
In February, “dogs and blogs” combined for a total of $3,799.20. In March, it was:
Total Blogging + Dog Sitting Income: $4,295.77
I’ll take any growth in a month that we’re away for 10 days on vacation.
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 of catering to the smaller dogs – he just loves them.
Their 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. Learn why you should get started with a kid Roth IRA as soon as possible.
Natural water slide!
Someday, I want to get them more involved in blogging, taking pictures, and things like that. During school, they have too much to keep them busy. After school, there’s homework, becoming mini-ninjas, scouting, music, and sports to fill up their days. Being a kid is hard work!
(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
The rental properties had about $40,000 in appreciation this month according to Zillow. That’s crazy! It seems like we’re back to the days of properties jumping up in value all the time. However, we’re finding that Zillow’s Zestimate may not be as accurate as we expected. We’re very likely going to be selling one property. We just don’t want to manage the property from far away anymore. It’s disappointing that we probably won’t get the price we were expecting.
We also always pay down a couple of thousand dollars of mortgage debt each month. So even when Zillow isn’t showing huge appreciation gains, we still build some equity each month.
We went from 73.77% to 75.10% ownership of the equity in our properties. That’s another month of big gains.
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 $4,000 a month. The expected rents have gone up a lot. However, we aren’t getting those kinds of rents yet. We’re keeping them low for now. So I’m going to average what we could make and what we are making, which is about $3650. It seems like low-lying fruit that we could get there and our tenants would still be happy that they are getting a bargain.
View from El Morro fort
If you multiply our expected net rent by $3,650 by the amount of equity we have (i.e. where we are on our journey to 100% equity ownership), 75.10%, you get $2,741/mo. in estimated passive income. That’s a gain of almost $50 from last month. That’s a big gain for one month.
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 5+ years, we’ve seen that number grow tremendously to $2,741. The forced savings of 15-year mortgages is a very powerful force.
When the mortgages are paid off, we’ll have $45,000/yr. of income. Rent is inflation resistant as we can raise rents over time. So this income will grow as things get more expensive. I imagine that $45k is enough for us to live on if we have our own home paid off (plus our solar panels, frugal shopping habits, and military healthcare.) Of course, that’s just one part of the plan as you can see.
In the previous report, the rental property income was $2,693.
Total Rental Property Income: $2,741
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 3.5% yield. We could also get that yield 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 a 5% 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.)
Of course, we may not convert everything over to dividend income at all, it’s just a conservative way to think of our investment portfolio. If I used a 3.5% or 4% withdrawal rate, the numbers would be much bigger.
Our youngest tries a bed of nails at the childrens’ museum.
The markets rebounded in March. It’s still down about 10% from its highs. I really have no idea where the markets are going with inflation, rising interest rates, and inverted yield curves. The good news is that I don’t care too much – we’ll be invested for between 15 and 40 more years.
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 this report, it makes sense to group all stock ownership in this bucket.
Total Dividend-ish Income: $3,762
Last month, it was $3,616, so we’re up almost $150. That’s a big move in this area. When I started tracking this number in January of 2017 we were at $1,180/mo. So in five years, we’ve grown this potential monthly income by over $2,500!
Our money is working hard to multiply, especially because we aren’t adding much to the investments. Instead we’re focusing on saving money in cash for my wife to retire. Except that, now my wife got a new job and isn’t looking to retire. That’s a roller coaster of emotions. Some days she wants to retire and other days, it seems like she wants to work for many more years. Whatever she wants to do is fine with me. At least this new job is much better than the last one. She’s had time to bring the kids to school and do some things like that. Before they had a keyboard tracker on her.
The view on our mini-honeymoon
Getting back to the monthly update, this monthly $3,762 would be over $45,000. As with the rental income number above (around the same amount) we should 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 started to see an estate planning lawyer last year, but they gave us a lot of paperwork to do before we can move forward. I haven’t had the time to convert our spreadsheet summaries to something they can use.
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 takes some active work to keep up. Rental property requires a little work, but not nearly as much as dog boarding and blogging.
We lost some of the gains here again this month. The stock market drop is too much for the real estate market to cover. We’re close to all-time highs though. I love having both types of income working together for us. With the stock market dropping recently, our real estate is saving our net worth from dropping further. I think 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.
I used to have a section here where I did a COVID update. Since everyone in the family got Omicron except my wife who seems to be immune, we don’t do anything about COVID anymore. The vaccines did their job for us. I haven’t brought a mask with me in Rhode Island for a month. Puerto Rico was very different. We needed a mask almost everywhere. Oh well, we’re the guests.
Very Close to Passive Income: $6,503
This would be over ~$78,000 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” – just live off dividends. We wouldn’t have to get a reverse mortgage on our home or the 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 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. So in 5+ years, we’ve added more than $4,000 in monthly passive income. That’s nearly $50,000 – a lot more than the $34,000 I made as a software engineer out of college in 1998. 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 I did. It’s a crazy system. I’m just doing my best to work within it.
Kids playing with balls being sucked into tubes.
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 can’t spend those retirement investments or the equity we have in properties. We don’t feel “rich” by any stretch of the word, 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. That’s why it might be nice to sell a rental property, pay off debt, and feel a little more financial freedom right now.
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 likely. Although if we sell off the rental property and invest that in the stock market, this number will likely go down.
Final Passive Income
When you add up “dogs and blogs” to the “very close to passive income” you get:
Passive-ish Income: $10,798.77
Last month it was $10,108.20. We’ll take the modest gains during a vacation month. It’s looking like we’ll see a big jump in April.
That’s about $130k a year. That (hypothetical) annual income for writing on a blog, taking care of dogs, investing, and landlording is very nice. If we manage 120K 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 they are a large percentage of it.
None of the numbers here include my wife’s bread-winning day job as a pharmacist, 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 much of our spending. It also gives 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 solid trend of the numbers staying high for several months now. Second, it doesn’t dip down too far. It seems like it should be at $8,000 going forward. I don’t want to see a big market collapse, it would hurt a lot of people, but I am curious how bulletproof all these sources of income are when they work together.
(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.
We saw our net worth grow 5.69% in March. That’s a new all-time high. Much of the gains came in equity in our primary residence. That kind of useless unless we sell our house or get a reverse mortgage. For 2022, our net worth is up 3.74%. Considering the markets haven’t been too hot, we’ll take the gains.
Recently for something new, I decided to share our liquid cash growth (or loss). I’ve been tracking it for some time, but never thought to 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 reports can do a lot of it. Looking at our liquid cash is a way to roughly gauge the bottom line, income minus expenses. In the past, we haven’t focused much on this because we’ve been investing that money. However, our focus now is to build enough cash so my wife feels comfortable retiring.
This month, we gained around $5,000 in liquid cash. I hope that continues, but we registered for a lot of kid summer camps and those may be coming due on the credit cards soon. I’ll have an article about the cost of kid camps coming soon.
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+ 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 month? Let me know in the comments.
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