It’s near the start of a new month, so that means I have the financial numbers to review for last month. Before we get into the numbers, here’s a little personal review.
The best part of September was that I felt very happy the whole month. That’s not usually the case. I capped off almost every night in our inflatable hot tub spa with some streaming service on a tablet. Sometimes I’d just pause the show and look up at the stars and listen to the crickets for a minute or two.
Usually, I’m rushing around and September was no exception, but it was good rushing around for stuff, not stressed.
As always, we had some notable events of the month. The kids are back in school. We were lucky to have school all last year, so this is just “normal awesome” instead of the “wow awesome!” that many families experienced in the last 4-6 weeks. Our oldest son turned 9 and I informed him we’re halfway done with him. That was jokingly, of course. I’ve been joking about shipping him off to catch Pokemon at age 10 like Ash Ketchum for years, so it’s a running gag.
Our youngest started soccer and he’s really good at it. It’s at least in part because he is the oldest on the team. The other part is that he’s willing to be aggressive. It’s also age 7 soccer, so picture a bunch kids crowded together kicking.
Both kids have been in karate for a year and got new belts this month. They are on their 4th and 5th belts with their respective ages. It’s halfway to the black belt in terms of the number of belts, but my understanding is that it gets more difficult to achieve each new belt.
We had some social experiences. We took a day trip to Mystic, CT with some friends. We didn’t see Julia Roberts, but we did eat at Mystic Pizza. Other than that, we spent a little time at the beach squeezing out the last bit of summer. We also went to a mansion lawn party.
My wife bought us a special event fundraiser experience at the local zoo. We all got to go in the bear den and feed the bears. It’s less dangerous than it sounds because we placed food in their den while they were asleep in their “secure bedroom.” Then from outside the den we watched the bears come out and scavenger hunt for the food we placed. It was a little expensive, but it included breakfast, created a unique memory, and helps out the zoo.
My friend, and prominent money writer, Miranda Marquit came to town. In the 8 years, we’ve lived in Newport, RI, I think it was my first friend who I was able to give a tour to. It was a ton of fun to take the day off and create an itinerary of historic places and local experiences.
Finally, my wife won the state’s Pharmacist of the Year award, so we got dressed up in suits (including the kids) for a fancy banquet. I’ve written about her career a good amount lately, and this personal update is too small to include too much about it. I guess I would say that she’s been cleaning up in the awards area lately. She wonders if people are buttering her up so that she doesn’t retire.
My family isn’t a bunch of animals, but my kids saw these edits on my phone recently and thought themselves as dog and turtle face was quite possibly the funniest thing ever. As a side note, I don’t know why this picture looks like was taken with my old Palm Pre from 2009.
That’s enough of the personal stuff… 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
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 more passive because I can make money even when I’m literally not tending to them. I leave real estate and investment income as their own separate main sources of very passive income.
1. Blogging + Dog Sitting Income
September saw people finally get back to school and stop their vacations. Revenue was down 25% from August, but we still had more than twice the income of our biggest month outside of this summer surge. October has it slowing down even more so far. I’m happy that it is less busy – it’s time for a break.
In the past, I have written that dog sitting is passive-ish income, which is why it is on this report. When it is one dog a day on average, it is passive. In September it was still fairly active work! Coordinating schedules with other dog owners and Meet and Greets takes a lot of time.
With summer tourism over, my dog can enjoy the beaches again.
Dog sitting is looking like it will be back to being mostly passive going forward. Beach town tourism disappears in the wintertime. Hopefully, we’ll have a happy medium.
That’s a lot about dog-sitting, but what about blogging? Blogging income was down as some advertisers didn’t pay their invoices on time. That money will be in October’s results, so it will all balance out.
In August, “dogs and blogs” combined for a total of $7,138.91. In September, it was:
Total Blogging + Dog Sitting Income: $5,326.58
It would have been nice to continue to hit new records, but it’s more important to get the kids started off well at school. This is still far more than I usually make, so it’s a success.
My kids in a bear den!
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. 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 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.
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. Homework, becoming mini-ninjas, scouting, and soccer fill up their days.
(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 huge housing market surge seems to have settled down. Zillow estimated that our properties went down a tiny bit. This seems a lot healthier. We continue to pay down the mortgages. Typically that’s about $2000 a month. This month that mortgage pay down is our main gain.
