It’s super late to be posting November’s recap, right? I’ve been too busy trying to cram as much Christmas as possible.
I can’t believe that November was so long ago. My son was still playing baseball. Rain every weekend canceled many games, so the season got extended. Baseball isn’t his sport, but he enjoyed it and improved a lot.
My other son continued Lego Robotics while his baseball season was going on. It was his first time in the First Lego League’s Challenge competition. He’s the youngest in grade four, which includes kids up to grade 8.
Each kid submitted some art for the local land preservation society. The society has a contest that offers prizes of $250. I don’t think too many people enter it, so their odds of winning are good. Well, they would be good if they tried, but they put in the bare minimum effort.
My oldest told me that he had a dream that was essentially the premise of the television show Heroes from about 15 years ago. So we watched most of the first season. Some parts of the show were not very kid-friendly. Oops. They had more fun at Ms. Marvel, which was more appropriate. We had the theater to ourselves, so they ran around while watching the movie.
As a family, we went to a local corn maze. My wife had a party for her military promotion earlier this year. It was big, but she’s not expecting to be promoted again. The next big party will be for retirement.
We closed out the month by going back to Aruba! We have had a Marriott Vacation Club Timeshare for almost 20 years now. I’ve written a few articles about Aruba over the years, but here’s one about saving money in Aruba.
Sometimes you just have a deep conversation with your brother on a balcony over lunch.
I’ll keep it short since I’ve written whole articles about Aruba. We hadn’t been back since 2019, so my kids didn’t remember much about it. We paid for DePalm Island, an all-inclusive place “resort” with a few water slides and banana boat rides. The kids loved it, and I liked that it was a change of pace from the typical hotel/beach relaxing.
We went over Thanksgiving, which is usually very expensive, but we flew back the Monday after. That made our flights much cheaper. We did have to stay at a local Airbnb for one extra night as our timeshare week was over. We’ll look into using this trick on future trips.
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.
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 ignored the bottom section, “career/job,” which is 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
November wasn’t a great month for dog boarding. We weren’t available for the two biggest times of the month, Veterans Day and Thanksgiving week. When I shut down for a day on the weekend, it means that people going away for the week can’t book. That could make the difference of a thousand dollars or more. Thanksgiving would have an even bigger impact. At the end of the day, we have to live our lives.
The dog picture of this month is this girl. That’s a long tongue!
Blogging went really well in November. Advertisers were out in full force over the month of Black Friday sales. As good as it was, it couldn’t make up for the loss in dog boarding.
In October, “dogs and blogs” combined for $3,306.51. In November, it was:
Total Blogging + Dog Sitting Income: $2,673.25
The blue line is the monthly income. The red line is the 3-month average.
That’s the lowest number in a while. I’m not concerned, though – so far, December is going well.
My kids help with the dog sitting. My 11-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 9-year-old is also good with dogs. Since I’ve been doing this for eight years now, having dogs around is just second nature. To them, it’s weird when there aren’t dogs around.
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
For the first time in forever, I’m not sure what to think about the real estate market. Zillow has always been consistently good with their estimates of how much our properties are worth. For some reason, the value of our primary residence has dropped by about 8%. That doesn’t show up in any of these numbers because it doesn’t bring in income (outside of being important to the dog boarding income above).
What’s strange is that the rest of the local market has been steady. In fact, Zillow says that our rental properties are worth $200 more than they were last month. That’s the smallest sliver of percentages, but it’s still something. We continue to pay off our mortgages, making around $1000 in equity a month.
Last month, we owned 79.17% of our properties, and this month we own 79.33%. Since January, we’ve gained about $50,000 in equity. The landlord’s job is paying well, even though it’s not in direct, spendable cash.
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, 79.33%, you get $1,759/mo. in estimated passive-ish income. Last month, it was $1,756/mo. We’re moving at a pace of 2 or 3 dollars a month since there’s not a lot of room for the properties to appreciate.
Total Rental Property Income: $1,759
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 almost seven 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.
My son likes to lean back and forward in his chair. Rather than simply tell him it’s not safe, I asked if he could design something that is safer. This design extends the back legs when you lean forward. He took it a step further and put it into Tinkercad.