We went from 70.66% to 70.93% ownership of the equity in our properties. 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 by $3,400 by the amount of equity we have (i.e. where we are on our journey to 100% equity ownership), 70.93%, you get $2,412 in estimated monthly passive income. That’s only a gain of $10 from last month, but slow and steady wins the race.
This Newport mansion lawn party was fun – food trucks and music. Perfect for a couple of hours after work/school.
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 almost 5 years, we’ve seen that number more than double. That’s the power of 15-year mortgages.
In about 5 years from now, the ratio will grow to 100% of that $3,400 rent. 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 $2,402.
Total Rental Property Income: $2,412
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.)
We had a 9th birthday part at the house outside. Next year, I’d like to do it at a trampoline park. Hosting people at our house requires a lot of preporation.
The markets fell from their highs. There was always going to be a time when the markets go down. I diversified some money across industries and increase the amount in bonds in hopes that they’ll be more stable if a crash does happen. Since the markets were only down a little, I don’t know if helped too much. If we see a full 10% correction, I’ll start to sell some bonds and buy stocks at a discount. I try to plan to be able to keep doing this every time the market drops 10%, 15%, 20%, etc. from its highs.
We continue to get a profit-sharing check since I bought (a lot of) a company. The business was almost ideally positioned in this pandameic 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: $3,786
Last month, it was $3,880. It’s a significant drop, but we’ve been up for so long it doesn’t matter too much to me. 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.
Improtu stop at a local bookstore in Mystic, CT lead to this cool moment
Annualized, this monthly $3,786 is $45,433. 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 still 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 big growth this month came from the stock market. Real estate was mostly flat. 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 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.
This month in COVID
For a little while now, I’ve been giving some thoughts on the state of COVID in the middle of this section, so it might as well have a title. Delta looks to have peaked and is now down about 30% in cases from the peak. I guess the combination of vaccines and herd immunity is working a bit. At 100,000 cases we still have a ways to go to get to the 12,000 from earlier this summer.
I’m optimistic we’ll get there.
Every year, we go to Gregg’s, a local restaurant chain and our oldest gets a piece of Death by Chocolate cake.
Kids under 12 will soon be able to get vaccines and that might help stop the spread. I think more people will be able to get booster shots going forward. It’s looking like we’ll get cheap ($12) or free rapid tests for home use soon. Experts say that kind of near-instant detection could help prevent the spread a lot.
Not that this is related to case numbers, but the Merck pill treatment seems like a huge win. The odds that you would still be okay with breakthrough COVID were good, but this extra treatment may make even that diagnosis not so scary.
We still have Thanksgiving and Holidays to get through, so things could still spike then. I’m looking forward to late January when it seems like everything is in place – vaccines for our family, boosters for us adults, good overall community immmunity, low cases due to easy testing at group events, and easy affordable treatment.
Now… back to the month in passive income finance.
Very Close to Passive Income: $6,198
Last month it was $6,283. For the first time in a long time our passive investments didn’t grow. That’s bound to happen sometimes when we’re dependent on things we don’t control such as the stock and real estate markets.
This would be nearly $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 for the dividends are assuming 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 don’t feel “rich” by any stretch of the word, even though we are relative to many people’s circumstances. 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 unless we have that major crash.
Final Passive Income
When you add up “dogs and blogs” to the “very close to passive income” you get:
Passive Income: $11,524.58
Last month it was $13,420.91. Looks like I’m done setting records until next year’s dog sitting season. I started the year thinking that I was just going to lower and lower because the “dogs and blogs” weren’t working. Even though this is less passive with all the dog sitting, it’s great to have real earning power. When “dogs and blogs” aren’t going well, the passive-ish income can still keep me from getting too low.
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. However, it’s over $9,700 on average now, so I just have to keep things going for three more months.
This ~$11,500+/mo income is almost $140,000 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.
It was a bit of work, but I reached the best of the best in a small DuoLingo group.
As the 18 months have 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 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.
As we saw with the investing numbers above, September was a poor month for our net worth. We lost 1.43%. For the year overall, our net worth is up 24.32%, so a one-month hiccup is no big deal.
Last month for something new, I decided to share our liquid cash. 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. We grew our liquid cash by $4,684.91 this month. The dog sitting income has really made a difference, so we might not be able to improve this as much in the future without cutting down on spending.
It’s important to realize 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 – especially ones saddled with huge student loans. 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 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 September? Let me know in the comments.