At some point, I won’t want to manage properties. One option is to let our kids do it and pay them well for the help. Another option is to have them move into the properties (or do a 1031 exchange to a property they are interested in.) Our kids are at least ten years away from that, though. Yet, another option is to sell them, invest the money, and live off dividends. We’ll have to see how it goes.
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 the money in a high-dividend ETF. For example, the high-yield ETF, iShares Core High Dividend ETF (HDV), currently pays a 4.34% yield.
Most bloggers use the actual dividends they earned that month. I have too many 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 high dividends if we needed to live off the cash flow. A vast majority of our money is in retirement accounts, so 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.
The markets have been great! It’s really helped us get close to new all-time highs in almost all areas. We are spending a lot, but Bidenomics is working for us. That’s a bit of a joke because it isn’t about the President. It’s mostly due to good planning and the general economy.
Total Dividend-ish Income: $4,247.00
That was a gain of $185 over last month. That’s a huge, huge gain, and it’s the highest our dividend income has ever been. Annually, it’s a little over $50,000. When I started putting these numbers together in January 2017, the dividend income was $1,180/mo.
I’ve finally made some progress on estate planning. After reading More Than Enough by Mike Piper, I reached out to him. He’s not taking new clients, but likely will within a couple of months.
Adjusted Passive Income
I used to combine real estate and dividend income into “very close to passive income.” That wasn’t very scientific and didn’t sound right. Now, I add up 50% of the dogs/blogs money, 80% real estate, and 100% dividend income. That gives a more accurate number of what’s truly passive.
Dog/Blogs: $2,673.25 – Adjusted to $1,336.63
Rentals: $1,759.00 – Adjusted to $1,407.20
Dividends: $4,247.00 – Remains at $4,247.00
Dogs/Blogs Blue Line
Rental – Red Line
Dividend – Yellow Line
Total Adjusted Passive Income: $6,990.83
Last month it was $7,119.06. The numbers continue to go down a little bit. However, that’s not bad for being on vacation for ten days. It’s far enough into December to know that this number will be closing strong.
This ~$7,000 is about $85,000 of adjusted passive income annually. That’s shy of the $100,000 that I estimate for our core/necessary expenses. For the year, we’ll come in very close to that $100,000 number. In the next 3 or 4 years, the two biggest expenses, mortgages, and education costs will disappear. That would bring our necessary expenses down a lot. 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.
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, which I’m not reporting here. We might also have to rely on savings for a while.
Corn Maze 2023! We can get to this one in about 15 minutes and it takes about an hour and half to complete. It’s a great way to get the kids off video games and YouTube.
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 when we’ll be in a lower tax bracket.
You’d think we’d feel “rich,” but we don’t. Some people tell me that we “won” the money game. I agree and would say that we feel “wealthy”. Our social circle has many generationally rich people. Nearly every one of my sons’ 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. In my opinion, that’s real wealth.
(The blue line represents the total adjusted passive income. The Red Line represents the three-month average.)
The three-month average in November 2021 was $8,630.16. In November 2022, it was $9,286.95. Now, in November of 2023, it is $7,149.23. So much for my goal of growing. Most of it is due to declining dog boarding. The real estate and dividend numbers grow slowly and can’t keep up.
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 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.
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 come close to matching my wife’s. However, the flexibility allows me to stretch almost every dollar of our spending. It also frees me to bring the kids to school and after-school activities.
Net Worth Update
My net worth updates aren’t fascinating. I don’t share the exact numbers. That’s why it’s just a footnote, not its own 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 2.01%. For the year, we are up 11.87%. We were very close to reaching all-time highs, but Zillow’s reassessment of our primary residence set us back a lot. It’s fine if that asset goes down. It’s still the same shelter and the same mortgage from 2012. A lot of people don’t count their primary residence as their net worth, and this is a good reason why.
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 gained $20,000. At first, I was confused about how this happened since we were spending a lot of money. However, I have some of this “liquid” cash in the stock market. Unlike retirement accounts, I feel we can tap this money at any time.
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.
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 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.